France Likely to Dial Down Relations with Qatar After Election
The cozy relationship enjoyed between France and Qatar may come to an end after the election on Sunday. Both Emmanuel Macron and Marine Le Pen have bashed the Persian Gulf state on the campaign trail.
“I will put an end to the agreements that favor Qatar in France,” Macron, the frontrunner, said last month. “I think there was a lot of complacencies, during Nicolas Sarkozy’s five-year term in particular.” Read more
Obama Escapes Nixon Treatment for Holiday Bombings
In the fall of 1972, Secretary of State Henry Kissinger and a North Vietnamese peace delegation led by Lê Đức Thọ reached a preliminary peace agreement in Paris that would eventually lead to the end of the Vietnam War, at the time America’s longest war. Kissinger had deliberately kept South Vietnamese negotiators in the dark and when he arrived in Saigon to deliver the agreement for their approval, South Vietnamese negotiators had not been involved in the process.
Saigon rejected the plan, which was effectively the death warrant for thousands of South Vietnamese in the South, and asked its views be included in the ceasefire agreement. South Vietnamese president Nguyễn Văn Thiệu accosted Kissinger, “Are you trying to win the Peace Prize?”
Conversely, the North Vietnamese government in Hanoi flatly refused to make even minor concessions, setting the stage for the December 1972 bombing of North Vietnam and the mining of Haiphong harbor by the United States. Formally known as Linebacker II, the operation became known as the “Christmas Bombings” by Richard Nixon’s critics.
Kissinger indeed later won the Nobel Peace Prize and, eventually, the North Vietnamese agreed to allow South Vietnamese input and an eventual ceasefire.
President Barack Obama, himself a Nobel Peace Prize winner, drew criticisms from the far left with a recent bombing campaign that coincided with a religious holiday, though the howls of anguish have been far less than those confronting Nixon. While it’s true that a variety of left-wing twitterati and commentators drew the connection, major American newspapers were still running editorials condemning Nixon’s bombing into the last decade.
The parallels between Nixon’s expansion of the war in Vietnam and President Obama’s move to expand counterterrorism operations into Yemen are similar. The Linebacker II bombings and Obama’s Easter Bombings share an effort to target the real opponent in the war. Just as Nixon realized the North Vietnamese were running the Viet Cong and responsible for the civil war in the South, Obama realizes that Al Qaeda in the Arabian Peninsula is the most clear and present terrorist threat to American interests at present. Yemen is the site where the War on Terror began with the 2000 attack on the USS Cole but — unlike in Afghanistan or Iraq — the United States has been reluctant to engage there. Only one drone strike in Yemen was launched by the administration of President George W. Bush. The Easter weekend attacks, including an American supported Yemeni special forces raid, left over forty dead. One of the intended targets was Ibrahim al-Asiri, Al Qaeda’s most skilled bombmaker, a man who has been linked to attacks launched against both the United States and within the Arab world.
Furthermore, it appears that the Easter round of drone strikes was coordinated with special forces raids in Yemen as well as a new Yemeni ground offensive against extremists groups. The United States should be prepared to provide support for these operations, as it did in 2011 by supplying beleaguered Yemeni forces during the siege of Zinjibar.
Nixon and Obama inherited unpopular wars promising to create “peace with honor.” Nixon, however, had little operational control over Linebacker II and, it should be noted, there was in fact a 36 hour pause in the December 1972 bombings during Christmas. Obama, who signs off on drone strikes personally, has not hesitated to launch them on holidays in the past and this year that included strikes in Yemen over Easter weekend.
Sometimes presidential leadership requires unpopular moves and the ability to impose a timeline rather than react to one. At present, drone strikes remain the best of a mix of bad policy options in Yemen. However, the loss of civilian lives also remains horribly tragic.
This story first appeared at America’s Future Foundation’s Doublethink blog.
