Bharat Rakshak

A deeper understanding of Ronald Reagan’s foreign policy doctrine is essential for three reasons beyond its historical significance.

First, many of Reagan’s critics and revisionist defenders have distorted his record and the lessons to be derived from it.

Second, the contending approaches that Ronald Reagan assailed—unrealistic realism and liberal multilateralism—continue to influence current debates about American grand strategy.

Third, Reagan’s legacy transcends his times. Ronald Reagan’s grand strategy, adapted to the challenges of the 21st century, provides the most prudent framework for America’s foreign and national security policy, as well as the standard of measure for judging all candidates for national office.

After briefly summarizing the precarious conditions that President Reagan inherited, the first part of this essay analyzes the grave defects of the unrealistic realism of Nixon–Ford–Kissinger and the liberal multilateralism of the Carter Administration. The second part sets forth the first principles of Reagan’s foreign policy, their application to the paramount challenge of the Cold War, and their felicitous consequences. The third rebuts the errors and distortions, replete in revisionist accounts of Reagan, that subvert the true meaning of his legacy. The fourth explains why the first principles of Reagan’s doctrine are valid not only for his time, but for ours as well.
The Flawed Alternatives: Unrealistic Realism and Naïve Multilateralism
It has become increasingly fashionable in many quarters to take the end of the Cold War for granted. That was not how it looked when Reagan became President in January 1981. The 1970s was a dismal decade: freedom in retreat, collectivism on the rise. The power and scope of government expanded voraciously, stifling the incentives for innovation and growth that had been responsible for the post–World War II economic boom in the United States.
The Arab oil boycott following the Yom Kippur War of October 1973 and the oil shocks of 1978–1979 following the fall of the Shah of Iran exacerbated stagflation (low growth, high interest rates, high inflation), ravaging the American economy. By the final year of the Carter Administration, the economy had plummeted to post–World War II lows, with inflation reaching 12 percent and interest rates soaring to 21 percent. Defense spending had dropped to 4.8 percent of GDP, less than half of the amounts that liberal Presidents Harry Truman, John Kennedy, and Lyndon Johnson had spent to keep the nation secure.
The Iranian takeover of the American Embassy in Tehran in November 1979 epitomized the enervating self-doubt about the credibility and capability of American power. For 444 days, the militant mullahs held 52 Americans hostage, defying and humiliating a Carter Administration that was evidently unable to do anything about it.[1]
What made America’s predicament more ominous was that it coincided with the rising power and assertiveness of the Soviet Union. During the 1970s, the Soviet Union engaged in the most massive peacetime military buildup in history, consuming more than one-quarter of its GDP. Correspondingly, Soviet expansionism surged, culminating in the Red Army’s invasion of Afghanistan in December 1979. The Soviet dictators were confident that the correlation of forces had changed irrevocably in their favor. Egged on by the Kremlin, a virulently anti-American Third World bloc at the United Nations reached its peak of influence, with American ideals and interests relentlessly under assault.[2]
The flawed strategies of the Nixon, Ford, and Carter Administrations bear major responsibility for the dangerous and deteriorating strategic situation that confronted Ronald Reagan when he took office in January 1981.
The Unrealistic Realism of Nixon, Ford, and Kissinger
Presidents Richard M. Nixon (1969–1974) and Gerald R. Ford (1974–1977) and Secretary of State Henry A. Kissinger (1973–1977), who served under both, had sought vainly to constrain Soviet power by defining American interests more narrowly while depicting the Soviet threat less menacingly. Nixon and Kissinger devised and implemented a version of détente, defined as a more cooperative, less confrontational relationship with a Soviet Union that was presumed to be a traditional nation-state seeking stability rather than a revolutionary enterprise seeking hegemony.
The Nixon–Kissinger conception of world politics sprang from the classical realist tradition, which takes a dark view of human nature and accepts the inherently anarchic nature of international politics where there can never be a monopoly on the legitimate use of violence. Based on this fundamental view, realists conceive the limits and possibilities of international politics through the prism of four core propositions.
A narrow definition of the national interest, largely divested of moral or ideological content, must drive American foreign policy.
International politics will remain primarily a struggle for power and equilibrium rather than a quest for justice.
Foreign policy should ignore regime type or ideology in assessing threats or opportunities.
Accordingly, it should never aim to transform the domestic nature of states.
As Nixon and Kissinger saw it, domestic constraints made retrenchment necessary as well as prudent. Having won the election of 1968 by a narrow margin, Nixon faced a nation convulsed by the Vietnam War. Even after his landslide reelection in November 1972, Nixon faced a Democratic Congress hostile to increasing defense spending and American military intervention abroad.[3]
The policy of détente toward China and the Soviet Union reflected a major shift in the perception of American interest and how to promote it. Ideology, regime type, and the threats associated with them had become, according to Nixon and Kissinger, less important as sources of international conduct when compared to traditional narrower conceptions of the national interest. Whereas previous Administrations had defined the Soviet Union as an implacable revolutionary adversary with unlimited aims and ambitions, Nixon and Kissinger considered the Soviet Union a traditional type of empire, dangerous and expansionist but with limited aims, offering the possibility of achieving durable equilibrium through a mixture of deterrence, trade, and arms control.
Nixon and Kissinger spoke publicly of removing ideology or regime type as reference points for measuring threats. “We have no permanent enemies,” Kissinger announced in 1969; “we will judge other countries on the basis of their actions and not on the basis of their domestic ideology.”[4]This de-emphasis on ideology and regime type inspired Nixon, Kissinger, and Ford to improve relations not only with the Soviet Union, but also with China. As Kissinger put it in typically realist fashion, Chinese “leaders were beyond ideology in dealing with us. Their peril had established the absolute primacy of geopolitics.”[5]
Nixon and Kissinger also forecast the end of the bipolar era, with Soviet and American power towering above all the rest. Anticipating the emergence of global and regional multipolarity, they believed that regional surrogates could substitute for American power to maintain equilibrium in key geopolitical regions. The “Nixon Doctrine,” as the strategy came to be known, reflected the Administration’s effort to transform the American role in resisting Soviet aggression from primary to supporting.
Rapprochement with China was a prime example of the Nixon Doctrine in action. Nixon and Kissinger hoped to enlist China’s assistance in containing the Soviet Union, pressuring North Vietnam to accept a peace compatible with U.S. honor, and maintaining geopolitical equilibrium in Asia. In the Middle East, Nixon and Kissinger designated the Shah of Iran as the primary U.S. surrogate. The United States would supply the arms, while the Shah would provide the ground troops and actual military presence to preserve regional equilibrium.[6]
Through arms control, Nixon, Ford, and Kissinger hoped to curb the Soviet Union’s military buildup. Through economic benefits and trade, they hoped to engage the Soviet Union in building a stable international equilibrium in which the Soviets had a stake in maintaining international order rather than undermining it. Through negotiations and agreement, they hoped to change Moscow’s approach to international relations by convincing Soviet leaders that it was in their interest to cooperate rather than compete with the West. Their conception of détente reflected not only their optimism about Soviet intentions, but also their pessimism about American prospects: By their reckoning, the Soviet Union was on the rise, and the United States was in decline, so increasing cooperation with Moscow was a necessity as well as a virtue.[7]
Not all of détente was conciliation. When the Soviet Union encouraged Arab countries to attack Israel in 1973, the United States responded vigorously. Kissinger’s shuttle diplomacy worked deftly to isolate the Soviet Union in the Middle East. As even Kissinger confessed, however, détente did not stem the dangerous erosion of American power.[8]
Major responsibility for this failure lay in Nixon’s, Ford’s, and Kissinger’s own conception. Their unrealistic realism neglected—to America’s peril—the fundamental importance of ideology, ideals, and regime type as well as power in international politics. International agreements could not tame Soviet ambitions or generate pressure to liberalize so long as the Soviet Union remained a totalitarian state committed to a revolutionary, brutal Marxist–Leninist ideology that called for unremitting struggle against the United States as leader of the free world.

