Islamic Countries in Global Energy Politics

In energy sector, Islamic countries in the Middle East (Persian Gulf and the Caspian Sea) have
49% of world oil reserves. For the countries of Saudi Arabia has 60% of world oil reserves.
Achieving agreement on nuclear technology and the lifting of economic sanctions Iran, will have
an impact on the political map of the strength of Islam, the price of energy and the global
economy.
No doubt some countries are drawn into the conflict, should be assumed to have a desire for
control of energy resources of oil and natural gas, including in this case, access to infrastructure
and the economy, as well as other interests such as, political, military and sectarian.
I. Introduction

Geographically, Islamic countries are at various peninsula and stretches from Indonesia to
Morocco. It has been since along time ago, Islamic countries active in economy of the world,
especially on the Silk Road, as well as a potential market. After the collapse of the Turkish
Ottoman Emporium, practical Islamic countries become unconsolidated well in politics and the
global economy.

In energy sector, Islamic countries in the Middle East (Persian Gulf and the Caspian Sea) have
49% of world oil reserves. For the countries of Saudi Arabia has 60% of world oil reserves.

In energy sector, Islamic countries in the Middle East (Persian Gulf and the Caspian Sea) have
49% of world oil reserves. For the countries of Saudi Arabia has 60% of world oil reserves. With
an average rate of exploitation as it is today, then Saudi Arabia's reserves can be exploited up to
125 years, Kuwait 144 years, Iraq 98 years, United Arab Emirates 120 years. Countries that own
and control the source of energy, will have a strategic role in the political map.
World Energy Reserves
Oil Gas Coal
No Country Nuclear
(billion barrels) (trillion cubic feet) (million ton)
1 Venuzuela 297,6 196,4 479
2 Saudi Arabia 265,9 290,8 NPP
3 Canada 173,9 70 6.582
4 Iran 157 1.187,3 NPP, R&D
5 Iraq 150 126,7
6 UAE 97,8 215,1 NPP
7 Rusia 87 1.163 157 NPP, ICBM
8 Amerika 35 300 237,3 NPP, ICBM
9 Qatar 23,9 885,1
10 China 17,3 109,3 11.450 NPP
British Petroleum Statistik 2013 & IAEA
Sources of energy, particularly oil and natural gas, a commodity that is contested by many
countries. Not a few conflicts between states are triggered by the problems in the energy resource
needs.
Islamic countries in the Middle East to source energy as an issue to keep the country's bargaining
position. Russia uses energy issues to maintain influence over Eastern European countries former
Soviet Union, as well as a supplier of 50% of the EU's oil and gas.

II. Allied with Iran

Achieving agreement on nuclear technology and the lifting of economic sanctions Iran, will have
an impact on the political map of the strength of Islam, the price of energy and the global
economy.

Iran negotiating process with the six-nation nuclear authorities led by the United States, has
successfully completed the relevant treaties of nuclear technology in the city of Vienna, Austria,
on Tuesday (07/14/2015). Iran as a country with a Shiite majority, agreed to have nuclear
technology for peaceful purposes. Accordingly, economic sanctions since 2012, addressed to
Iran has ended.

With the lifting of economic sanctions that have been imposed upon Iran, enabling Iran to return
to the player of the world economy and export of goods, including oil and gas. Iran has signaled
his intention to return to the global oil market, by trying to maximize the capacity of crude oil
exports to Europe, if Iran's official entry into the world oil market, it is likely the price of oil and
natural gas will be much lower than now. For 2015 alone, already abundant supply of crude oil
and the demand continues to fall which made the prices continue to fall.

Iran's nuclear mastery is not just a prestigious project, but based on the needs and abilities. Iran
has a stable position in politics and economics. As an oil-producing countries, Iran does not have
a dependency exploration by western countries. This is very different from Saudi Arabia and
Kuwait.

Iran is a superpower in terms of energy. Iran has oil reserves that have been proven by 10% of
world oil reserves, and gas as much as 15% of the world gas reserves. As an oil producer, Iran's
oil production is in the second position in OPEC and is in fourth position in world oil production.
In addition, Iran has the independence politically, either among the Middle Eastern countries, as
well as Western countries.

III. Oil Prices Continue to Go Down

In 1992, the state Saudi Arabia is the world's largest oil producer, and the United States as the
world's biggest oil consumer. Between both countries, there has been a cooperative relationship
that has existed for a long time.

The return of Iran as the world energy actors, could endanger oil producers, because there will be
more oil in the market. In addition, when the oversupply of oil, OPEC (Organization of the
Petroleum Exporting countries) will find a market. Market imbalances will depress oil prices, for
the period until the medium term.
10 Largest Oil-Producing Countries
No Country Production Percentage
1 Russia 544 Mt 13%
2 Saudi Arabia 520 Mt 13%
3 United States of America 387 Mt 9%
4 China 206 Mt 5%
5 Iran 186 Mt 4%
6 Canada 182 Mt 4%
7 UEA 163 Mt 4%
8 Venezuela 162 Mt 4%
9 Kuwait 152 Mt 4%
10 Iraq 148 Mt 4%
International Energy Agency (IEA) 2012
World energy prices, especially oil and gas, will continue to decline. After the United States
discovered shale gas (natural gas trapped in formations crack rocks) a few years ago, could
reduce the dependence of the United States to the countries of the Middle East for its oil and gas
needs. This of course makes the production and supply of oil and gas the Middle East countries
become redundant.

The discovery of new energy sources, and supplemented if Iran release its oil and gas production
to the global market, in accordance with the laws of market economy between the demand and
supply of oil and gas reserves, will make the price of oil and natural gas is getting down.
VI.Rejecting Saudi Arabia and Pressing to Russia
Economic deficits of Saudi Arabia

World oil prices continue to decline, will depress the economy of Saudi Arabia. 80% of Saudi
Arabia's state revenue comes from oil sales, and international oil prices continue to decline,
while state funding remains high. Even to cover the budget deficit, Saudi Arabia has to borrow
money or incur debt of $ 4 billion through the issuance of bonds in 2014 ago.
Arab government bond is the first in the last eight years, the Government of Saudi Arabia has
never issued bonds since 2007, and was an attempt to maintain the level of public spending as oil
prices continued to decline.
As previously stated Governor Saudi Arabian Monetary Agency, Fahad al-Mubarak, that the
Saudi government will use a combination of bond and foreign exchange reserves to maintain
spending and cover the financial deficit will be greater than expected. The country continues to
hope that there is an increase in lending for 2015 to $ 5 billion. Until the end of 2015, the state of
Saudi Arabia would have a budget deficit of 20%.
State expenditures for special projects, payment of bonuses for civil servants and military Arabia
recognized funding will increase the weight of Saudi Arabia's economy and continuing to reduce
the financial capacity of the state treasury that eventually eroded international reserves. War
against Yemen and Syria trigger an increase in the military budget from 10% to 17% of the
Gross Domestic Product (GDP).
To meet the needs of the planned expenditure, Saudi Arabia requires oil prices at a price of USD
105 per barrel. While the average world oil price is currently only USD 44 per barrel. If the
economic government of Saudi Arabia continues like this it will deplete reserves faster than
expected.
The discovery of new energy sources that are cheaper and the inclusion of Iran as an oil supplier
countries in the global market, making the dependence of the world oil consumer countries to be
reduced. Energy consumers who dominated countries of the west, of course, there is the
possibility of critically will see Saudi Arabia as the world democratization major obstacle, the
system of absolute monarchy is not democratic, social systems that greatly inhibit the role of
women, and has a network with radical groups. A signal to be conveyed that the western
countries would dispose of Saudi Arabia in the global political stage.
Economy Depressed of Russia
On the other hand, as the country as a stabilizing force in the economic, political and military.
Russian state has one of the super power, including in terms of supply and energy production
capacity, either oil, gas, coal and uranium.
The lifting of economic sanctions Iran adversely affect the Russian economy, particularly the oil
and gas industry. Exports of Russian oil and natural gas to Europe which has been the backbone
of the Russian economy will experience a serious threat. Decline in world oil prices and the
lifting of economic sanctions Iran will press the Russian economy.
European oil companies, especially in the Mediterranean market are eager to conduct exploration
and production in the country of Iran, and are eager to continue the business relationship there. In
the short term Europe will buy crude oil from Iran who have better access to the global energy
market and beat the Russian energy companies and Iraq.