Crossed Swords? Rethinking the “Clash” of Christians and Muslims
Since Samuel Huntington unveiled his “Clash of Civilization” thesis in a 1993 Foreign Affairs article, a cottage industry of critiques have emerged to challenge it. Great thinkers, such as Amartya Sen, Amin Maalouf and Edward Said, have expended time and ink to refute Huntington’s controversial thesis. For the most part, these works have presented rationale critiques that focus on theoretical problems raised by Samuel Huntington’s board game like simplification of geopolitics and global history. Few of these critiques have, however, tried to counter Huntington’s argument with primary source research or been as readable as Ian Almond’s Two Faiths One Banner: When Muslims Marches with Christians Across Europe’s Battlegrounds (2011).
In this slim book, Almond shows that European history is far more muddled than Huntington’s depiction of one overarching “clash” between two visions of Abrahamic monotheism. Indeed the individual motivations and allegiances proves far to complex to paint with even the most vivid neoconservative or Marxist brush strokes. In making this argument, Almond cuts across wide historical periods, as well as the politics of several different centuries, demonstrating a mastery of facts, figures and a flair for colorful details. Read more
Argentina Might Lead Wave of Resource Nationalism
Despite the Arab Spring, it was not a Middle Eastern country which grabbed biggest headlines for resource nationalism in 2012. It was Argentina, where populist President Cristina Fernández de Kirchner proposed a bill on April 16 to renationalize Yacimientos Petrolíferos Fiscales (YPF), the country’s largest energy company. Her idea was subsequently approved in early May 2012 by the Argentinian legislature.
The move sent shock waves across the global energy industry, the desks of geostrategists and political risk consultants. Leaders from Europe to Mexico rushed to criticize the move. Kirchner cited the need to keep energy prices manageable for Argentinians but at that time, the price of gasoline within the country was actually less than the price at the pump to be found in some of its neighbors.
The renationalization of YPF, at the time largely owned by Spain’s Repsol, came at a time when some geostrategists were predicting a shift in global energy politics from the Middle East to the Americas. North and South America are home to the largest oil resources outside of the Middle East and North Africa.
Other projections were more modest, noting that with shale gas in the United States, presalt oilfields off shore in Brazil, Canadian tar sands and above all gains on energy efficiency, the United States might one day be able to reduce its energy imports to countries strictly within the Americas. The renationalization of YPF suggested the future of energy policy in the Americas might be closer to the goals of Hugo Chávez than regional development.
Argentina’s renationalization of YPF at the expense of Spain’s Repsol was so shocking that even some of the most seasoned political risk firms were caught off guard.
The threat of nationalization falls under what the business world considers political risk. While all international industries are concerned with political risk, the energy industry whose project can cost billions of dollars and take years to complete is particularly concerned.
One of the firms that concern itself with political risk is Maplecroft based in Bath, England. The company’s “Political Risk Atlas of 2012” had only ranked Argentina as a “medium” risk. The damage already done, the “Political Risk Atlas of 2013” gave Argentina a similar “medium” ranking, though it described the nationalization of Repsol as the most “notorious” example of resource nationalization last year.
In the 2013 edition, Maplecroft identified Somalia, the Democratic Republic of the Congo, Sudan, Afghanistan, Myanmar, Iraq, Libya, Central African Republic, Syria and Yemen as places with an “extreme risk” that resources will be nationalized. All of these nations boast either weak governments, even weaker respect for the rule of law or both.
One year later, the most striking thing about the nationalization of Repsol is how little Argentina has suffered any consequences for a clear breach of the rule of law that undergirds all democracies. It has not however dented enthusiasm for Argentina amongst most investors. Repsol is seeking compensation for the seizure. It has also flirted with the idea of accepting shale gas from the government. A United States government study noted that Argentina’s 774.000 billion cubic feet of recoverable shale gas constitute the third largest reserves in the world. Argentina’s ability to stun Repsol with impunity may encourage other nations to follow suit. Any country with a sagging economy may be tempted to nationalize its resources.
Professor Michael Ross of the University of California, Los Angeles points out in his 2012 book, The Oil Curse: How Petroleum Wealth Shapes the Development of Nations, that resource nationalism tends to come in waves. Other examples of resource nationalism took place in Bolivia and Egypt in 2012 which halted gas exports to Israel and Jordan. We are likely entering a new wave of resource nationalism.