Ronald Reagan’s grand strategy rested on a conception of enlightened self-interest that respects the decent opinions of mankind without making international institutions or the fickle mistress of often indecent international opinion the polestar for American action. Six enduring principles emerge from the disciplined study of his foreign and national security policies.
1. There is no substitute for American power.
Great statesmen and decent states can reduce and mitigate but never eliminate the danger of war, even in the best of times, because of the irredeemable imperfections of human nature. The anarchical system of international politics, where there is no monopoly on the legitimate use of violence, compounds the severity and frequency of violence and strife. In these ineluctable circumstances, the vindication of America’s national interest depends mainly on the capability and credibility of American power. Coalitions of the willing can supplement but can never substitute for American power.
As Reagan and his intrepid ambassador to the U.N., Dr. Jeane J. Kirkpatrick, warned indefatigably, multilateral institutions in general and the U.N. in particular can inhibit the necessary exercise of American power if American statesmen are unwise enough to make them the arbiters of international legitimacy for using force. No nation, no alliance, no international organization can have a veto on American action, particularly those that are organically hostile to American interest and values such as the United Nations or its constituent parts such as the Security Council. The Declaration of Independence calls on American statesmen to show a decent respect for the decent opinions of mankind, not a slavish deference to the indecent opinions routinely emanating from anti-American tyrannies regnant in the U.N. General Assembly.
2. A strong defense is the best deterrent.
The greatest dangers to the United States typically arise not from vigilance or the arrogance of American power, but from unpreparedness or an excessive reluctance to fight. Historically, retreat, retrenchment, and disarmament are a recipe for disaster. Consequently, the United States should strive for what Reagan’s hero Winston Churchill called “overwhelming power,” with plenty to spare for unforeseen contingencies.[49] This posture will deter most aggressors most of the time and defeat them at the lowest possible cost and risk even when the best deterrent sometimes fails.
Confronted with a large budget deficit, Ronald Reagan gave priority to his military buildup, rightly envisaging it as freedom insurance. The restoration of American power during the 1980s not only hastened the Soviet Union’s demise, but facilitated what the great Harvard political scientist Samuel Huntington called Democracy’s Third Wave: a vast global expansion of liberty, making the United States and the free world more prosperous and secure.
Indeed, Huntington identified a strong correlation between the rise and fall of stable liberal democracy and the rise and fall of American power: Though the greater or lesser prevalence of such regimes was “not exclusively a product of American policy and power, the latter certainly played a role.”[50] A similar relationship between American power and stable liberal democracy will likely prevail during the 21st century. American retrenchment and decline will not conduce to stability, but instead will precipitate the spread of various forms of tyranny, imperiling American ideals and self-interest.[51]
Today, the United States must replenish the military capital that Ronald Reagan bequeathed to the nation. For the sake of freedom and security, the United States must remain on the cutting edge of military innovation, deployment, research, and development, keeping well ahead of dangerous rivals waiting in the wings even in times of comparative tranquility.
As Ronald Reagan well knew, the problem is not defense spending, but domestic spending, particularly entitlement programs. The United States now spends on defense only 16 cents of every federal dollar and 4.7 percent of GDP, compared to 52 cents of every dollar and 8.5 percent of GDP during the Administration of President John F. Kennedy. If current trends continue, defense spending will fall to less than 4 percent of GDP—the level of US spending on the eve of Pearl Harbor with the United States isolationist and perilously unprepared.[52]
This is perilous. The United States can well afford to spend 5 percent to 6 percent of GDP on defense to sustain American military preeminence. This will suffice to deter most threats to America’s vital interest most of the time, with ample surplus of power so that we can defeat aggressors at the lowest possible cost and risk when even the best deterrent inevitably fails.
3.Regime types matter.
A prudent grand strategy accords great weight to regime type and ideology in discerning friends, foes, opportunities, and perils. Not all regimes behave alike. Some are more aggressive or more benign than others. Ronald Reagan distinguished sharply between stable, liberal, democratic regimes on one hand and totalitarian regimes, often animated by messianic, malevolent ideology, on the other. He rightly considered stable liberal democracies more reliable allies, more likely to cooperate, and less likely to fight with one another than with other types of regimes—a conviction consistent with the historical record affirming it.
For Reagan, too, pernicious regime types and ideologies accounted historically for the most menacing threats to the United States, such as the Soviet Union. He thus aimed to transform and liberalize a totalitarian Soviet tyranny responsible for initiating, intensifying, and perpetuating the Cold War.
Today, a neo-Reaganite grand strategy would confront, not deny, the gathering danger of Islamic Fascism, particularly a fanatical Iranian regime determined to develop and deploy nuclear weapons.
Today, a neo-Reaganite foreign policy would envisage a still dangerously authoritarian China as a competitor requiring containment as well as engagement.
Today, a neo-Reaganite foreign policy would give precedence to defending our decent, democratic friends in Eastern Europe, Great Britain, Colombia, Israel, Japan, and India rather than appeasing an increasingly authoritarian Vladimir Putin in Russia, a brutally repressive and expansionist China, or dictatorships in the Islamic world that loath the United States for its very essence.
This does not mean that the United States should court enormous risks to establish democracies everywhere, on any pretext. Ronald Reagan did not do that. Like Jeane Kirkpatrick, his ambassador to the United Nations, Reagan sometimes considered the prospects for stable liberal democracy too bleak, America’s geopolitical stake in the outcome too limited, to justify active American involvement. Sometimes an authoritarian regime that is less anti-American is the lesser evil if the more likely alternative is a totalitarian regime that is intrinsically anti-American and more difficult to reform.
Typically, Ronald Reagan found much congenial in neoconservatism. Reagan, too, always preferred a stable liberal democratic outcome when the United States could achieve it. Yet a neo-Reaganite approach wisely strikes a prudential balance, recoiling from the reflexive interventionism of some less sober neoconservatives who sometimes underrate the obstacles to establishing stable liberal democracy, just as unrealistic realists more frequently overestimate them.[53]
4. Think geopolitically.
A prudential grand strategy ranks threats, interests, and opportunities based on the imperatives of geopolitics rather than abstract, vague, and unenforceable principles of cosmic justice. Many realists and liberal internationalists still fail to grasp that American decline is by no means inevitable.[54] Whether the unipolar era is enduring or evanescent depends on how the United States decides to govern itself and defines its role in the world. No nation will dethrone the United States as the world’s preeminent military power any time soon.[55] For all nations, however—even a nation as powerful as the United States—resources are finite. So the United States must establish its priorities wisely.
The geopolitical logic that Ronald Reagan employed dictates that containing a still authoritarian China from dominating East Asia has become the greatest long-term challenge for the United States. Eventually, China will face the same reckoning as the Soviet Union did during the 1980s—reform the political system, collapse, or expand—because it will become impossible to reconcile the Chinese Communist Party’s dominance with economic dynamism. When that happens, the United States must have in place a credible democratic alliance system and a formidable military deterrent, the way Ronald Reagan did with the Soviet Union, to induce the Chinese leadership to make the same decision as Gorbachev: Give up rather than fight. This strategic logic wisely impelled President George W. Bush to engage a democratic India that shares many American core values and geopolitical interests.[56]
The neoconservative disposition that Ronald Reagan found so congenial in many respects is more right than wrong in its diagnosis of the threats the United States faces and in its policy prescriptions for dealing with those threats. For his entire political life, Ronald Reagan also assailed isolationism, declinism, global retrenchment, American withdrawal, and the fallacy of moral equivalence as geopolitically reckless and morally bankrupt. Yet he recoiled at the unbridled democratic globalism of some less prudent neoconservatives because it risks squandering American resources and morale imprudently on peripheral goals.
As Charles Krauthammer warns presciently, mirroring Reagan’s dispositions, the United States could not do everything but must do the most important things: first, prevent hegemons from emerging in East Asia, Europe, and the Middle East; then, to the extent possible, consolidate a democratic zone of peace in these major power centers where the absence of liberty could prove most perilous. Elsewhere, the United States should vigorously support extending freedom and stable liberal democracy, but not by threat, employment, or commitment of American military power, except in rare instances such as Rwanda where minimal force with minimal risk, with a prompt and certain exit strategy, can avert mass murder or genocide.[57]
5. Embrace American exceptionalism.
A prudent grand strategy depends on a synergistic combination of economic prosperity at home, the robustness of American military power, and the vitality of the American way of life. Whereas President Barack Obama’s grand strategy calls for making government omnipotent at home while making the United States weaker, more humble, and more deferential abroad, Ronald Reagan derided such Carteresque strategy as a recipe for moral, economic, and geopolitical catastrophe. He restored American preeminence not by vastly expanding the public sector, but by constraining it: by unleashing private enterprise, deregulating the economy, lowering taxes, limiting the growth of government, spurring innovation in the private sector, embarking on and persevering with a major military buildup, and unabashedly asserting American ideals and self-interest in a way that clearly distinguished between freedom’s friends and foes.
Ronald Reagan did not consider the United States a perfect nation, but a great, good, and indispensable one. For his entire political life, he championed the traditional notions of American exceptionalism that many today—realists and multilateralists in particular—find so troubling. He emphatically rejected the fallacy of moral equivalence or, even worse, the tendency to blame America first that President Obama frequently has exhibited, most infamously in his Cairo speech of 2009 where he placated Middle Eastern dictators by exponentially exaggerating Islamic virtues and American vices.[58] Or, as Reagan put it himself, summing up his record: “we should stop apologizing for America’s legitimate national interests and start asserting them.”[59] He infused his conception of the national interest with moral as well as practical content.
Like the greatest of American statesmen, Ronald Reagan recognized that the United States must wage war and conduct peace in a way that is consistent with American society and the principles of well-ordered liberty. The seminal expression of his grand strategy toward the Soviet Union (NSDD-75), stipulated accordingly: “US policy must have an ideological thrust which clearly affirms the superiority of US and western values of individual dignity, and freedom, a free press, free trade unions, free enterprise, and political democracy.”[60] This is no less true for our times.
6. Different times call for different strategies.
The mark of prudential statesmanship is the capacity to discern when changing times require different measures to achieve the same goals. Strategies appropriate for one set of circumstances are often inappropriate for others. Reagan exemplified a standard of prudence that any effective grand strategy must incorporate.
As Reagan frequently observed, the United States could prudently pursue a policy of armed neutrality, avoiding the cost or risk of war outside the Western Hemisphere, when it was weak in the world of the strong and could take the effective operation of the European balance of power for granted; yet the conditions the United faced in the 20th century called for a more vigilant, interventionist, foreign policy. Even before World War II, Reagan opposed the policy of appeasement, and during the Cold War, he considered it imperative vigilantly to contain the Soviet Union while prudently adjusting his tactics (though not his goals) by engaging Gorbachev when the opportunity arose.
Nor did Reagan consider a strategy of containment and deterrence appropriate in all circumstances. On the contrary, he defended the moral and practical wisdom of preemptively using force against certain types of gathering dangers, such as Nazi Germany for reasons his hero Churchill’s words convey best:
If you will not fight for the right when you can easily win without bloodshed: if you will not fight when your victory will be sure and not too costly; you may come to the moment when you will have to fight with all odds against you and only a precarious chance for survival. There may even be a worse case. You may have to fight when there is no hope of victory, because it is better to perish than live as slaves.[61]
Similarly, the events of September 2001 rudely exposed the inadequacy of deterrence, containment, or ex post facto responses when dealing with the insidious interaction of radicalism and the spread of weapons of mass destruction. Accordingly, the Bush Doctrine, or any sound grand strategy in Reagan’s tradition, treats military preemption as a prudential rather than categorical judgment: weighing the gravity of the danger, the probability of its realization, the availability of alternative means, and the prospects for success.[62]