For western countries who are consumers of energy, pressing Russia will benefit with reduced
Russian dominance over Eastern Europe. Emergence of Iran in global oil producers will reduce
Europe's dependence on Russia for energy supply of oil, and obtain cheaper oil prices.
V.Competition of Islamic Regime
Middle East region is dominated Islamic countries is an area that is considered as the center of
world conflict. The high level of conflict in the Middle East countries, under certain conditions
to be very helpful (in spite of the conflict must been created intentionally or not) for hegemony
in the region in order to gain economic, social, political, military and ideological.
Iran as a country with a Shiite majority, agreed to have nuclear technology for peaceful purposes.
The emergence of Iran as a country with a majority Shiite country's nuclear authorities and
returned as global economic players in the field of energy, will increase the competition among
Islamic countries, which affects the power escalation of Islamic countries.
During this state supporters of Saudi Arabia following the majority Sunni and Wahabi, more
dominant to give color to the economic and political escalation in the Middle East. As the
superpower United States with a capacity of oil and gas consumption in the world, America has a
high dependence to Saudi Arabia to meet the energy needs of the country.
Not a bit of competition that led to the conflict between the Middle East countries, which are
triggered by several factors, including:
1. Boundary and occupation of territories: caused by (i) natural factors with desert
conditions susceptible and become a classic problem (ii) policy factors that triggered the
demographic conditions.
2. The religious and political ideology: the Middle East is the center of religious
development and has a complex repertoire in religious thought. Iraq-Iran conflict is a
form of religious ideology and political competition.
 3. Natural resources: the seizure of oil and natural gas resources is fairly dominant trigger
for conflict between Islamic countries Middle East. Oil potential in the region reached
49% of the world's oil needs. Conflicts caused by competition over oil resources, will
usually trigger a global conflict. Iraqi military aggression to Kuwait and US military
aggression on Iraq, is the embodiment of the control of oil resources and infrastructure as
well as access to global distribution.

VI.ISIS and the failure of Arab Spring

At the end of 2010, the Middle East region to experience the 'Arab Spring', where the political
situation of the Islamic countries which have a majority of authoritarian rulers hit by a wave of
revolution to demand leadership succession.
Protests, civil disobedience, revolution and rebellion and civil war are actions that characterize a
wave of Arab Spring in the Middle East. The phenomenon is caused by several factors, either
partially or accumulation, which are increasingly worse economic conditions, authoritarian
leadership, government corruption, human rights abuses, poverty and unemployment, as well as
sectarian.

Egypt, Yemen, Tunisia, Libya is an Islamic countries in the Middle East were hit by the Arab
Spring that led to the change of leadership, either constitutional or unconstitutional, even of them
ended tragically with the death is tragic.
Syria and Bahrain is a country that experienced the revolt. Jordan, Kuwait, Lebanon, Oman and
Morocco to reform in the government and the country to adjust the wave of political change in
the Middle East region.
Algeria and Iraq does not escape from the rallies with almost the same purpose. Especially for
the Syrian state, the condition turns into a never-ending chaos, and even escalation of conflicts
turn into increasingly widespread.
Middle Eastern countries hit by the Arab Spring

No Country Incident Impact

Demonstration,
Civil Disobedience
1 Egypt President Hoesni Mubarak on
trial
Government changed
Demonstration, President Ali Abdullah Saleh handed over
2 Yemen
Civil Disobedience power to Vice President
Demonstration,
Civil Disobedience
3 Tunisia President Ben Ali was
overthrown
Government changed
Demonstration
Rebellion
4 Libya
Civil War
Libyan leader Muammar
 Gaddafi was shot dead
Governments changed
Demonstration
5 Bahrain Rebellion
Governments changed
6 Jordan Demonstration Government remodel
7 Kuwait Demonstration Government remodel
8 Lebanon Demonstration Government remodel
9 Oman Demonstration Changed Constitution
10 Morocco Demonstration Changed Constitution
Demonstration
Rebellion
Civil War
11 Syria
The President does not change
Government remodel
ISIS
Government remodel
12 Iraq Demonstration
ISIS
various sources
Action in Syria triggered by protests against the government of As'ad, but on the other hand also
appeared to support government action. The action led to armed conflict of interest groups and
the state to interfere in the armed conflict, both politically, economically and militarily. Syrian
civil war as a result of wave action.
The emergence of ISIS (Islamic State of Iraq and Syria) in the Syrian conflict, escalation of
widespread conflict, a conflict that is increasingly a period of time, an accumulation of factors
that cause conflicts and interests of the parties involved in the conflict. Iran and Russia provide
support to the Syrian government, while the United States and Saudi Arabia are more aligned to
the opponents of the Syrian government.
No doubt some countries are drawn into the conflict, should be assumed to have a desire for
control of energy resources of oil and natural gas, including in this case, access to infrastructure
and the economy, as well as other interests such as, political, military and sectarian.

VII. Islamic Countries and Control of Nuclear

Nuclear energy is an alternative energy source that allows the realization of world energy
consumption efficiency. Nuclear energy is the primary means to reduce global warming, the use
of nuclear energy should be avoided only if it poses a threat to the life expectancy of beating the
benefits that would be given to humans. In politics, as the nuclear balance of power over the
country economically inferior to the state economically superior.
Islamic Countries which have nuclear facilities
REMAR
COUNTRY UTILIZATION
K
3 NPP
PAKISTAN military since 1972
1000 MW
IRAN R&D NPP since 2007
 nuclear enrichment
believed to be able to develop a nuclear
facility weapon in a short time
ARAB suspected to have nuclear facilities and nuclear
NPP
SAUDI weapons in secret
since 1950
4 NPP
INDONESIA R&D Infrastructure ready
4000 MW
2014 operated
4 NPP will operated 2022
KUWAIT
4000 MW Cooperation with France
4 NPP
TURKEY 10000 Cooperation with Korea
MW
Will be operated in 2017
4 NPP
UEA Investment US$ 40 billion
5600 MW
Reactor PR1400
since 2015
2 NPP
JORDAN Cooperation with : Russia, France
1000 MW
Japan, and Canada
various sources
Pakistan, in current de facto an Islamic state has recognized and capable of producing nuclear
weapons. Mastery recognized nuclear state Pakistan has been able to produce nuclear weapons.

In the Middle East after Iran agreed country to have nuclear technology for peaceful purposes,
the state of Saudi Arabia and Israel is suspected to have nuclear facilities and nuclear weapons in
secret. Saudi Arabia and Israel refused to be called has had a nuclear weapons facility, and
Pakistan denies helping build a nuclear facility of Saudi Arabia.
Iran even at the stage of research and development as well as a nuclear enrichment facility,
however, if it is not due to embargo that afflict this country, Iran is believed to be able to develop
a nuclear weapon in a short time.
Although it was not until the development of nuclear weapons facility, Islamic countries already
planned and has built nuclear facilities for peaceful purposes. Some of these Islamic countries in
the Middle East is oil-rich region. They have anticipated when oil resources run out and not be a
source of state revenue.
Life often presents us with paradoxes, but seldom so blatant or consequential as the following.
Read this sentence slowly: Today it is especially difficult for most people to understand our
perilous global energy situation, precisely because it has never been more important to do so.
Got that? No? Okay, let me explain. I must begin by briefly retracing developments in a
seemingly unrelated fieldclimate science.
Once upon a time, the idea that Earths climate could be changing due to human-caused carbon
dioxide emissions was just a lonely, unpopular scientific hypothesis. Through years that
stretched to decades, researchers patiently gathered troves of evidence to test that hypothesis.
The great majority of evidence collected tended to confirm the notion that rising atmospheric
carbon dioxide (and other greenhouse gas) levels raise average global temperatures and provoke
an increase in extreme weather events. Nearly all climate scientists were gradually persuaded of
the correctness of the global warming hypothesis.
But a funny thing happened along the way. Clearly, if the climate is changing rapidly and
dramatically as a result of human action, and if climate change (of the scale and speed thats
anticipated) is likely to undermine ecosystems and economies, then it stands to reason that
humans should stop emitting so much CO2. In practical effect, this would mean dramatically
reducing our burning of fossil fuelsthe main drivers of economic growth since the beginning
of the Industrial Revolution.

Some business-friendly folks with political connections soon became alarmed at both the policy
implications ofand the likely short-term economic fallout fromthe way climate science was
developing, and decided to do everything they could to question, denigrate, and deny the climate
change hypothesis. Their effort succeeded: belief in climate change now aligns fairly closely
with political affiliation. Most Democratic elected officials agree that the issue is real and
important, and most of their Republican counterparts are skeptical. Lacking bipartisan support,
legislative climate policy languished.

From a policy standpoint, climate change is effectively an energy issue, since reducing carbon
emissions will require a nearly complete revamping of our energy systems. Energy is, by
definition, humanitys most basic source of power, and since politics is a contest over power
(albeit social power), it should not be surprising that energy is politically contested. A
politicians most basic tools are power and persuasion, and the ability to frame issues. And the
tactics of political argument inevitably range well beyond logic and critical thinking. Therefore
politicians can and often do make it harder for people to understand energy issues than would be
the case if accurate, unbiased information were freely available.