The last era of resource nationalism was in the Middle East which saw the nationalization of foreign oil interests in the 1960s and 1970s. This wave of resource nationalization often spawned violence. In 1956, Israel, Britain and France attacked Egypt over the nationalization of the Suez Canal by Egyptian leader Gamal Nasser. The incident is still well remembered in the region but the fact that American president Ike Eisenhower brought an end to the conflict in favor of the Egyptians is forgotten.
More recently, the conflicts and disputes in the Sudan, the Caspian Sea and off the coast of the Philippines are clearly influenced by resource nationalism.
Indeed, Kirchner’s move to nationalize YPF came after recent oil discoveries near the Falkland Islands led her to renew Argentina’s claim to the disputed territory.
There are positive signs, though. One nation stung by Kirchner’s move was Mexico whose state-owned oil company Pemex is a 10 percent stakeholder in Repsol. There is a certain degree of irony, of course, as Mexico famously became the first major oil exporter to nationalize its reserves in 1938. Argentina, though only a small producer, nationalized its oil production in 1907 before privatizing the state run oil company in 1993.
Yet, recently, Mexico has signaled that it hopes to liberalize its energy industry in a substantial way for the first time since Pemex, the state oil company, became a monopoly. Large scale privatization may indeed be possible, though it will require a constitutional revision. Mexico is making the move after two straight years of expanded oil reserves both onshore and offshore.
While examining this issue last year, I noted that even in this era of globalization, “mercantilism still lurks in the shadows.” Yet the example of a country like Mexico shows that trends toward nationalization are not irreversible.
This story first appeared at America’s Future Foundation’s Doublethink blog, April 19, 2013.
Egypt’s Opposition Tactics: Mayhem, Canal City Strikes
The past month has seen the emergence of two very different approaches to street protests in Egypt.
On the one hand, the use of violence as a means of protest has gained renewed vigor. Port Said erupted into clashes at the end of January after death sentences were issued to 21 people for their role in the deadly football riots the year before. And a new, violent and mysterious protest group called the Black Bloc has emerged in the last few weeks whose predilection for street fighting and aggressive tactics has become well known.
On the other hand, however, resistance to President Mohamed Morsi’s government is evolving in other ways. Recently in Port Said, although violence has continued, there has also been a marked shift toward organized strikes and civil disobedience. Read more
In Cairo, a Free Market Experiment Underway
Near the middle of Tahrir Square a sign nestled among the tents proclaims to pedestrians that they stand in “The Free Republic of Tahrir.” While protesters seek political reform, Tahrir’s entrepreneurs have continued to evolve with Egypt’s political situation and continue to meet the needs of new customers. Read more
Azerbaijan’s Necessary Energy Diversification
The ink dried in 1994 on the “deal of the century” between Azerbaijan, BP and a number of Western oil companies. It paved the way for Azerbaijan to become one of the world’s most pivotal oil and gas exporters under the direction of the State Oil Company of the Azerbaijan Republic (SOCAR).
But in a new century, even hydrocarbon rich Azerbaijan must begin considering ways to diversify its energy portfolio. Furthermore, developing alternative sources of energy within Azerbaijan would leave more natural gas for export and help diversify the Azerbaijani economy.
A Chinese proverb notes, “A partnership is like a marriage; you sleep in the same bed but have different dreams.” Still there is no doubting the significance of the oil deal signed that September 1994. Azerbaijan was recovering from a disastrous war with Armenia in which up to one million Azeris from Armenia and the Karabakh region were displaced and major damage had been sustained to Azerbaijan’s economy. At the time the Caucasus was a forgotten region on the world map, a mere byproduct of the dissolution of the Cold War. But for international oil companies, the region was not without opportunities nor its political risks.
BP aggressively expanded into the post Soviet space, providing a much needed infusion of technology while SOCAR was keen to access these new methods and technologies. Although Azerbaijan saw the world’s first offshore oil platform in the late 1940s, Soviet drilling technologies had failed to keep up with those in the West. Thus, in the 1990s, BP began to invest heavily in the former Soviet Union knowing that there were many opportunities to be had. One of the company’s major goals was to bring natural gas to European markets.