Conclusion
A neo-Reaganite grand strategy offers the surest guide for restoring and sustaining American greatness in the 21st century.
It incorporates the importance of the principles of the Founding without slighting the perennial imperatives of power and geopolitics.
It inoculates us from the pessimism of unrealistic realists, who underestimate the possibility of provisional justice, and the dangerous illusions of idealists, who underrate the obstacles to achieving it in international politics.
It can facilitate the expansion of stable liberal democracy and economic prosperity, thereby minimizing the number and gravity of the threats the United States faces.
Its commitment to American exceptionalism and American military preeminence not only enhances deterrence, but reduces the blood, toil, tears, and sweat of the wars that the United States must fight.
Finally, a neo-Reaganite grand strategy contrasts favorably with any other plausible alternative, be it unrealistic realism, liberal internationalism, isolationism, or utopian versions of neoconservatism unconstrained by geopolitical imperatives.
—Robert G. Kaufman is a Professor of Public Policy at Pepperdine University and the author of three books, including In Defense of the Bush Doctrine (2007). He is in the research phase of a book titled A Tale of Two Americas: Ronald Reagan, Barack Obama, and the Future of American Politics.

New and Old Alliances


In a few weeks U.S. strategy has suffered various setbacks. The electoral triumph of Ollanta Humala in Peru represents a defeat for the recently formed Pacific Alliance. Indeed, on April 28th Mexico, Peru, Colombia and Chile signed an agreement to promote free commerce that in practice was seen as an alternative to Mercosur and Unasur, in which Brazil and Argentina a lot of influence.


Three of these countries have current Free Trade Agreements with the United States. Colombia is still awaiting the ratification of its agreement by Congress. Washington used to have strong allies in the region. However, the world crisis and the success of leftist and progressive forces continue to deplete their power, above all in South America. On the regional stage the biggest winner from Humala’s victory is Brazil who will consolidate a passageway to Asia for its enormous soy production.


Colombia is much more than geopolitics and infrastructure works. It is one of the most dynamic countries of the region. Its population is close to 50 million, its gross product is third in the region bested only by Brazil and Argentina, its hydrocarbon production may expand considerably and it possesses an important industry when compared to the Andean nations. It receives more direct foreign investment than Argentina and Colombia’s direct investments abroad represent the biggest growth of the decade: from $16 million in 2001 to $6.5 Billion in 2010.[14]


The conservative reaction to Lula’s visit was immediate. Three days after the forum in Bogota, the press issued a report from the U.S. embassy in Brazil claiming “doubts remain about how the alleged leader of the FARC, Francisco Cadena, was given refuge, allegedly due to pressure by Lula’s government.”[15] They were referring to a diplomatic incident in 2006 when Brazil granted asylum to Cadena refusing his extradition. The incident is being used again to attack Lula.


The day in which the binational forum came to a close, the press reported that sanctuaries for the FARC still existed on Venezuelan soil. The Minister of Defense, Rodrigo Rivera, was forced to publicly dispute the allegation claiming, “Today there is no safe hiding places anywhere for criminals and terrorists of FARC to hide in the Colombian neighborhood.”[16] Hugo Chavez asserted that Washington was behind the allegations and assured that relations with Colombia were excellent.


The White House and the Colombian Right have less and less cards to play. Without a doubt they will continue to throw a wrench in the works of Santos’ foreign policy and, in particular, his plans to strengthen relations with Brazil. Washington could gain the upper hand with the approval of the Free Trade Agreement with Colombia, but the difficulties Barack Obama’s administration is facing make it very difficult to guess the outcome.

A new area of potential confrontation is developing between China and the U.S. According to reports, Exxon Mobil which has acquired exploration and production rights from Vietnam has discovered substantial gas reserves in the South China Sea off the coast of North Vietnam.

"U.S. oil company ExxonMobil is reporting a "potentially significant" gas discovery off the coast of Vietnam, stating in a press release, "We can confirm ExxonMobil Exploration and Production Vietnam Limited drilled its second exploration well offshore Danang in August 2011 and encountered hydrocarbons." (See John C.K. Daly, Apocalypse Redux? U.S. Natural Gas Find off Vietnam Could Raise Tensions with China, http://oilprice.com )

It is important to note that these off-shore reserves are located between the North Vietnam coastline and China's Hainan island in an area of disputed jurisdiction between Vietnam and China. (see map above) The contested area is made up of blocks 117, 118 and 119, which according to Hanoi fall within the 200-mile exclusive economic zone under international maritime law (Ibid)

On October 31, following the ExxonMobil discovery announcement, China responded by warning foreign companies not to meddle "in areas also claimed by China." ( China again warns foreign oil firms on South China Sea exploration | Reuters, October 31, 2011)

"We hope foreign companies do not get involved in disputed waters for oil and gas exploration and development. This position has been consistent," Hong said, when asked whether China plans to ask Exxon Mobil to withdraw from its oil and gas deal with Vietnam.

He did not elaborate, nor single out Exxon Mobil by name.

Exxon Mobil has a licence from the Vietnamese government to explore blocks 117, 118 and 119 off the Danang coast, falling within what Vietnam claims is its 200-mile exclusive economic zone under international maritime law, the Financial Times reported last week.

But the blocks also fall within China's vast claim to almost the entire South China Sea, also claimed in part by Brunei, Malaysia, the Philippines and Taiwan.

The sea and areas such as the Spratly Islands and other atolls are believed to have rich deposits of oil and gas and is also a rich fishing ground.

One of China's most popular newspapers, the Global Times, cautioned last week that nations involved in territorial disputes in the waters should "mentally prepare for the sounds of cannons" if they remain at loggerheads with Beijing. ExxonMobil finds significant gas off Vietnam » Energy Delta Institute, October 27, 2011)

The conflict is not between Vietnam and China. Vietnam is a junior partner. The Hanoi government is serving Western oil interests against those of China.

It is important to view the confrontation between US and Chinese oil and gas interests in the broader geopolitical context.

The potential clash between Washington and Beijing in the south China sea is intimately related to the broader battle for oil waged in the Middle East-Central Asian chessboard, where China has significant interests in oil, natural gas as well as pipeline routes.

For more than five decades, the world’s oil map has centered on the Middle East. No matter what new energy resources were discovered and developed elsewhere, virtually all forecasts indicated that U.S. reliance on Mideast oil supplies was destined to grow. This seemingly irreversible reality has shaped not only U.S. energy policy and economic policy, but also geopolitics and the entire global economy.

But today, what appeared irreversible is being reversed. The outline of a new world oil map is emerging, and it is centered not on the Middle East but on the Western Hemisphere. The new energy axis runs from Alberta, Canada, down through North Dakota and South Texas, past a major new discovery off the coast of French Guyana to huge offshore oil deposits found near Brazil.

The search for a “hemispheric energy policy” for the United States has been a subject of discussion ever since the oil crises and supply disruptions of the 1970s. Yet it was never easy to pin down exactly what such a policy would mean. Some years ago, an economic adviser to a presidential candidate dropped in to see me, explaining the directive that his boss had given him: “You know that Western hemispheric energy policy that I have been giving speeches about? Could you talk to some people around the country and find out what I actually mean by a Western hemispheric energy policy?”