So here is the reason for the paradox stated in the first paragraph: As energy issues become more
critically important to societys economic and ecological survival, they become more politically
contested; and as a result, they tend to become obscured by a fog of exaggeration, half-truth,
omission, and outright prevarication.

How does one cut through this fog to gain a more accurate view of whats happening in our
societys vital energy supply-and-support systems? Its helpful to start by understanding the
positions and motives of the political actors. For the sake of argument, I will caricature two
political positions. Lets personify them as Politician A and Politician B.

Politician A has for many years sided with big business, and specifically with the fossil fuel
industry in all energy disputes. She sees coal, oil, and natural gas as gifts of nature to be used by
humanity to produce as much wealth as possible, as quickly as possible. She asserts there are
sufficient supplies of these fuels to meet the needs of future generations, even if we use them at
rapidly increasing rates. When coal, oil, and gas do eventually start to run out, Politician A says
we can always turn to nuclear energy. In her view, the harvesting and burning of fossil fuels can
be accomplished with few incidental environmental problems, and fossil fuel companies can be
trusted to use the safest methods available. And if Earths climate is indeed changing, she says,
this is not due to the burning of fossil fuels; therefore, policies meant to cut fossil fuel
consumption are unnecessary and economically damaging. Finally, she says renewable energy
sources should not be subsidized by government, but should stand or fall according to their own
economic merits.

Politician B regards oil, coal, and natural gas as polluting substances, and societys addiction to
them is shameful. He thinks oil prices are high because petroleum companies gouge their
customers; nuclear energy is too dangerous to contemplate; and renewable energy sources are
benign (with supplies of sunlight and wind vastly exceeding our energy needs). To hear him tell
it, the only reason solar and wind still supply such a small percentage of our total energy is that
fossil fuel companies are politically powerful, benefiting from generous, often hidden,
government subsidies. Government should cut those subsidies and support renewable energy
instead. He believes climate change is a serious problem, and to mitigate it we should put a price
on carbon emissions. If we do, Politician B says, renewable energy industries will grow rapidly,
creating jobs and boosting the economy.

Who is right? Well, this should be easy to determine. Just ignore the foaming rhetoric and focus
on research findings. But in reality thats not easy at all, because research is itself often
politicized. Studies can be designed from the outset to give results that are friendly to the
preconceptions and prejudices of one partisan group or another.

For example, there are studies that appear to show that the oil and natural gas production
technique known as hydrofracturing (or fracking) is safe for the environment. With research in
hand, industry representatives calmly inform us that there have been no confirmed instances of
fracking fluids contaminating water tables. The implication: environmentalists who complain
about the dangers of fracking simply dont know what theyre talking about. However, there are
indeed many documented instances of water pollution associated with fracking, though
technically most of these have resulted from the improper disposal of wastewater produced once
fracking per se is finished, rather than from the hydrofracturing process itself. Further, industry-
funded studies of fracking typically focus on sites where best practices are in place and
equipment is working as designedthe ideal scenario. In the messy real world, well casings
sometimes fail, operators cut corners, and equipment occasionally malfunctions.

For their part, environmentalists point to peer-reviewed studies showing air, water, and human
health problems associated with actual (far from ideal) fracking operations.

So, depending on your prior beliefs, you can often choose research findings to support them
even if the studies you are citing are actually highly misleading.

Renewable energy is just as contentious. Mark Jacobson, professor of environmental engineering

at Stanford University, has co-authored a series of reports and scientific papers arguing that
solar, wind, and hydropower could provide 100 percent of world energy by 2030. Clearly,
Jacobsons work supports Politician Bs political narrative by showing that the climate problem
can be solved with little or no economic sacrifice. If Jacobson is right, then it is only the fossil
fuel companies and their supporters that stand in the way of a solution to our environmental (and
economic) problems. The Sierra Club and prominent Hollywood stars have latched onto
Jacobsons work and promote it enthusiastically.
However, Jacobsons publications have provoked thoughtful criticism, some of it from
supporters of renewable energy, who argue that his 100 percent renewables by 2030 scenario
ignores hidden costs, land use and environmental problems, and grid limits (see here, here, and
here. Jacobson has replied to his critics, well, energetically (here and here).

At the other end of the opinion spectrum on renewable energy is Gail Tverberg, an actuary by
training and profession (and no shill for the fossil fuel industry), whose analysis suggests that the
more solar and wind generating capacity we build, the worse off we are from an economic point
of view. Her conclusion flatly contradicts that of this report, which aims to show that the more
renewables we build, the more money well save. Ecologist Charles Hall has determined that the
ratio of energy returned to energy invested in capturing solar energy with photovoltaic (PV)
panels is too low to support an industrial economy. Meanwhile the solar industry claims that PV
can provide all of societys power needs. Global wind capacity may have been seriously over-
estimated. But then again, maybe not .

In sum, if youre looking for quick and simple answers to questions about how much renewables
can do for us, at what price, and over what time frame, forget it! These questions are far from
being settled.

Theres a saying: For every Ph.D., there is an equal and opposite Ph.D. Does this mean science is
useless, and objective reality is whatever you want it to be? Of course not. However, politics and
cultural bias can and do muddy the process and results of scientific research.

All of this is inevitable; its human nature. Well sort through the confusion, given time and the
hard knocks that inevitably come when preconceptions veer too far from the facts. However, if
the more worrisome implications of climate science are right, we may not have a lot of time for
sorting, and our knocks may be very hard indeed.

* * *

Heres a corollary to my thesis: Political prejudices tend to blind us to facts that fail to fit any
conventional political agendas. All political narratives need a villain and a (potential) happy
ending. While Politicians B and A might point to different villains (oil companies on one hand,
government bureaucrats and regulators on the other), they both envision the same happy ending:
economic growth, though it is to be achieved by contrasting means. If a fact doesnt fit one of
these two narratives, the offended politician tends to ignore it (or attempt to deny it). If it doesnt
fit either narrative, nearly everyone ignores it.

Heres a fact that apparently fails to comfortably fit into either political narrative: The energy
and financial returns on fossil fuel extraction are decliningfast. The top five oil majors
(ExxonMobil, BP, Shell, Chevron, and Total) have seen their aggregate production fall by over
25 percent over the past 12 yearsbut its not for lack of effort. Drilling rates have doubled.
Rates of capital investment in exploration and production have likewise doubled. Oil prices have
quadrupled. Yet actual global rates of production for regular crude oil have flattened, and all new
production has come from expensive unconventional sources such as tar sands, tight oil, and
deepwater oil. The fossil fuel industry hates to admit to facts that investors find scary
especially now, as the industry needs investors to pony up ever-larger bets to pay for ever-more-
extreme production projects.

In the past few years, high oil prices have provided the incentive for small, highly leveraged, and
risk-friendly companies to go after some of the last, worst oil and gas production prospects in
North Americaformations known to geologists as source rocks, which require operators to
use horizontal drilling and fracking technology to free up trapped hydrocarbons. The energy
returned on energy invested in producing shale gas and tight oil from these formations is
minimal. While US oil and gas production rates have temporarily spiked, all signs indicate that
this will be a brief boom that will not change the overall situation significantly: society is
reaching the point of diminishing returns with regard to the economic benefits of fossil fuel
extraction.

And what about our imaginary politicians? Politician A wouldnt want to talk about any of this
for fairly obvious reasons. But, strangely, Politician B likely would avoid the subject too: while
he might portray the petroleum industry as an ogre, his narrative requires it to be a powerful one.
Also, he probably doesnt like to think that gasoline prices might be high due to oil depletion
rather than simply the greed of the petroleum barons. Motives can be complicated; perhaps both
feel the patriotic urge to cheer domestic energy production, regardless of its source and in spite
of evidence of declining returns on investment. Perhaps both understand that declining energy
returns imply really bad news for the economy, regardless which party is in power. In any case,
mums the word.

Some facts seem to fit one narrative or the other but, when combined, point to a reality that
undermines both narratives. What if climate change is an even worse problem than most of us
assume, and there is no realistic way to deal seriously with it and still have economic growth?
In the real world of US politics, many Democrats would agree with the first part of the sentence,
many Republicans with the second. Yet both parties would flee from endorsing the statement as
a whole. Nevertheless, this seems to be where the data are driving us. Actual climate impacts
have consistently outpaced the worst-case forecasts that the UNs International Panel on Climate
Change (IPCC) has issued during the past two decades. That means curbing carbon emissions is
even more urgent than almost anyone previously thought. The math has changed. At this point,
the rate of reduction in fossil fuel consumption required in order to avert catastrophic climate
change may be higher, possibly much higher, than the realistically possible rate of replacement
with energy from alternative sources. Climatologist Kevin Anderson of the UK-based Tyndall
Centre figures that industrial nations need to cut carbon emissions by up to 10 percent per year to
avert catastrophe, and that such a rapid reduction would be incompatible with economic
growth. What if Anderson is right?