BP discovered the Shah Deniz field in the Caspian Sea south of Baku, a development which put Azerbaijan instead of Turkmenistan as the country best positioned to provide natural gas to European markets in the midterm.
Not only was Shan Deniz one of BP’s largest gasfield discoveries in decades; it came at a time when the company’s operations were centered on North America, allowing BP to significantly diversify its portfolio.
BP and other international oil companies made other significant finds which have resulted in a second oil boom and spectacular economic growth for Azerbaijan. In 2006, the nation’s economy grew over 25 percent. In 2007, economic growth even reached 30 percent.
Today, Azerbaijan accounts for roughly 70 percent of economic activity among South Caucasus nations and is geostrategically one of the important countries of the twenty-first century. Further expansion of the Shah Deniz field will come online in 2017, effectively doubling its production. BP invests roughly $1.5 billion in Azerbaijan this year, an increase from $870 million in 2011. Azerbaijan’s total gas reserves are booked at three to five trillion cubic meters.
The gas from the Shah Deniz expansion will need a way to reach markets and for now, the Trans Anatolian Gas Pipeline continues to pick up steam while the competing Nabucco project languishes.
In an apolitical world, Azerbaijan might also consider working to develop connections eastward such as with the proposed Trans Afghanistan Pipeline. In such a world, Azerbaijani gas could have access to both European and South Asian markets.
However, political instability in Afghanistan and South Asia is likely to give SOCAR pause in pursuing a partnership. Secondly, and perhaps more importantly at present, it appears that Azerbaijan does not have the reserves to make an oil or gas pipeline toward South Asia feasible.
According to Ilgar Gurbanov, an energy security analyst at Strategic Outlook, a Turkish based research think tank, “Azerbaijan does not have enough natural gas reserves to turn to both East and West.”
At the present time, Western markets are priorities for [the] Azerbaijani government, since there are already infrastructure and legal basis, notably intensive negotiations in order to transport its natural resources to Western markets.
Pending new discoveries, this is Azerbaijan’s inherent geostrategic reality. Despite having the world’s seventh largest gas reserves, SOCAR officials have expressed concern about the potential for shale gas discoveries in Central and Eastern Europe cutting into the market share of any future pipeline project.
In order to better capitalize on its position as an energy exporter, Azerbaijan should work on more than just pipelines. It should work to develop alternative energy sources which will allow more energy for export.
Currently, 5.2 megawatts of Azerbaijan’s seven megawatt capacity is produced by fossil fuels with the balance coming from hydroelectric sources, one of the benefits of Azerbaijan’s mountainous terrain. Yet its geography means that it has great potential for a variety of alternative and renewable energy resources. Wind power in the country has the potential to produce eight hundred megawatts per year. The name Baku comes from “Badi Kube” which translates from old Persian as “City of Wind.” Anyone who has ever visited Azerbaijan can testify to the fact that the capital’s title is well deserved.
Solar can also play a role given that Azerbaijan receives 2400 to 3200 hours of sunshine per year. Geothermal has great potential in the seismically active Caucuses region.
In the past, Azerbaijan has also flirted with going nuclear and has signed some research efforts. By waiting so long to pursue nuclear technology, it can benefit from safer fourth-generation reactors. Surrounded by states such as Armenia, Iran and Turkey, which are either pursuing or planning to pursue nuclear power, Azerbaijan has been cautious in developing nuclear energy. The state has long enjoyed the moral high ground of bashing the nearby Metsamor nuclear power plant in Armenia as an environmental and safety risk to the region.
This year, the government took steps to deregulate the energy sector and promote alternative energy sources. Baku would like to see alternative energy’s share in domestic consumption to rise to 17 percent in the coming years.
Given that more alternative energy in Azerbaijan would mean more natural gas for export, the European Union has not surprisingly been supportive of the country’s efforts. Seeing the value in a strong Azerbaijani alternative energy sector, Europe has signaled that it will help develop its alternative energy resources.
Few countries have as firm a grip on their energy future as Azerbaijan. With the right portfolio, energy sources and pipeline projects, it can strengthen its hold on a bright future.