The notion of “hemispheric energy” in the 1970s and 1980s rested on two pillars. One was Venezuela, which had been a reliable petroleum exporter since World War II. The other was Mexico, caught up in a great oil boom that had transformed the United States’ southern neighbor from an oil importer into a major exporter.

But since Hugo Chavez took power in Venezuela, its petroleum output has fallen — about 25 percent since 2000. Moreover, Venezuela does not seem quite the pillar to rely on when its leader denounces “the U.S. empire” as “the biggest menace on our planet” and aligns his country with Iran. And Mexico, which depends on oil for 35 percent of its government revenue, is struggling with declining output. Without reform to its oil sector and international investment, it could become an importer of oil later this decade.

The new hemispheric outlook is based on resources that were not seriously in play until recent years — all of them made possible by technological breakthroughs and advances. They are “oil sands” in Canada, “pre-salt” deposits in Brazil and “tight oil” in the United States.

The world may be radically different 20 years in the future, but looking at five tectonic changes that will shape our environment can provide direction for companies today, according to Eric Peterson, director at A.T. Kearney’s Global Business Policy Council and senior advisor with the Center for Strategic and International Studies. Peterson delivered the closing keynote address at the Breakbulk Americas 2011 Conference & Exhibition in New Orleans, Louisiana.

Peterson addressed the likely impacts of population, natural resources, technology, geopolitics and economics and presented his audience with startling facts.

Popululation implosion, not explosion
Between 1965 and 1970, global population grew at a rate of 2.02 percent. “We are four days away from 7 billion and by 2083, the world’s population will reach 10 billion,” Peterson said.
While those numbers sound huge, the growth rate will have dropped to 0.06 percent — nearly 0 — by the end of the century. “What this means is that we'll see nations dealing with depopulation,” he said. “For instance, Russia is now depopulating by 100 people every hour.”

Peterson predicted a full-scale shake-up of global population balance. In2050, India will overtake China. Nigeria will rank third, followed by the U.S., Tanzania, Pakistan, Indonesia, Congo, the Philippines, Brazil and Uganda.
Further, 70 percent of the world’s population will live in urban environments by 2050. As early as 2025, there will be 27 cities with populations greater than 10 million that Peterson dubbed "mega-cities.”
Global aging will contribute to a “stunning transformation” of the composition of populations, a factor of both increasing longevity and lower birth rates. By 2100, the average lifetime will increase to 81.5 years compared with 47 years in 1950. In just 20 years, people over the age of 60 in China will outnumber the entire U.S. population.

Land grab ahead

Worldwide supply-demand outlooks are highly uncertain for food, water and energy, according to Peterson. “We're entering into an age of global resource geopolitics where countries will "land grab" to ensure land to grow food, access water and generate electricity,” he said.

The pressure to secure resources will be phenomenal. Food demand will double by 2050, not from an increasing population, but from increasing demand from populations as they shift into developed world status. Half of the world will live water-stressed by 2020. Energy will continue to be dominated by fossil fuel, but political unrest stands in the way.

Watch the wild card
Technology and its impact on future world problems such as food, water and energy shortages are the wild card, he said. The effects of ever more powerful computers, robotics, biotechnology, applied materials and nanotechnology are unknown, but promise to be profound.

Political change is around the corner
Next year will be a threshold year for politics and governments around the world. In 2012, elections will be held in Taiwan, Russia, India, Mexico, South Korea, Venezuela, Gabon, Iceland, Senegal, Spain, Turkmenistan, Ireland, the Dominican Republic, Albania and of course, the U.S.
“While the relationship between Beijing and Moscow is important, the ties between the U.S. and Beijing are even more important,” he said.

Expect a global economy shake-up
Growth figures mask a complex, multi-speed recovery that is underway and brings divergent policy challenges. Developing nations weathered the recession far better than developed economies, a difference that Peterson called “night and day.” Peterson expects that notions of debt are long term challenges for both the U.S. and the E.U.
China's economy overtook Japan's in August of 2010, placing China second only to the U.S. The International Monetary Fund expects China to overtake the U.S. in 2016, but Peterson believes that the U.S. will retain its top spot through 2020, followed by China, India, Japan, Germany Russia and Brazil.

However, economic rankings will look far different by 2050:

India
China
U.S.
Indonesia
Brazil
Nigeria
Russia
Mexico
Japan
Egypt
“These five critical influences will change the business environment beyond recognition,” Peterson said. “Same planet, different world."

By any measure 2011 has been a tumultuous year for shipping. The Arab Spring uprisings are reorienting global geopolitics and bringing the issues of energy security and transport logistics into sharp focus. Meanwhile, the thorny matter of piracy continues to increase not only the financial burdens placed on ship owners and governments but also the amount of time spent considering steps to contain and minimise the threat.
However the impact of these developments on the maritime industry is marginal compared to that of the Eurozone sovereign debt crisis. The inability of EU policymakers to come up with a workable means of writing down Greek debt and recapitalising banks exposed to indebted governments has created volatility in the global equity markets, uncertainty in business circles and slowdowns in all the region’s economies.
Hit by rising levels of taxation, inflation and unemployment, European consumers are finding that their savings are earning “negative” real returns. Furthermore, the Eurozone crisis has become a global problem due to the EU’s pre-eminent status as a trading partner. The US and China, the International Monetary Fund's largest shareholders, have a vested interest in helping solve the crisis. All are agreed that the chosen solution must be one that also spurs economic growth, job creation and trade.

In the meantime, most shipping sectors are struggling and Europe’s quandary is not helping. Average container ship freight rates worldwide have plunged 70% since a 2010 peak. Fleet container-carrying capacity, already oversupplied, is set to rise by 30% over the 2011-2013 period as the newbuilding orderbook is delivered. At the same time growth in the demand for container ship space over this three-year stretch is not expected to exceed 18%. Fleet supply and demand are not due to be back in balance for at least five years.
Evidence of the extent to which shippers are benefiting from ship owner misfortunes is given by the fact that it now costs only USD 650 to ship a 20-foot container from Asia to Europe in contrast to USD 2,100 some 18 months ago.
The trickle-down effect will ensure that the owners of the smallest ships, i.e. those vessels of 1,000-2,000 TEU engaged in the coastal distribution trades, bear the brunt of this depressed container ship market. A large percentage of the current orderbook is comprised of ultra-large container ships of 10,000 TEU and above. On delivery these vessels will go into service on the major deepsea trade lanes, displacing mid-size ships in the process. The mid-size vessels, in turn, will move into the regional trades, providing stiff competition for the existing small ships on these routes.
In the face of continued fleet overcapacity and depressed freight rates, container ship owners are weighing up a range of contingency measures, including scrapping older tonnage. A significant amount of consolidation, especially in the small ship sector, seems unavoidable.

Although oil demand may be peaking and going into decline in the West, oil use in emerging markets is growing. This seismic shift in oil consumption, and the associated longer distances that oil generally has to travel to reach these developing nations, are supporting some additional demand for tanker shipping. However, they are not enough to absorb anything like the volume of newbuilding tonnage currently entering what has become a very depressed shipping market, especially at the very large crude carrier (VLCC) end of the spectrum. High oil prices, which are unlikely to decline significantly in future, also have a stultifying effect on trade volumes
Tanker newbuildings will be filtering through in the years ahead at a robust rate. So far this year the overall crude oil and product tanker fleet has expanded by 5% while the rise in global movements of crude and refined products is barely reaching 2.5%

Sanjaya Baru joins London think-tank
London, Nov 2, (PTI) :

Sanjaya Baru, a former media advisor to Prime Minister Manmohan Singh, has joined the International Institute for Strategic Studies (IISS) here as its director for Geo-economic and Strategy programme.

The programme is devoted to analysis of the interplay between economics and geopolitics at the global level, an IISS release said.

A former editor of Business Standard and a respected commentator on economic and political issues, Baru previously served as a Consulting Senior Fellow of the IISS from September 2008.

Besides holding senior positions on The Times of India and The Economic Times, Baru has been a professor at the Indian Council for Research on International Economic Relations in New Delhi, and a Member of India's National Security Advisory Board in the Prime Minister's Office.

He is the author of Strategic Consequences of India's Economic Performance, which was launched in the UK at the IISS in April 2007, and The Political Economy of Indian Sugar(1990).

He has also published extensively on economic and strategic policy in India and abroad.

You know that an idea is catching on when Tom Friedman gets behind it. He's been a reliable weathervane for some time (a cheerleader for U.S.-led globalization in the 1990s, backing the Iraq War in 2002 and then reversing course when it went south, supporting escalation in Afghanistan with his fingers firmly crossed, and lecturing Americans on their recent failings once that became fashionable, too). But in this case I'm not complaining, because some of his recent writings suggest that he's coming around to the idea of offshore balancing.