The problem of transitioning quickly away from fossil fuels while maintaining economic growth
is exacerbated by the unique characteristics of different energy sources.

Heres just one example of the difficulty of replacing oil while maintaining economic growth.
Oil just happens to be the perfect transport fuel: it stores a lot of energy per unit of weight and
volume. Electric batteries cant match its performance. Plug-in cars exist, of course (less than
one percent of new cars sold this year in the US will be plug-in electrics), but batteries cannot
propel airliners or long-haul, 18-wheel truck rigs. Yet the trucking and airline industries just
happen to be significant components of our economy; can we abandon or significantly downsize
them and grow the economy as we do so?

What about non-transport replacements for fossil fuels? Well, both nuclear power stations and
renewable energy systems have high up-front investment costs. If you factor in all the financial
and energy costs (something the solar, wind, and nuclear industries are reluctant to do), their
payback time is often measured in decades. Thus there seems to be no realistic way to bootstrap
the energy transition (for example, by using the power from solar panels to build more solar
panels) while continuing to provide enough energy to keep the rest of the economy expanding. In
effect, to maintain growth, the energy transition would have to be subsidized by fossil fuels
which would largely defeat the purpose of the exercise.

Business-friendly politicians seem to intuitively get much of this, and this knowledge helps fuel
their continued infatuation with oil, coal, and natural gasdespite the increasing economic
problems (even if we disregard the environmental problems) with these fuels. But these folks
way of dealing with this conundrum is simply to deny that climate change is a real issue. That
strategy may work for their supporters in the fossil fuel industries, but it does nothing to avert the
worsening real-world crises of extreme temperature events, droughts, floods, and stormsand
their knock-on impacts on agriculture, economies, and governments.

So those on the left may be correct in saying that climate change is the equivalent of a
civilization-killing asteroid, while those on the right may be correct in thinking that policies
designed to shrink carbon emissions will shrink the economy as well. Everybody gets to be
correctbut nobody gets a happy ending (at least as currently envisioned).
Thats because nearly every politician wants growth, or at least recognizes the need to clamor for
growth in order to be electable. Because growth, after all, is how we currently define our
collective, national happy ending. So whenever facts lead toward the conclusion that more
growth may not be possible even if our party gets its way, those facts quickly get swept under the
nearest carpet.

Masking reality with political rhetoric leads to delays in doing what is necessary-- making the
best of the choices actually available to us. We and our political leaders continue to deny and
pretend, walking blindly toward environmental and economic peril.

* * *

We humans are political animalsalways have been, always will be. Our interests inevitably
diverge in countless ways. Further, much of the emotional drive fueling politics comes from
ethical impulses: perhaps for genetic reasons, different people assign different ethical principles
a higher priority. Thus one politicians concern for fairness and anothers passion for national
loyalty can glide right past each other without ever shaking hands. Religion can also play a role
in partisanship, along with the legacies of economic and social exclusion, historic rivalries,
disputes, and atrocities. None of this can be dispelled with the wave of a magic wand.

Moreover, political engagement often leads to welcome outcomes. When people organize
themselves to effect change, the result can be expansions of civil rights, womens suffrage, and
environmental protection. On the other hand, when people fail to speak up, social power tends to
become monopolized by a small minority--and that never ends well. So, lets not withdraw from
politics.

But how to work effectively in a politically polarized environment? Hyper-partisanship is a

problem in approving judicial appointees and passing budgets, and failure to do these things can
have serious consequences. But when it comes to energy and climate, the scale of what is at
stake runs straight off the charts. The decisions that need to be made, and soon (ideally 20 years
ago!), on energy and climate may well determine whether civilization survives. The absence of
decisive action will imperil literally everything we care about.

Energy is complicated, and there can be legitimate disagreements about our options and how
vigorously to pursue them. But the status quo is not working.

Ive struggled to find a hopeful takeaway message with which to end this essay.

Should I appeal to colleagues who write about energy, pleading with them to frame discussions
in ways that arent merely feeding red meat to their already far too polarized audiences,
encouraging them to tell readers uncomfortable truths that dont fit partisan narratives? I could,
but how many energy writers will actually read this essay, and how many of those are willing to
examine their preconceptions?

Perhaps the best I can do is point out the existence of a small but enthusiastic subculture that
actually understands these issues. This subculture is exemplified by Transition Initiatives
promoting small-scale local responses to the global challenges of climate change, economic
hardship, and shrinking supplies of cheap energy and the premise that life can be better without
fossil fuels. For better or worse, this subculture is practically invisible to political elites and the
mainstream media (except perhaps in parts of the UK).

Perhaps its fitting that this essay leaves both author and readers unsettled and uncomfortable.
Discomfort can sometimes be conducive to creativity and action. There may be no solutions to
the political problems Ive outlined. But even in the absence of solutions there can still be better
adaptive behaviors, and judo-like strategies that achieve desired outcomesones that could
conceivably turn the tide on intractable global problems such as climate changewithout
directly confronting existing societal power structures. These behaviors and strategies can be
undertaken even at the household scale, but were likely to achieve much more if we collaborate,
doing what we can locally while using global communications to compare notes and share our
successes and challenges.

The Geo-Politics of Energy

By Michael Brenner
The current turmoil in the greater Middle East confirms the regions centrality in world affairs as
the place where ideological and strategic political forces intersect the established patterns of
economic interdependence. Energy and finance are the twinned dimensions of that deep and
intricate connectedness that are vulnerable to disruption by conflict, impaired government
authority or calculated attempts to use control of energy resources as a diplomatic weapon.
Consider these plausible scenarios that could arise from current crises. State failure due to civil
strife a la Syria in a major oil exporter: Libya, Iraq, Algeria, Nigeria. Military conflict that leads
to a physical blockage of oil commerce: war with Iran accompanied by a closing of the straits of
Hormuz. Accession to power of a regime so hostile to the West as to curtail exports: Saudi
Arabia, Russia. Interference with major pipelines: Russia, Syria.
As a consequence of turbulent political conditions, the element of uncertainty in international
energy markets has increased markedly. That is the result of political developments that impinge,
directly or indirectly, on the security of supply. They are the Arab Spring and its aftermath of
instability in major oil exporting countries; the stringent boycott placed on oil and natural gas
exports from the Islamic Republic of Iran; the heightening of regional tensions across the Middle
East associated with the contest between loosely configured Shiite and Sunni blocs led by Iran
and Saudi Arabia respectively. Adding to the uncertainty over the middle and longer term are
market developments. These include growth in demand from the burgeoning economies of
China, India and other Asian economies; and the increase in the supply of hydro-carbon fuels
through the exploitation of new sites and the application of new production techniques, e.g.
hydraulic fracturing. Those new sites, and the distribution pipelines being constructed and
negotiated to major consumers, are also located in areas of political uncertainty: Central Asia and
the Caspian Basin, and Russia.
The foreign policy and energy policy issues that arise from the intersection of energys political
geography and other international concerns of a security and political nature are multiple and
multi-dimensional. A variable but everywhere substantial element of indeterminacy marks the
future even as the saliency of these issues becomes more acute. The questions of analysis,
interpretation and policy choice that we face have precedent in the oil crises of the 1970s and
early 1980s. At that time, it was the OPEC oil embargo and the Iran Revolution whose
repercussions forced a reconceptualization of energy security and a rethinking of strategies to
anticipate, avoid and cope with supply crisis. Moreover, the restructuring of the world oil
markets had lasting effects on the dynamics among suppliers, consumers and intermediaries.
Analyses done during that period clarified new patterns of interaction and laid the basis for
responses at both the national and multilateral level.
Today a similar effort is in order. It would begin with identification of new geopolitical factors.
The next step is to trace the implications for established arrangements and policies. An important
ancillary element would be design of monitoring devices for following changes of key variables
in the external and policy environment and tracing their chain of effects. On those foundations,
one is in a better prepared to formulate and assess policy choices.
So what generalizations does this situation permit us?
One important implication is that a close monitoring of fluid politics, fluid policy, and a
shuffling of government elites is imperative. With less to be taken as given, premiums should be
placed on first-hand knowledge as to the state of play among factions and personalities within
governments, developments in particular sectors of national economies, in the interplay among
domestic and regional/international trends.
CONTEXT
A snapshot of the energy universe as it exists today shows a number of noteworthy features.
The International Energy Agency has published comprehensive statistics in two reports that
provide us with the requisite illustrative data.1 Conveniently, one presents a times series that uses
1971 as a baseline, and the latest data is from 2010. The World Energy Outlook 2012, the other,
updates and assesses a comprehensive data set. The most salient points are these.
1. World demand for energy has doubled over the past 40 years.
2. Supply also has doubled. Therefore, net price variations do not express significant shifts in the
supply/demand ratio.
3. Energy consumption worldwide has risen to 88 mbd. It is projected to grow to nearly 100mbd by
2020. The breakdown of principal consumers indicates a significant shift in regional shares
represented by the drastic increase in use by the rapidly developing economies of Asia. China
alone accounted for nearly 50% of the global rise in energy consumption between 1990 and
2008.2
4. The largest contribution to increases in supply as well as demand stems from dramatic changes
in China by far. The second largest production increase has occurred in the United States. Oil
production in the United States has risen to nearly 11 million barrels per day, placing it second
only to Saudi Arabia. It is expected to surpass Saudi Arabia in the next few years. US production
has increased at a rate of 7% per annum due primarily to the rapid exploitation of shale oil.
Moreover, a more dramatic expansion of natural gas extraction using hydraulic fracturing has
meant that North American energy production is growing faster than another other region.
5. On a regional basis, the main changes are a decline of 19% in the share of OECD countries, a
12% increased share in China and a 6.5% increase elsewhere in Asia.
6. In the oil sector, regional shares have been relatively constant with a 5% decline in the Middle
East share being the only noteworthy change.
7. The United States imports 45% of the oil it consumes. That is a drop from the high of 54 %
reached in 2006. In 1973, it imported 23%. In absolute terms, U.S. imports have declined by 17%
from 2006 to 2012. The IEA forecasts the United States becoming a net oil exporter by 2030.
8. Oil production capacity has increased to 93 mbd, of which:*
o Crude Oil, 78
o NGLs 15
 9. The progressive increase in demand follows a trajectory that deviates noticeably only in the two
years following the great financial crisis**
10. The shares of world total primary energy supply by major fuel (Mtoe) since 1971 have not been
constant. Oils share drops by 12%; natural gas sees a roughly 5% increase as does nuclear.
11. Exports to the United States from Canada have risen substantially in both absolute and relative
terms (i.e. as a fraction of U.S. imports).
12. Fossil fuels will remain dominant in the global energy mix between today and 2035.
13. Iraq makes the largest contribution by far to global oil supply growth.3
14. Water availability will be the main constraint on the viability of expanded energy projects.
*For shares of energy production and consumption by source, see Appendix A.
**From 2001-2010, world oil demand increased by a compounded average growth rate of 1.4
percent. In that decade, demand faced two years of negative increases in 2008 and 2009, as a
consequence of the global financial crisis, and two years of spikes, when it exceeded a 3 percent
growth year-on-year: in 2003, due to a recovery after two years of poor increases, and in 2010,
when it
bounced back after the financial turmoil. In any case, the average growth of demand registered in
the 2000s was remarkably similar with that of 1990s. (Leonardo Maugere, Geopolitics of
Energy Project Belfer Center for Science and International Affairs, John F. Kennedy School of
Government, June 2012, Discussion paper #2012-10)