Consider his column in today's Times. He makes two basic points: 1) the strategic stakes in Central Asia aren't worth the costs, and 2) withdrawal from Iraq will exacerbate Iranian-Iraqi relations and improve our strategic position. Gee, where did I hear those ideas before? And then he goes further, pointing out that getting out of our current "land wars in Asia" will restore our freedom of maneuver and give us more strategic options. Here's the money quotation from Friedman, based on testimony from a prominent Indian scholar:

'If the U.S. steps back, it will see that it has a lot more options,' argues C. Raja Mohan, a senior fellow at the Center for Policy Research, in New Delhi. ‘You let the contending regional forces play out against each other and then you can then tilt the balance.' He is referring to the India, Pakistan, Russia, Iran, China and Northern Alliance tribes in Afghanistan. ‘At this point, you have the opposite problem. You are sitting in the middle and are everyone's hate-object, and everyone sees some great conspiracy in whatever you do. Once you pull out, and create the capacity to alter the balance, you will have a lot more options and influence to affect outcomes - rather than being pushed around and attacked by everyone.'

The United States today needs much more cost-efficient ways to influence geopolitics in Asia than keeping troops there indefinitely. We need to better leverage the natural competitions in this region to our ends. There is more than one way to play The Great Game, and we need to learn it."

One might add that playing "hard to get" a bit would also make other countries do more to retain U.S. backing, and that would be good for us too.

Although Friedman doesn't use the term in his column, the logic he's outlining here is pure offshore balancing. That strategy -- which would eschew nation-building and large onshore ground and air deployments -- would both increase our freedom of action and dampen anti-Americanism in a number of key areas. It would acknowledge that Americans are not very good at running other countries -- particularly when their histories and culture are vastly different from our own -- and that trying to do so is neither necessary nor wise. Offshore balancing would take advantage of America's favorable geopolitical position, most notably its distance from most of the world's trouble spots and centers of power. (Why should a country that has no great power rivals near its own borders be so eager to send its military forces deep into the Asian landmass, in search of monsters to destroy, especially when there are no threats to the overall balance of power in these areas? Better to follow Muhammed Ali's famous advice and "float like a butterfly, sting like a bee.)

Offshore balancing is not isolationism, however, because the United States would still be diplomatically engaged in many places and committed to intervening in key areas if and when the balance of power broke down. By eschewing costly onshore commitments and fruitless exercises in "regional transformation" and nation-building, however, it would husband the resources on which America's long-term prosperity depends and help us rebuild a society that used to be inspire others and increasingly disappoints.

Nor is offshore balancing a magic bullet or a panacea. To make it work, you need to know a lot about the diplomatic and security constellations in key areas; you need expert diplomats who know how to play hardball in subtle ways; and you need a foreign policy establishment that pursues U.S. interests ruthlessly and doesn't get sidetracked by ideological crusades or the pleadings of special interests. And in case you hadn't noticed, those features are in short supply these days.

So we have a ways to go before offshore balancing becomes a reality. But with the Times' cheerleader-in-chief on board, maybe we'll get there a bit sooner.

‘American energy independence’ advocates also want to export

When the Republican party swept onto Capitol Hill in the 2010 election it was clear that U.S. Congress’ stalemate on a national energy policy was only going to become more, well, stalemated. And now here we are still propping up an energy system conceived in the Victorian-age while a globalization movement makes Wyoming’s “red, white and blue” coal look more China-red every day.

Speaking in Wyoming this week, John Dill of Chesapeake Energy said, “It just aint gonna happen, folks, it doesn’t matter who is in charge in Washington DC.”


Dustin Bleizeffer
No matter the political stripe, Americans don’t expect congressional delegates will break out of their election-cycle politics long enough to craft any national energy policy, let alone one that takes a long view on both local and international matters. As with any policy void, there’s always people, companies, industries and special interest groups eager to fill it.

“The country has waited long enough for a national energy policy,” Dill told attendees of the Wyoming Infrastructure Authority’s Tuesday meeting in Laramie. “So we’re going to take the bull by the horn and do it ourselves.”

Dill, director of Chesapeake’s, corporate development and government relations, touted his company’s plan, “A Declaration of Energy Independence,” as a no-nonsense and downright patriotic strategy for weening America off oil imports from unfriendly nations.

Chesapeake’s plan is one of dozens of plans, initiatives, reports and blueprints raining down from the oil and gas industry’s corporate headquarters. The Western Energy Alliance is pushing its “Blueprint for Western Energy Prosperity,” promising to increase domestic oil and natural gas production enough to fully ween America off foreign imports by 2020 — if only we could get rid of “redundant and burdensome government regulations and bureaucratic red tape,” according to Western Energy Alliance.

Domestic natural gas will go a long way in meeting the nation’s need to rely less on foreign energy imports — and maybe even help the nation emit fewer greenhouse gases that contribute to global warming. So what if the oil and gas industry gets what it’s asking for?

Forget, for a moment, what it might actually look like. (There will be environmental impacts; “The energy industry has environmental impacts and anyone who pretends that isn’t the case is obviously not looking closely at how drilling occurs or at what other industries do,” Dill told WyoFile.)


This rig was drilling a horizontal oil well near the Black Thunder mine in southern Campbell County this summer. (Dustin Bleizeffer/WyoFile - click to enlarge)
But what if the industry’s wish-list for environmental regulation is granted, and they get whatever else they say it would take to crank open the American-made oil and gas spigot as wide as the industry would like? Would they insist that that American natural gas and oil remain in the United States powering the American economy? These are international commodities, and big companies are beholden to international markets.

I asked Dill on Tuesday if Chesapeake would commit to not selling its American-made natural gas overseas if the company’s vision for U.S. development played out.

“Well there’s not a commitment at this point,” Dill said, and acknowledged that plans in the 1990s to build Liquified Natural Gas (LNG) ports in the U.S. for imports are now being reconsidered for exporting American natural gas.

“Chesapeake has no particular plans right now to do so, but we’re watching it very carefully because, again, an American resource that we cannot only produce here for the good of this country, but can also sell overseas, is great,” said Dill. “Probably, any effort to market this gas in other countries would be done by somebody other than Chesapeake. But we’re taking a look at it and I think it’s very encouraging from a balance of payments point of view and from a trade point of view and for building our own economy in the United States and not being dependent on other countries.”

Exporting a modest percentage of domestic oil and natural gas to high-paying markets overseas would likely be very good for our economy. Our Wyoming coal producers certainly intend to increase their export of American coal to Asia. But without a national energy policy, and left to the winds of geopolitics and international markets, how can we expect that America’s domestic coal, oil and natural gas will actually serve our “energy independence” interests?

Mark Steyn's Odd Call for Small-Government Imperialism
NOV 7 2011, 10:00 AM ET 3

Pining for a more aggressive, interventionist America, he deludes himself into thinking a small government conservative could run it

In the November issue of Commentary, Mark Steyn assesses America at this moment in time and offers "The Case for Pessimism," wherein he argues that the United States is likely to lose its status as the most powerful nation in the world, done in by the welfare state, profligate spending, and a president who doesn't understand geopolitics. "In 2008, the U.S. electorate... voted for normaliut [normality, as defined in the Israeli context]. Americans voted to repudiate the previous years, dominated by terror attacks and Code Orange alerts and anthrax scares, and thankless semicolonial soldiering in corners of the map no one cared about. They were under the sway of a desperate hope that wars can simply come to an end when one side decides it's all a bit of a bore," he writes. "But as Israel understands by now, sometimes who you are is more important than anything you do. And sometimes who you are is an offense to those indifferent to anything you might or might not do. America will discover, as Israel did, that a one-way urge for normaliut will lead to a more dangerous world."

Steyn goes on to predict that "America will discover, as Britain has in twilight, that, long after imperial grandeur has faded, imperial resentments linger. We will not be left alone to fade into second-rate status. We will be taunted and humiliated and haunted and chased on the way down." The result will be "something terrifying...This will be the greatest step backwards for the civilization that built the modern world and spread its blessings across the map. There will be no new world order... The only way to prevent it is to act, and act quickly."

Okay, let's think fast.

What if the U.S. builds the biggest, most powerful, most technologically advanced military in the world -- in fact, let's spend more on the military than all of our credible rivals combined. After that, we can open military bases in 50 or 60 countries, so that we've got every region of the world covered; make sure we own more than half the world's aircraft carriers; and identify 150 countries of strategic importance where we can deploy American troops. What's that you say? We've already done all that? It's almost as if we haven't chosen to cede an extremely interventionist version of global leadership, for better or worse.

Steyn is a man of contradictions. He insists that America's debt and deficit are existential threats to our future... even as he urges us to maintain a permanent semi-imperial military presence all over the world at a cost of hundreds of billions of dollars per year... and insists, as he cheers on every excess in the War on Terrorism, that he is a Tea Party affiliated champion of limited government. He's a guy who can insist, quite eloquently and with appropriate righteousness, that the 1st Amendment is sacrosanct, even when cartoonists operating under its protection offend Muslim extremists; but who cannot be bothered to defend the 4th Amendment or lament the expansion of executive power or the innocents wrongly detained at Gitmo.

In Steyn world, there is never any worry that powers accrued in the War on Terrorism will be turned against non-terrorists. He wants small government imperialism, implemented by Jack Bauer-like men: tough enough to know that the constitution isn't a suicide pact, but so deferential to it that they'd never depart from a strict interpretation of the Founders' vision. In this way, they'll be able to fund interventions the world over, balance budgets, and never raise taxes.

It's a fantastical vision.

As absurd is Steyn's implicit assertion that Obama is ending America's global ambitions.
True to form, Steyn quotes a couple lines from a speech to characterize Obama's foreign policy views, totally ignoring the many actions he's taken since becoming Commander in Chief: surging troops into Afghanistan, trying to negotiate a troop extension in Iraq, planning to send more forces elsewhere in the Persian Gulf after America pulls out, waging an undeclared drone war in an unknown number of countries, killing hundreds of "suspected militants" in Pakistan alone, sending commandos into a sovereign, nuclear armed nation to kill Osama bin Laden, dispatching DEA paramilitary forces in Latin America, helping to topple Moammar Gaddafi in a war waged without Congressional approval. I hate Obama's foreign policy. Others defend his militarism and America's reach. Steyn just conjures a pretend Obama to rail against in the course of arguing for fiscal discipline and a re-commitment to remaking the globe, even as we're doing the latter, and failing to do the former partly as a result.

"Even in my deepest and most pessimistic vision, I can see a different future for the United States," Steyn writes near the end of his essay. "The United States is the only country in the world where a mass movement took to the streets in 2009 to say we could do just fine if you, the government, stayed the hell out of our pockets and the hell out of our lives. That fact, that populist refusal to be Europeanized, represents the best hope for this country. Those now-caricatured, much-maligned Tea Partiers moved the meter of public discourse significantly back in the direction of sanity."

He goes on to invoke a libertarian icon:

In 1975, Milton Friedman said this: "I do not believe that the solution to our problem is simply to elect the right people. The important thing is to establish a political climate of opinion which will make it politically profitable for the wrong people to do the right thing. Unless it is politically profitable for the wrong people to do the right thing, the right people will not do the right thing either, or if they try, they will shortly be out of office."

Just so. Every time Barack Obama stands at his teleprompter and is forced to pretend that he's interested in deficit reduction, we have taken a step toward that Milton Friedman reality. You have to create the conditions, as the Tea Party and the town hall meetings did, whereby the wrong people are forced to do the right things.

It's a wonder that Steyn believes, as Milton Friedman most certainly would not, that encouraging the president to act as a global hegemon is consistent with creating conditions that would force him to govern as a small government conservative. War is the health of the state, as it was when the Alien and Sedition Acts were justified on the basis of the possibility of war with France, when Abraham Lincoln suspended habeas corpus, when Woodrow Wilson pushed through the Espionage Act and the Sedition Act, when Franklin D. Roosevelt imprisoned Japanese Americans, when young men were drafted to fight in the Vietnam War, and when President Bush passed the Patriot Act and argued that he could declare Americans enemy combatants. Is there a war-fighting, small government-loving imperial hegemon Steyn can point us to?

There were three great citadels of Western civilization: Rome, Athens, and Jerusalem. It took a fourth, London, Washington’s immediate predecessor as the dominant power, to disseminate the ideas of Athenian democracy and Roman law and the Hebrew Bible to the farthest corners of the earth. America has signs of decline that follow the examples of all four.

Rome once built aqueducts, and then it stopped building aqueducts, and then the aqueducts it had built started to decay. At the dawn of big government, in the 1930s, we built the Hoover Dam. Then we stopped building dams. In September, in the town of Port Angeles in the state of Washington, there commenced the destruction of two century-old dams in order to “liberate” the Elwha River. So now we’re dismantling dams.

You can see this at work—or rather, not at work—every time you’re on the isle of Manhattan. The Empire State Building was put up in one year and 45 days in the middle of a depression. Ground Zero is still a building site after a decade. 9/11 is something America’s enemies did to us. The 10-year hole in the ground is something we did to ourselves.

Now consider the people who went rampaging through the streets this summer in London. These are the children of dependency, people who have been marinated in stimulus within an inch of their lives, and they’re good for nothing but lobbing concrete through store windows so they can steal the latest models of electronic toys. They tore apart a city that, within living memory, governed a fifth of the earth’s surface and a quarter of its population. When you’re imperialist on that scale, you make a lot of mistakes. But nothing the British did to any of their subject peoples in far-flung corners of the globe compares with what they did post-imperially to their own population.

These are the great-grandchildren of a tiny island that stood alone against the Germans during the Blitz in that terrible year after the fall of France. If those Britons of mid-century were to come back, they would assume they had landed in some bizarro alternative universe—until, like Charlton Heston rounding the corner and seeing the shattered Statue of Liberty poking up out of the sands, they realize that the Planet of the Apes is their own. The evil of big government is not that it is a waste of money, but that it lays waste to people.

Somehow, we still think of the United States as a young country, and in comparison with the other great nations of the Earth it is; but its political and social system is now among the world’s oldest. Indeed, the amazing durability of the American system over 235 years is the primary reason for optimism about the American future. The glory of the United States does not reside in the untold wonders of its people—that is politician-speak—but rather in the flexibility of the American system. The nation has weathered crises far worse than the present crisis and come out the better for them eventually because the spine of the American system is at once sufficiently ironclad and sufficiently flexible to bend, but not break—the exception, of course, being the Civil War, when that spine was fractured and, at enormous cost, put into traction and forced back into alignment.

That system, the direct outgrowth of the Declaration of Independence and the Constitution, extends beyond the country’s political structures to an idea that courses through all its public and private institutions—the primacy of the individual. The centrality of the individual over the collective in the American system has not been cost-free for this nation and its people. Taken to extremes, it can destroy communities and induce a hunger for the material and a taste for the superficial that can corrode the character of the nation’s citizenry. Still, the American system has functioned because its revolutionary acknowledgement of the primacy of the individual also confers on the individual a sense of responsibility for himself, his loved ones, and his community that is unique in history.

Finding the balance between liberty and license has been a national challenge for centuries. So has finding the balance between the freedom of the individual and the common needs of the larger society. Everyone, from right to left, seems to feel that the nation’s equilibrium has been lost in the past few years, that we are out of balance politically, socially, fiscally, and culturally. This is what undergirds Michael Lewis’s contention that Americans are fat, greedy, sloppy addicts who got themselves into all kinds of trouble knowingly and without forethought.

But that impressionistic sense is not borne out by the realities of life in the United States. There are surprisingly few signs of social instability even as the financial crisis enters its fifth year, and even when, as one census report suggests, household incomes have fallen dramatically throughout the country. Crime continues to decline; divorce rates are not rising; dropout rates are not rising; hospitals are not reporting an increase in domestic violence.

The American people do not seem unhealthy (though they could stand to lose a few, as could I). The political system does. But not because debates are ugly, and not because it is too partisan, and not because some fools call Obama a Kenyan or because Joe Biden, also a fool, dubs the Tea Party “terrorists.” These are all transitory unpleasantnesses, and they have their parallels in every era. The political system is uniquely unhealthy at the present moment because of twin temptations to which politicians at every level and in both parties have succumbed—temptations whose consequences were not all that visible during the boom times but have been cast in stark relief by the bum times.

The first temptation has been to direct the behavior of the citizenry through the manipulation of the tax code, which (over time) creates a system of perverse incentives. It may seem, for example, that the mortgage-interest deduction is a vital tax break, but it is an accident of history, a holdover from a time before modern levels of federal taxation when all interest payments were deductible. Its continued existence has undeniably had an inflationary effect; the result of its disappearance would be a revaluing of all property downward in equal proportion. The transition would be complicated and confusing and would require careful management, but the end result would be a more honest valuation. The real benefit of the home-mortgage deduction over time has been to the industries that compose the real-estate sector, because having the government favor ownership over renting has created greater demand for home construction and home flipping than would otherwise be the case.

The moral argument for favoring home ownership is that owners are better citizens than renters, and therefore that it supports a greater common good. But we have now seen the damage that can be done by driving people into home ownership who had no business making—and might even have had little desire to make—that kind of long-term commitment. If ownership is a good in itself, people will pursue it without the incentive of the tax break. Indeed, even as the value of the deduction grew in the post–World-War II period while income tax rates rose and more brackets were created, the level of home ownership remained startlingly constant, just over 60 percent of households. It was not until the push to broaden the numbers of borrowers began in the mid-1990s that the rate began to jump to nearly 70 percent.

The second temptation is to secure long-term control over public office by creating a constituency among public-sector workers through contracts that have, over time, made those in the employ of the government or those receiving retirement benefits from the government twice as wealthy as the people who are employing them. We are told, by Michael Lewis and others, that these problems are due to the fact that people want big government but do not want to pay for it. But what actual evidence, other than big government’s failure to shrink in size, is there for this contention? States and localities are beginning to go bankrupt due to pension obligations and absurdly generous deals with public-sector unions. When a firefighter in Vallejo, California (Lewis’s example), can join the ranks at 45 and retire at 50 with a full pension on the public dime—a case that sounds extreme but is replicated in many localities in many states—what benefit does the taxpayer get?