THE GEO-POLITICS OF ENERGY circa 2012

At the geopolitical level, there have been some dramatic changes. Foremost among them is the
break-up of the Soviet Union accompanied by autonomy for former satellite countries in Europe.
Among the former Soviet Republics that have become independent number major producers of
oil and natural gas are: Azerbaijan, Turkmenistan, Kazakhstan and Uzbekistan. They are
experiencing varying, and fluctuating degrees of political stability. All have perpetuating the
authoritarian patterns and personalized leadership inherited from the old USSR. Their relative
poverty has meant that issues of financing exploration and development have come to the fore.
Their relatively limited access to sophisticated technology creates an analogous need for foreign
assistance. Their location in the interior of the Asian landmass heightens issues of export
distribution via pipelines.
The routing of pipelines is a contentious matter involving the economic interests of large and
energy hungry nations of Japan, China and India.
Other stakeholders motivated by a combination of political and economic/energy concerns
include a Russia bent on maximizing its influence in the region and beyond via its own energy
exports and control of distribution networks, Turkey which harbors an ambition to become an
energy hub as well as to secure energy for its own development, the European Union seeking to
expand and diversify sources of energy, and the United States which sees its global position and
political interests, as well as energy security, bound up with all these developments.
Energy Security
Energy security in simplest terms can be defined as the dependable provision of the energy
resources requisite for meeting a countrys needs. This limpid formulation leaves much unstated.
The various forms of energy must be stipulated: petroleum, natural gas, coal, hydro-electric, non-
conventional along with sub-categories that have a bearing on accessibility and utilization. The
degree of fungibility among these energy types also is important. All of the above noted can be
used to generate electricity; only one can be used to power vehicles. The latter statement is valid
for any policy relevant time frame. Then there is the matter of time horizons.
The three standard methods for buffering oneself against supply shortfall (caused by whatever
reason) are: substitution, diversification of suppliers, and conservation. To be effective, any of
them needs years to be implemented. They cannot be put in place to deal with sudden
emergencies. The sole exception is the Strategic Petroleum Reserve (SPR) maintained by the
United States and other industrial nations.4
There is the further question of what exactly constitutes needs. By one measure, it can be defined
as the energy required to keep economic infrastructure and crucial sectors of the economy
functioning close to the existing level. How close can only be assessed by circumstances,
including domestic socio-political ones. Even a marginal reduction in supply will result in sub-
optimal economic performance. An additional consideration in this regard is energy use for
convenience and comfort which may not register directly in the economic statistics. Fuel for
private automobiles is the outstanding example. During the oil emergencies of 1973-74 and
1979, there were mandated cutbacks on gasoline purchases through various indirect rationing
methods. They greatly inconvenienced motorists although the restrictive measures fell far short
of full blown rationing. More dire steps could generate a level of popular discontent that would
result in high pressure lobbying which carries the potential to impinge of national policy choices.
Whether it does reach a high degree of intensity, and how officials react to it, would turn on the
popular sense of national need and the threat to it.
A final point of elaboration concerns the relevant unit of analysis. From a detached vantage
point, one could view the global economic system as an integral entity while noting patterns of
cause and effect. Those causes and effects should be broken down by country. National
governments are the only effective decision-makers, the only legitimate decision-makers, and the
only accountable decision-makers. They operate within a context where they both wield more
power within the confines of the state (and, for the strongest, on others) and equally important
their actions are scrutinized by the populace for whose welfare they are supposedly exercising
their authority.
There is a vital qualifier to this concept of sovereignty. In an integrated world economy,
particularly in the energy domain, governments ability to manage their affairs are constrained by
the workings of world markets and by the actions of other governments. Most obviously, a
calculated move by producer governments to curtail supply (as occurred in 1973) is a move that
impinges on and constricts the policy options of consumer states. There is also the possibility
that consumer states will follow beggar-thy-neighbor policies that militate against a concerted
strategy of managing distribution of available supplies on an equitable basis, i.e. shares set as a
fixed fraction of pre-crisis use. The British government of Edward Heath took this tack in
pressuring BP to favor its home country in divvying up reduced supply. He failed because BP, a
vertically integrated MNC that dealt with a wide range of countries, had compelling commercial
interest not to go along.
BPs Board of Directors responded to mounting pressure from 10 Downing Street by offering to
adjust supply allotments in the U.K.s favor if the PM were ready to stipulate the countries and
quotas and then BP would inform those governments that the cutbacks had been decided by
Her Majestys Government. Mr. Heath folded his cards. He integrated world energy market at
the same time defeated the plan of the Arab OPEC members to target particular countries,
especially the Netherlands and the United States. The producers simply could not direct the
passage of oil from the wellhead through several downstream stages to its delivery at a given
national port.5
The conclusion, reinforced by subsequent developments, is that governments have lost a very
significant measure of their influence over crucial elements in the economic equation. They have
lost it not to one another but to the market. The market is an amorphous, largely undirected and
wholly unaccountable entity. This is a cardinal feature of the global energy picture. Economic
interdependence has a bearing on economic security in yet another respect. Economic conditions
in one country are heavily dependent on economic performance in other major national
economies. If the European Union, Japan, China or the United States experiences a downturn, it
will have an adverse effect on everyone else. The precise degree of sensitivity to external
developments varies. Some countries, e.g. Germany, have a larger share of their economic
activity directly associated with imports and exports than some others, e.g. the United States. For
the former it is 44%, for the latter it is 16%. But even the United States is unable to insulate itself
from macroeconomic developments among the largest national economies. So, by implication,
energy security for the United States encompasses the energy security of the developed world
generally if the measuring rod is performance of the global macro economy.
It has been argued that the evolution of the global economy can be understood in terms of the
implicit contest between State and Market. Certainly, it is the latter whose influence in shaping
and directing international intercourse has grown markedly in relative terms. This multi-faceted
phenomenon is correlated with the most sustained, and widespread, expansion of economic
activity that the world has ever known. It also has led to the incongruity of a world where
countries are functionally integrated while political authority remains fragmented. That
discrepancy is the source of a generalized sense of insecurity and vulnerability that can be
somewhat mitigated through prudent action by national government but cannot be eliminated.
The systemic efficiency for the world viewed as one integrated world system has been
maximized by the progressive opening to the free flow of goods, resources, capital, and
technology without regard to political boundaries. By concentrating on the efficiency standard
alone, however, we do pay a price in stability. That is because the international markets in every
economic sphere are not self-equilibrating; no more so than national markets. Rule setting and
regulation are essential to their smooth functioning and the lowering (if not total elimination) of
the risks that they pose. Yet mechanisms for doing so are at best rudimentary. The most
significant innovations involving the relinquishing of some measure of sovereign power to an
international body are the IMF in the monetary sphere and the World Trade Organization in the
commercial sphere. There are no counterparts in the energy sphere that set and enforce codes of
conduct other than on an informal basis. Moreover, the dispersion of political authority opens the
possibility for unilateral intervention by national governments for their self-interested purposes
that may or may not serve the interests of other countries and/or market stability. Those
hypothetical interventions may be direct (embargo/boycott) or indirect manipulations of prices
through subvention, tariffs or non-tariff barriers (NTB) to trade. In addition, the motivations for
taking such action could be political as well as economic, e.g. the 1973 oil embargo. Today, the
world oil market is being manipulated by the United States and its allies through a boycott of
Iranian oil exports. It covers as well investment in development of the countrys entire energy
sector and is supplemented by other measures severely restricting Irans ability to avail itself of
world financial markets and banking services. Its adverse effects on consumers are being
alleviated by the willingness of Saudi Arabia along with other Gulf producers to raise output in a
to date successful effort to keep oil prices from skyrocketing. Those producer states are
motivated by the same political concerns as is the United States.
The general point to bear in mind is that in an international system populated by sovereign states
there is a ubiquity of conflict situations even though conflict in any particular instance will
have particular causes. In other words, the current structure of the world political economy
provides the necessary condition that allows economically disruptive action to be taken while the
sufficient condition is provided by the attitude and will of the systems component political units.
Set in this analytical context, the energy sector demonstrates some singular features. They are
most striking in regard to petroleum. First, a disproportionately large share of reserves and
existing production capacity is located in politically volatile regions; the Persian Gulf, North
Africa, the Caspian Basin, Central Asia and the North Sea. In addition, the worlds second
largest producer/exporter, Russia, has a leader who sees energy as a principal instrument of
foreign policy. Post-Soviet Russia being a state discontented with the present international status
quo and keen to increase its influence across the domain of the defunct USSR this is strong
incentive to interfere with energy market dynamics. Moscow had pursued a relentless, two-
pronged strategy aimed a binding the energy rich countries of Azerbaijan, Turkmenistan,
Kazakhstan and Uzbekistan to Russia: encouraging the development of pipeline networks that
run through Russian territory; and countering energy sector investment by offering favorable
deals with state directed Russian companies. This phenomenon confirms the precept that
political volatility takes two forms, internal and external. The latter encompasses major security
interests of both regional and great powers. Furthermore, domestic turbulence and external
strains intersect in multiple ways.6
Second, commerce in hydrocarbon fuels is marked by the combination of a very high degree of
functional integration and the dominant position of very large multination corporations. The
latter are vertically integrated and operate transnationally. Their degree of national identity, and
susceptibility to guidance by home governments, differs considerably. They can be placed along
a continuum of autonomy from governmental influence with Chinas China National petroleum
Company (CNPC and Russias Gazprom, Rosnet and Lukoil at one end and Shell at the other).
These powerful entities not only have great market power; they also possess technological and
financial assets that can be leveraged to enhance their role in winning contracts, in exploration
and exploitation of new energy sites.
Hydro-carbon fuels in Central Asia? Valuable, certainly. Do American companies have to own
or lease them we have to own them, or control the governments of producing states? No. How
important is preventing China or Russia from doing so? Somewhat. To deny either a major direct
stake there is to set ourselves another impossible dream. Furthermore, the global oil markets
integration makes all oil fungible. The geo-strategic fears voiced in some circles have an oddly
stale smell about them, redolent of early 20th century intrigue in the area around Baku. Still, it is
worthwhile supporting the domestic stability and autonomy of Kazakhstan, Turkmenistan and
Uzbekistan to the modest degree that we can. The relative stability of the first two, we should
note, correlates with the absence of major American involvements of a tangible kind. By
contrast, Washingtons intervention in the roiled politics of Kyrgyzstan to protect its stake in the
Manas air base (promoting disgraced ex-president Bakiyev) has contributed to the bloody civil
strife. Following our current course has the potential only to undermine rather than strengthen
such stability as exists in the region.
The Energy Weapon
Nation states remain the most important actors in the geopolitics of energy. They retain the
power and at home the authority for initiating actions that derive from their self-defined national
interests. At the same time, they are enmeshed in a complex energy international system wherein
petroleum and gas become increasingly fungible as they move downstream through a number of
stages from lifting/extraction to sale of consumable products. The readiness of a given state to
use energy dealings as a tool to advance a strategic agenda diplomatic or economic will be
determined by two sets of factors: the tangible and intangible. The tangible include its economic
needs and capacities. The intangibles cover a range of considerations from its tactical
calculations through broad national interests to domestic political contingencies. There are
internal and external aspects to both.
Among the internal elements in the policy mix is the revenue needs of an exporting country. Any
significant reduction in earnings decreases the funds available to a government. The factors
influencing how salient the impact on policy-making include: its capital reserves, its degree of
economic diversification, its standard of living and the populaces sensitivity to any manifest or
latent danger to its reduction. By these criteria, there is a striking contrast between Saudi Arabia
and Iran for examples. The former has enormous reserves.
Little diversification, a relatively high standard of living combined with a quiescent population.
Saudi leaders anxieties as to the last point in the aftermath of the Arab Spring have prompted
them to raise public spending for social programs and general stimulus at a time of global
economy is sluggish. Iran, by contrast, has depleted its reserves, commerce has been curtailed
across the board, and there is a wide gap between living standards and expectations that already
has cut tolerance for further stringencies to the bone.
The question of a countrys ability to use the oil weapon depends in part on its degree of
influence in the world market. Among suppliers, the larger a countrys share of aggregate
exports, the greater its potential influence. That can be compounded by acting in concert with
other exporters. That is what occurred in 1973 when the Arab members of OPEC together cut
back on petroleum exports while trying to target specific countries.
A. The readiness of a given state to use energy dealings as a tool to advance a strategic agenda
diplomatic or economic will be determined by two sets of factors: the tangible and intangible.
The tangible include its economic needs and capacities. The intangibles cover a range of
considerations from its tactical calculations through broad national interests to domestic political
contingencies. There are internal and external aspects to both.
Among the internal elements in the policy mix is the revenue needs of an exporting country. Any
significant reduction in earnings decreases the funds available to a government. The factors
influencing how salient the impact on policy-making include: its capital reserves, its degree of
economic diversification, its standard of living and the populaces sensitivity to any manifest or
latent danger to its lowering. By these criteria, there is a striking contrast between Saudi Arabia
and Iran for examples. The former has enormous reserves. Little diversification, a relatively
high standard of living (sustained by government programs) combined with a quiescent
population. Saudi leaders anxieties as to the last point in the aftermath of the Arab Spring have
prompted them to raise public spending for social programs and general stimulus at a time when
the global economy is sluggish. Iran, by contrast, has depleted its reserves, commerce has been
curtailed across the board, and there is a wide gap between living standards and expectations that
already has cut back severely tolerance for further stringencies.
B. The question of a countrys ability to use the oil weapon depends in part on its degree of
influence in the world market. Among suppliers, the larger a countrys share of aggregate
exports, the greater its potential influence. That can be compounded by acting in concert with
other exporters. That is what occurred in 1973 when the Arab members of OPEC together cut
back on petroleum exports while trying to target specific countries.
At the present time, the picture is especially complicated by the turbulence in the Middle East
that has unsettled regional politics and domestic politics alike. For Saudi Arabia, a more acute
sense of vulnerability on a number of fronts makes the promotion of stability its priority. That
pertains certainly to international energy markets. Its stepping forward to raise production as an
offset to the loss of boycotted Iranian oil conforms to its thinking about the imperative to ensure
market stability. It conforms as well to its political interest in bringing the Iranian leadership to
heal. By so using its surge capacity, Saudi Arabia also nurtures its image as an international good
citizen devoted to global stability and not only to advancing its national interests.
Generally speaking, nearly all major oil producers are in a position where there is an
overwhelming economic logic to maximize revenues on a stable basis. Variations in standards
of living and forms of government do not exercise enough independent influence on policy-
makers to alter that logic to any marked degree. This includes Kuwait, other Gulf producers,
Iraq, Libya and, beyond the Middle East, energy surplus countries in the Caspian Basin and
Central Asia.
The same holds true for Nigeria, Indonesia, Mexico and Venezuela where the need to generate
national income to meet the needs of a poorer population are even more exigent.
In these latter regions, external interests are salient only insofar as they impinge on internal
politics. The Central Asian leaders, heirs to the centralized power of Soviet era secular regimes,
see fundamentalist Islamic forces as the one threat to their rule. Hence, their acute concern about
developments elsewhere, e.g. Afghanistan, Iran, Pakistan, Iraq. In those places, they are partisans
of stability and opponents of Salafist movements in all forms.
See Appendix B for an Appraisal of the Political Outlook in the Middle East