Of course, the most popular benefits are national ones—Social Security and Medicare. Medicare is far more dangerous to the public weal, especially with the baby boomers beginning to retire. And certainly the case for controlling the costs of Medicare (and to a lesser degree, Social Security) is vastly tougher than the case against the public-sector workforce. But the unjust transfer of wealth from the young to the old—something that has been an impossible subject to raise in political life over the past several decades—will be an inescapable reality in very short order. If it is not halted or redirected, it will, as Yuval Levin has put it simply, “leave us with a national debt larger than our economy in just a decade and twice as large in the 2030s.”

Alaska Governor: Send our gas to Asia
Posted By Steve LeVine Tuesday, November 8, 2011 - 1:05 AM Share

The governor of Alaska is saying publicly what we've known for some time -- that his state's bonanza of natural gas is best shipped to Asia. Gov. Sean Parnell is asking oil companies that control Alaska's gas equivalent of 6 billion barrels of oil -- BP, Shell ExxonMobil and ConocoPhilips -- to explore the details of shipping the largesse across the Pacific. Yet the companies continue to be slow off the mark, and may still have their eye stubbornly on the hopelessly glutted Lower 48 U.S. states, according to Rebecca Penty of the Calgary Herald.

Unlike the estimates under circulation regarding the Western Hemisphere's oil reserves, this side of the globe definitively does have an embarrassing surplus of natural gas. It's this surplus that has stranded Alaska's North Slope riches. It's not needed in the continental U.S., which is replete with both conventional and shale gas.

Much new gas is being directed to China -- from Qatar, Australia, Turkmenistan and probably from new discoveries in eastern Africa. Russia would like a deal to ship nearly the equivalent of China's entire current annual gas consumption. Yet Parnell is betting that the increased supply would not glut Asia, but trigger a demand chain reaction and further boost China's shift to gas, which seems to be a reasonable economic calculation. If that happens, it would shake up geopolitics since less coal might be burned than is projected, hence reducing expected emissions of CO2.

If Parnell is right, ExxonMobil is the clear candidate to carry out Parnell's wishes. The company is in partnership with TransCanada, the Canadian pipeline company, in plans to export the North Slope gas, though they have not figured out a destination. Earlier this year, they failed to win a critical-mass of shipping commitments from Alaskan gas producers for either of two alternative lines -- a 1,700-mile line from Prudhoe Bay to Alberta, Canada, from which the gas would feed into existing lines to the U.S.; and an 800-mile pipeline to a liquefied natural gas facility to be built at the Pacific port of Valdez for onward shipment to Asia.

An ExxonMobil spokesman referred queries to TransCanada, which I emailed but did not manage to connect with. In remarks last week, TransCanada CEO Russ Girling suggested that the partners are still looking at the Lower 48 states, though that could change. Unlike Parnell, he seemed in no rush. "The producers will have to sort out where they want that gas to go, over time," Girling was quoted as saying by the Calgary Herald.

Parnell is right -- the writing appears to be on the wall. Alaska's gas is headed to Asia.

Acharya wrote:The Case for Pessimism

There were three great citadels of Western civilization: Rome, Athens, and Jerusalem. It took a fourth, London, Washington’s immediate predecessor as the dominant power, to disseminate the ideas of Athenian democracy and Roman law and the Hebrew Bible to the farthest corners of the earth. America has signs of decline that follow the examples of all four.

.......

The regional diplomacy forestalling the United States’s New Silk Road, which surged at the recent Istanbul conference on Afghanistan (November 2), gained further traction at the Shanghai Cooperation Organization [SCO] Heads of Governments meeting at St. Petersburg on Monday. From the Indian viewpoint, the outcome can be significant in three directions.

For the first time openly, Russia endorsed Pakistan’s SCO membership, signalling a qualitatively new level of trust and understanding in the bilateral relationship. In essence, Moscow has “de-linked” Pakistan’s SCO membership from India’s.

Second, Russian Prime Minister Vladimir Putin pledged that Moscow will invest “at least” 500 million dollars in the regional project bringing electricity from Tajikistan to Pakistan via Afghanistan. The transmission lines are expected to pass through regions that have been the strongholds of the erstwhile Northern Alliance [NA] groups, over whom both Moscow and Dushanbe have much influence, and who will now be ’stakeholders’ in the regional project. This is also a major Russian initiative toward Tajikistan and comes within the orbit of Putin’s “Eurasia Union” project.

Third, Pakistan PM Yousuf Gilani made a major speech at St. Petersburg. The intellectual content ( ) that buttresses Pakistani regional policies in the recent period is highly impressive. Unsurprisingly, Putin voiced support for Gilani’s proposals, which on the whole would open the door for SCO’s extensive involvement in Afghanistan. Most important, Gilani spoke of an Afghan settlement by “taking all Afghans on board, regardless of ideological, ethnic or political preferences.” This pledge has been made in the presence of Putin and Chinese PM Wen Jiabao.

Interestingly, Russian foreign ministry summed up the Istanbul conference as having “shown the regional states’ growing desire to shape the political landscape of the region on their own, without outside interference.” [Emphasis added.] To be sure, there is strong convergence on the imperatives of regional security between Russia, China, Pakistan and Iran. This is at variance with the “inclusive” approach that Indian mandarins have been espousing. [i]{Essentially the fellow is saying that India is the only one open to US involvement.}[/i]

Equally, Russia signed an agreement last Monday on the construction of a nuclear power plant (2000 MW) in Bangladesh. The Russian foreign ministry said: “This event is further evidence of Russia building up its foreign policy and economic presence in Asia and, in particular, in Bangladesh, which is a reputable member of the Asian community and an important partner for Russia. Another major step has been taken along the path of securing Russian interests and promoting high technologies in the region. Russia and bangladesh are traditionally bound by strong ties of friendship and mutual understanding. Our country took an active part in the creation of Bangladesh as an independent state in 1971. With the signing of the Agreement, we are entering a period of intensive development of bilateral cooperation.” [Emphasis added.]

Dysfunctional German politics are making a bad situation worse, writes Allegra Stratton.

Currently, Iran, India, Mongolia and Pakistan have an observer status in the six-nation SCO. Representatives of Afghanistan and Turkmenistan participate in the organization's meetings as guests. Belarus and Sri Lanka have a dialog partner status at the SCO. Afghanistan also applied for an observer status in 2011.

SwamyG wrote:Hmmm...so America creates an international economic crisis; and its effect is regime changes across the planet. Africa and West Asia expends blood doing so, and Europe fares slightly better - not much blood. One could say Republicans lost because of Economy.

So only India and China withstand the E-Khan-Mic Toofan? Life went about as (almost) usual.

Any parallels with WWII ? The West - notably Europe was wasted and spent. Lots of countries saw independence from Europe. America rose. After this WWIV (economic crisis), Europe and America are wasted and spent too. Despots in Africa and Asia fall because of lack of support. People in these countries get more freedom? Let us forget about the Islamic revolution waiting to happen in some countries.

I think the big 'perspective' to me is the hold of West (IMF and WB) on the rest of the World, and how their grip has been relaxed. Hope some scholars study and get some PHd veeHd.

President Medvedev revealed his prognosis that the volumes of Russian gas delivered to China will soon equal those being piped to European customers.

“Evidently, China needs much more hydrocarbons [than Russia delivers now] and that’s exactly what we are talking about now with our Chinese partners,” Medvedev revealed.

He said that there are two pipeline projects to China, the final obstacle being, as usual, the price, but as soon as it is settled, the projects will be kicked into life.

“The potential gas supply to China will absolutely match that of western Europe,” the Russian president emphasized.

Europe: the International System and a Generational Shift
George Friedman
17 Nov 2011

Change in the international system comes in large and small doses, but fundamental patterns generally stay consistent. From 1500 to 1991, for example, European global hegemony constituted the world’s operating principle. Within this overarching framework, however, the international system regularly reshuffles the deck in demoting and promoting powers, fragmenting some and empowering others, and so on. Sometimes this happens because of war, and sometimes because of economic and political forces. While the basic structure of the world stays intact, the precise way it works changes.

The fundamental patterns of European domination held for 500 years. That epoch of history ended in 1991, when the Soviet Union — the last of the great European empires — collapsed with global consequences. In China, Tiananmen Square defined China for a generation. China would continue its process of economic development, but the Chinese Communist Party would remain the dominant force. Japan experienced an economic crisis that ended its period of rapid growth and made the world’s second-largest economy far less dynamic than before. And in 1993, the Maastricht Treaty came into force, creating the contemporary European Union and holding open the possibility of a so-called United States of Europe that could counterbalance the United States of America.