HOW TO THINK ABOUT SECURITY & RISK

The purpose of political risk analysis is quite simple: to provide decision-makers with an
additional tool to aid them in making decisions about the allocation of investment resources
among various alternative opportunities.7 For government leaders, crucial decisions involve
defining and prioritizing stakes, designing strategies to advance them, deciding on how to
distribute political capital among purposes and policies, and preparing contingency plans. For an
international business, the counterparts are taking crucial decisions involve the structuring of its
asset portfolio by degree of risk and concentration; the preferred relationship between return and
the assessment of country risk; and the development of a marketing strategy.
The design of a system for political risk assessment is not a purely academic task. It must be
guided by, and structured to meet the requirements of the business organization that will be using
it. Methods employed, data sources, and the form of the systems output should reflect, to a
substantial degree, that organizations interests and its capabilities. However, the system should
not sacrifice quality of product for the sake of organizational convenience.
Most political risk systems share certain characteristics. They use diverse measures to determine
the extent of political/social disorder and the current or potential level of political instability.
They seek, thereby, to make an estimate of the political risk to business interests. Finally, they
normally attempt to rank countries against each other by some numerical rating. These objectives
can be easily stated, but they are not so easily met.
The obstacles to building a stringent, effective analytical system for evaluating political risk are
three in number. Data is often either unavailable or inherently ambiguous. Social theories and
models are not refined enough to allow for unqualified judgments as to the significance of social
and political phenomena, however diligently the data is collected and skillfully assayed. Also,
political forecasts must always be discounted for unpredictable events and individual decisions.
Accepting these limitations does not negate the value of systematic, informed political
assessment.
A properly designed system can reduce uncertainty about political conditions, and clarify
prospects. By so doing, it lowers worry costs, permits more measured and deliberate business
decisions, and facilitates the monitoring of country conditions.
Under the changeable and uncertain conditions that are a feature of the Middle East, and other
major oil producing regions, there is value in having available formal analytical devices for
making more informed tactical decisions and drafting longer term plans. As noted, uncertainty is
a compound of information scarcity, unpredictability, and discretionary response potential.
The last refers to the ability of a
n institution to influence: a) the occurrence of a particular event and/or how it registers on the
relevant policy environment; and b) the capacity to adapt to the resulting changes. Logically
speaking, the more knowledge available in a timely fashion about key elements in the equation
makes prediction more reliable, thereby increasing DRP. Positive DRP, in turn, enables one to
catalogue and winnow information more effectively. That instills confidence in the decisions
taken since their analytical basis is made explicit; moreover, one is reasonably confidence that
the decision taken is the best possible under the circumstances. That reduces worry costs. The
term worry costs refers to the amount of management time that must be devoted to continual
monitoring and reassessing of conditions that could impact a political or financial commitment.
RISK MANAGEMENT STRATEGIES
DIVERSIFICATION
In the realm of foreign policy, a strategy of political diversification turns on the ability to replace
one partnership with another at tolerable diplomatic cost. The classic world of balance of power
(operative roughly from the 17th through the 19th century) was conducive to the making,
unmaking and remaking of alliances. Changing partners was not promiscuous but commonplace.
The enabling features of that system were : the considerable number of players several of
whom were of approximately equal strength and none of whom towered over the others; all were
authoritarian monarchies which concentrated power in the hands of a few individuals who could
make these decisions with little regard to public opinion however the relevant public was
defined; political ideology was not an issue and therefore did not stand in the way of realpolitik
calculations; statesmen shared a high culture and, even more important, a political culture;
popular nationalism, too, was still on the distant horizon and therefore not a factor; and there was
no one (piece of real estate) location so vital that it greatly constrained the game of shifting
alliances.
Todays geopolitics of energy displays nearly antithetical traits on every count. So diplomatic
diversification offers many fewer possibilities. Oil and natural gas reserves are where they are.
Strategy in those areas has the energy stake as its pivot. Other considerations of a less concrete
nature do come into play: terrorism, nuclear proliferation and the Palestinian issue being the
outstanding ones. Whereas they influence and in turn are influenced by the energy stake, they are
subordinate to it. So what are the opportunities for political diversification however limited
they might be?
Three are identifiable. First, one can seek to minimize the value of a given energy rich state for
achieving other objectives. That is to say, where ties of energy dependence are reinforced by
security cum diplomatic needs, loosening of the former has collateral costs. Where non-energy
needs are not salient, the United States gains some flexibility in bilateral dealings insofar as one
set of interests is not held hostage to another. For example, a United States that did not have
critical military facilities in Bahrain could be less inhibited in speaking candidly about the
Khalifa familys violent crackdown on its Shiite population. A chance in the American position
would have two salutary effects: it could some credibility to its pro-democracy image, and it
could convey the message that the United States will not always subordinate its political interests
to its admittedly multi-dimensional interest in having Saudi Arabia as a its critical strategic
energy partner and swing producer.
A major incentive behind the United States push to accelerate production of oil and natural gas
in the Caspian Basin and Central Asia is to shift the locus of export capability farther from the
volatile Persian Gulf. The building over the necessary pipelines through the territory of countries
who have friendly relations with the United States are a requirement for maximizing the benefit
from this part of a diversification strategy. Hence, a priority is given to prevent tie-up of new
sources with existing or envisaged pipelines that pass through Russia. A similar logic explains
the lack of enthusiasm for construction of large capacity lines to China. A latent fear of
politically motivated control of energy supply, at any stage, still lurks in the back of many minds.
This holds despite the reality that, in a world where hydrocarbon energy supplies are fungible in
a highly integrated global market, increased production anywhere will have a desirable effect on
prices while reducing the shock effect of supply disruption (for whatever reason) in any one
region. The more direct and unimpeded the access to major sources does in itself enhance energy
security.
SUBSTITUTION
Substitution understood as replacement of sources encounters most of the same constraints and
limitations as does a diversification strategy. Indeed, it is a more drastic measure. For it connotes
than another party could provide whatever the existing party now provides on a par basis. That is
unrealistic in todays world for the reasons cited earlier.
Substitution understood as generating and developing new forms of energy, by contrast, could
shift the parameters of the global energy system. For were those forms within the control of the
United States, and each major consuming country, the resulting decrease in the reliance on
external sources would move the consumer/supplier balance strongly in favor of the consumer.
The ramifying effects would be profound- economically and politically.
We should be cautious, though, is assessing what that conjectured gain would be. Lowered
dependence can be measured in physical terms. Gauging what it means in terms of the politics
and psychology of a relationship is far more difficult. This is especially so where there is a
complicated interlacing of security/ political interests and economic ones.
CONSERVATION
Conservation as a foreign policy concept has two meanings: the husbanding of political capital
so that it is available for application in the most important ventures where the national stakes are
highest; and, seeking the most cost effective means to achieve objectives. The parsimony
principle governs both. Occams Razor tells us that the simplest method to achieve stipulated
objectives should be preferred. Their application to American foreign policy in reference to
places rich in energy resources would mean observing these precepts:
Be assiduous in discriminating between those aspects of a relationship that have a direct
bearing on the meeting of national interests and those of a marginal nature. One example is
provided by the oil-rich Arab states of the Persian Gulf Saudi Arabia, Kuwait, the Emirates. A
parsimonious approach would stress their political stability which translates into secure
agreements that militate toward mutually beneficial commercial dealings. It would downplay
the value and/or super imposing political values and institutions uncongenial to local
circumstances. The United States security stake in the region points to a similar logic.
Other interests should also be taken into account. Two stand out. First, by its close identification
with autocratic regimes the United States risks alienating alienating potentially significant
political forces. Violent salafist groups, i.e. jihadis, would be more inclined to target the United
States thereby raising the risks of terrorism. That is the context of al-Qaedas emergence as a
menace to the United States. A second quite different force is represented by democratic
secularists (or, more accurately democrats whose interpretation of Islam is compatible with
more or less secular, constitutional governance). Their too would see the United States as an
obstacle to achieving their ambitions. In their case, the danger is not retaliation but rather the
lessening of an opportunity to see the coming to power of people whose compatibility with the
United States and the West) goes beyond narrow utilitarian interests.
The inevitable trade-offs that arise from these circumstances should be made pragmatically
rather than derived through a deductive reasoning process that disregards or downplays
variations of national position and conditions.
A sober recognition of the limitations on the extent to which the United States can influence the
outcomes of internal politics should permeate our foreign policy. The overwhelming evidence of
the past twelve years highlights the heavy penalties that the United States pays by acting on the
sanguine conviction that it is within our power to shape the affairs of other societies. This is
especially so in the Islamic world where there is little in the way of shared history, culture or
political philosophy.
A parsimonious approach benefits from the cultivation of personal relationships in places where
authority resides largely in the hands of a few individuals. Drawing on those relationships can
facilitate the reaching of practical objectives with less expenditure of financial capital or political
capital in the form of grandiose (and costly) projects that entail more imposition than
cultivation. Tradeoffs are inescapable. It also spares us the highly public demonstration of what
we are about which can, and has, resulted in the loss of credibility and status when things go
awry.
LOWERING THE STAKES
The elements of the strategy sketched under the heading of conservation imply a lowering of
stakes. Or, more exactly, applying our efforts to a more narrowly construed set of concerns
which are grounded on our central interests and goals. Everything is connected to everything else
in this world especially in the intricate world of Middle Eastern affairs. Consequently, one can
see how a wide array of factors have a bearing on those attitudes and actions which engage
directly our interests. Prudence suggests that we refrain from trying to inflect more than a
handful of most important elements concentrated on those operate closest to points of tangible
action. Resources and capabilities are limited, the environment is not congenial to our
promiscuous interventions, and the often silent costs of unrewarded (and/or unwelcome)
interference can be prohibitively high.
A few points in this regard can be made with some confidence. First, the costs incurred by
United States political engagements in the Greater Middle East along with its accompanying
military presence are high. Resolution or even significant amelioration of the problems
associated with them would have a salutary effect on our energy dealings in the region. As
argued above, the net effect of having multiple interests at stake is to weaken our hand in the
energy sphere. Yes, the dependence of the Saudis and others on the United States for defense
also gives us some leverage. But the manifest risk to the United States are greater because they
are two-fold. At one and the same time, we can be more readily manipulated into acting as if the
interests of local parties are ipso facto the same as our own; and our presence generates a
considerable amount of anti-America sentiment among those who bear us ill will and can
exercise influence on regional governments. It follows that deactivation of the neuralgic conflict
with Iran, the festering Palestinian situation, and the easing of Sunni-Shiite tensions would be to
the American advantage in the energy sphere.
Second, the ability to position the United States so that it could deal with energy supplier states
in strictly commercial terms would have the further beneficial effect of reducing openings for
other powers to exploit diplomatic frictions that stem from our heavy engagement.
CONCLUSIONS
The number of factors in the energy security equation is growing, their points of intersection
increasing, and causal chains lengthening
This is related to deepening economic interdependence globally. That integration creates
mutualities of economic interest
Progressive constricting of economic autonomy creates a conservative bias that places
premiums on international stability in all domains
States they see themselves as challenged domestically have an interest in maximizing export
revenues on a stable basis
Those states are inclined to contain/avoid international political conflict except where
paramount national interests are engaged
A reduced United States reliance on energy imports to meet national needs does not in itself
automatically increase leverage on exporters for either commercial or political purposes
The correlation between import dependence and political autonomy is vague and indirect
There is no identifiable threshold of dependence below which concrete advantages accrue
Given the integration of global energy markets with a wider context of economic
interdependence, attention must be paid systemic characteristics as well as national ones
The feasibility of targeting a particular country for boycott or embargo will turn on the tightness
of the market and the availability of producer surge capacity on a world-wide basis
NOTES
1. International Energy Agency OUTLOOK 2011(Paris: IEA June 2011)
Producers, net exporters and net importers of crude oil
Producers Mt world
Saudi Arabia 517 12.9
Russian Federation 510 12.7
United States 346 8.6
Islamic Rep. of Iran 215 5.4
Peoples Rep. of China 203 5.1
Canada 169 4.2
United Arab Emirates 149 3.7
Venezuela 148 3.7
Mexico 144 3.6
Nigeria 139 3.5
Rest of the world 1 471 36.6
World 4 011 100.0
Net exporters Mt
Saudi Arabia 333
Russian Federation 246
Nigeria 129
Islamic Rep. of Iran 126
United Arab Emirates 105
Iraq 94
Venezuela 87
Angola 84
Norway 78
Mexico 71
Others 609
Total 1 962
2011 data
2010 data
2010 data
% of
Producers Mt world
Total
Saudi Arabia 517 12.9
Russian Federation 510 12.7
United States 346 8.6
Islamic Rep. of Iran 215 5.4
Peoples Rep. of China 203 5.1
Canada 169 4.2
United Arab Emirates 149 3.7
Venezuela 148 3.7
Mexico 144 3.6
Nigeria 139 3.5
Rest of the world 1 471 36.6
World 4 011 100.0
Net importers Mt
United States 513
Peoples Rep. of China 235 Japan 181 India 164 Korea 119 Germany 93 Italy 84 France 64
Netherlands 60 Singapore 57 Others 483
Total 2 053
According to IEA data from 1990 to 2008, the average energy use per person increased 10%
while world population increased 27%. Regional energy use also grew from 1990 to 2008: the
Middle East increased by 170%, China by 146%, India by 91%, Africa by 70%, Latin America
by 66%, the USA by 20%, the EU-27 block by 7%, and world overall grew by 39%.
In 2008, total worldwide energy consumption was 474 exajoules (4741018 J=132,000 TWh).
This is equivalent to an average power use of 15 terawatts (1.5041013 W).[1] The potential for
renewable energy is: solar energy 1600 EJ (444,000 TWh), wind power 600 EJ (167,000 TWh),
geothermal energy 500 EJ (139,000 TWh), biomass 250 EJ (70,000 TWh), hydropower 50 EJ
(14,000 TWh) and ocean energy 1 EJ (280 TWh).[4]
Energy consumption in the G20 increased by more than 5% in 2010 after a slight decline of
2009. In 2009, world energy consumption decreased for the first time in 30 years, by ?1.1%
(equivalent to 130 Megatonnes of oil), as a result of the financial and economic crisis, which
reduced world GDP by 0.6% in 2009.[5]
This evolution is the result of two contrasting trends: Energy consumption growth remained
vigorous in several developing countries, specifically in Asia (+4%). Conversely, in OECD,
consumption was severely cut by 4.7% in 2009 and was thus almost down to its 2000 levels. In
North America, Europe and the CIS, consumptions shrank by 4.5%, 5% and 8.5% respectively
due to the slowdown in economic activity. China became the worlds largest energy consumer
(18% of the total) since its consumption surged by 8% during 2009 (up from 4% in 2008). Oil
remained the largest energy source (33%) despite the fact that its share has been decreasing over
time. Coal posted a growing role in the worlds energy consumption: in 2009, it accounted for
27% of the total. return
2. Source: IEA/OECD, Population OECD/World Bank return
3. World Energy OUTLOOK 2012(Paris: IEA June 2012) Executive Summary return
4. The SPRs capacity, reached in December 2009, is 727,000 barrels. It now holds the
equivalent of of 60 days of import protection. (Based on 2012 EIA data of net petroleum imports
of 8.72 MMB/D. The maximum days of import protection ever held in the SPR was 118 days in
1985). The agreed International Energy Agency requirement 90 days of import protection
(both public and private stocks).*
*Average price paid for oil in the Reserve $29.76 per barrel
Maximum drawdown capability 4.4 million barrels per day
Time for oil to enter U.S. market 13 days from Presidential decision
Global reserves of International Energy Agency (IEA) member states are, according to the
United States Energy Information Administration, approximately 4.1 billion barrels
(650,000,000 m3) of which 1.4 billion is government-controlled. Japans reserves of 583 million
barrels is by far the second largest reserve. Other non-IEA countries have begun creating their
own strategic petroleum reserves, with China being the largest of these new reserves. Since
current consumption levels are neighboring 0.1 billion barrels (16,000,000 m3) per day, in the
case of a dramatic worldwide drop in oil field output as suggested by some peak oil analysts, the
strategic petroleum reserves are unlikely to last for more than a few months. return
5. The events of the period receive careful review and analysis from the contributors to The Oil
Crisis ed. Ray Vernon (The American Academy of Arts & Sciences 1976). See too Daniel
Yergin The Prize The Epic Quest For Oil, Money & Power (Simon & Schuster 1991) Part V
return
6. A comprehensive assessment of the evolving energy commerce among Central Asia, Iran,
Turkey and Europe is provided by Behsat Ekici Is Turkey Realigning?: A Three Dimensional
Investigation of Turkish Iranian Security Rapprochement (Lambert 2012) return