The Post-European Age

All these developments happened in the unstable period after the European Age and before … well, something else. What specifically, we’re not quite sure. For the past 20 years, the world has been reshaping itself. Since 1991, then, the countries of the world have been feeling out the edges of the new system. The past two decades have been an interregnum of sorts, a period of evolution from the rule of the old to the rule of the new.

Four things had to happen before the new era could truly begin. First, the Americans had to learn the difference between extreme power (which they had and still have) and omnipotence (which they do not have). The wars in the Islamic world have more than amply driven this distinction home. Second, Russian power needed to rebound from its post-Soviet low to something more representative of Russia’s strength. That occurred in August 2008 with the Russo-Georgian war, which re-established Moscow as the core of the broader region. Third, China — which has linked its economic, political and military future to a global system it does not control — had to face a readjustment. This has yet to happen, but likely will be triggered by the fourth event: Europe’s institutions — which were created to function under the rules of the previous epoch — must be rationalized with a world in which the Americans no longer are suppressing European nationalism.

With the benefit of hindsight, we know that the 2008 financial crisis initiated the last two events. The first result of the financial crisis was the deep penetration of the state into those financial markets not already under state influence or control. The bailouts, particularly in the United States, created a situation in which decisions by political leaders and central banks had markedly more significance to the financial status of the country than the operation of the market. This was not unprecedented in the United States; the municipal bond crisis of the 1970s, the Third World debt crisis and the savings and loan crisis had similar consequences. The financial crisis, and the resultant economic crisis, hurt the United States, but its regime remained intact even while uneasiness about the elite grew.

But the financial crisis had its greatest impact in Europe, where it is triggering a generational shift. Since 1991, the idea of an integrated Europe has been a driving force of the global economy. As mentioned, it also has been presented as an implicit alternative to the United States as the global center of gravity.

Collectively, Europe’s economy was slightly larger than the US economy. If mobilized, that inherent power made Europe a match for the United States. In the foreign policy arena, the Europeans prided themselves on a different approach to international affairs than the Americans used. This was based on a concept known as “soft power” — which relied on political and economic, as opposed to military, tools — an analog to the manner in which it saw itself managing the European Union. And Europe was a major consumer of goods, particularly Chinese goods. (It imported more of the latter than the United States did.) Taken together, Europe’s strengths and successes would allow it to redefine the international system — and the assumption for the past generation was that it was successful.

In the context of the ongoing European financial crisis, the issue is not simply whether the euro survives or whether Brussels regulators oversee aspects of the Italian economy. The fundamental issue is whether the core concepts of the European Union remain intact. It is obvious that the European Union that existed in 2007 is not the one that exists today. Its formal structure appears the same, but it does not function the same. The issues confronting it are radically different. Moreover, relations among the EU nations have a completely different dynamic. The question of what the European Union might become has been replaced by the question of whether it can survive. Some think of this as a temporary aberration. We see it as a permanent change in Europe, one with global consequences.

The European Union emerged with the goal of creating a system of interdependency in which war in Europe was impossible. Given European history, this was an extraordinarily ambitious project, as war and Europe have gone hand in hand. The idea was that with Germany intimately linked to France, the possibility of significant European conflict could be managed. Underpinning this idea was the concept that the problem of Europe was the problem of nationalism. Unless Europe’s nationalisms were tamed, war would break out. The Yugoslav wars after the collapse of Communism comprised the sum of Europe’s fears. But there could be no question of simply abolishing nationalism in Europe.

National identity was as deeply embedded in Europe as elsewhere, and historical differences were compounded by historical resentments, particularly those aimed toward Germany. The real solution to European wars was the creation of a European nation, but that was simply impossible. The European Union tried to solve the problem by retaining both national identity and national regimes.

Simultaneously, a broader European identity was conceived based on a set of principles, and above all, on the idea of a single European economy binding together disparate nations. The reasoning, quite reasonably, was that if the European Union provided the foundation for European prosperity, then the continued existence of nations in Europe would not challenge the European Union. Perhaps, over time, this would see a decline of particular nationalisms in favor of a European identity. This assumed that prosperity would cause national identity and tensions to subside. If that were true, then it would work. But there is more to Europe politically speaking than an enhanced trading area, and the economics of Europe are hardly homogeneous.

Germany and the Periphery

The German economy was designed to be export-based. Its industrial plant outstrips domestic consumption; it must therefore export to prosper. A free trade zone built around the world’s second-largest exporter by definition will create tremendous pressures on emerging economies seeking to grow through their own exports. The European free trade zone thus systematically undermined the ability of the European periphery to develop because of the presence of an export-dependent economy that both penetrated linked economies and prevented their development.

Between 1991 and 2008, all of this was buried under extraordinary prosperity. The first crisis revealed the underlying fault line, however. The US subprime crisis happened to trigger it, but any financial crisis would have revealed the fault line. It was not a crisis about the euro, nor was it even a crisis about economics. It was actually a crisis about nationalism.

Europe’s elites had crafted and committed themselves to the idea of a European Union. The elite of Europe, deeply tied to a European financial system as a principle, were Europeanists in their soul. When the crisis came, their core belief was that the crisis was a technical matter that the elite could handle within the EU framework. Deals were made, structures were imagined and tranches were measured. Yet the crisis did not go away.

The German-Greek interplay was not the essence of the problem but the poster child. For the Germans, the Greeks were irresponsible profligates.For the Greeks, the Germans had used the EU free trade and monetary system to tilt the European economy in their favor, garnering huge gains in the previous generation and doing everything possible to hold on to them in a time of trouble. For the Germans, the Greeks created a sovereign debt crisis. For the Greeks, the sovereign debt crisis was the result of German-dictated trade and monetary rules.

The Germans were bitter that they would have to bail out the Greeks. The Greeks were bitter that they would have to suffer austerity. From the German point of view, the Greeks lied when they borrowed money. From the Greek point of view, if they lied it was with the conscious collaboration of German and other bankers who made money from making loans regardless of whether they were repaid.

The endless litany is not the point. The point is that these are two sovereign nations with fundamentally different interests. The elites in both nations are trying to create a solution within the confines of the current system. Both nations’ publics are dubious about bearing the burden. The Germans have little patience for paying Greek debts. The Greeks have little interest in shouldering austerity to satisfy German voters.

On one level, there is collaboration under way — problem solving. On another level, there is distrust of the elites’ attempts to solve problems and suspicion that it will be the elites’ problems and not their own that will be addressed. But the problem is bigger than Greco-German disputes. This system was created in a world in which European politics had been declared in abeyance. Germany was occupied. The Americans provided security and inter-European fighting was not allowed. Now, the Americans are gone, the Germans are back and European international politics are bubbling up to the surface.

In short, the European project is failing at precisely the point that it had been attempting to solve — nationalism. The ability of leaders to make deals depends on authority that is slipping away. The public has not yet clearly defined the alternatives, but that process is under way. It is similar to what is happening in the United States with one definitive exception: In the United States, the tension between mass and elite does not threaten the disintegration of the republic. In Europe, it does.

Europe will spend the next generation sorting through this. Whether it can do so remains to be seen — though I doubt it. We know the tensions between nations and between elites and the public will redefine how Europe works. Even if things do not get any worse, the situation already has been transformed beyond what anyone would have imagined in 2007. Far from emerging as a unified force, the question will be how divided Europe will become.

Saudi Arabia could need the oil price to average more than $100 a barrel by 2015 to sustain the big public spending rises it plans in an effort to forestall the political unrest sweeping the Middle East.

The break-even oil price the Gulf kingdom requires to balance its budget will jump from $68 last year to $88 this and then $110 in 2015, according to new estimates by the Institute of International Finance, a leading industry group.
Only a decade ago Saudi Arabia was able to balance its budget with oil prices averaging $20-$25 a barrel.

To Balance Budgets
DUBAI, Aug 12, (RTRS): Violence sweeping North Africa and the Middle East has driven up the oil price level required by producer countries, including leading OPEC member Saudi Arabia, to balance their budgets. Riyadh in the past has been able to balance its books with much lower oil prices than some other producers such as Iran, whose high population and ambitious social spending plan has long driven its need for high levels of oil revenue. Saudi Arabia still has huge financial reserves, but analysts say multi-billion dollar handouts to its population as it has striven to stave off social unrest have raised its price requirements. Bank of America Merrill Lynch Global Research said this week Saudi Arabia’s government required $95 a barrel to break even this year and would require $85 next year.

On Friday, the Cyprus-based Middle East Economic Survey (MEES) gave a much more conservative estimate of Saudi budget assumptions at $50-$58 per barrel for 2011, still a substantial increase from $43-$50 for 2010. Brent crude futures have averaged around $110 this year and hit a peak of $127.02 in April. As anxiety about the state of the global economy has taken hold, oil prices have fallen sharply, dipping briefly below $100 this week. When prices crashed in late 2008, Saudi Arabia stated $70-$80 was a fair price — high enough for producers seeking to invest in new supply and not so high as to hurt consumer economies and destroy demand. In June this year, Saudi Oil Minister Ali al-Naimi said that range was a thing of the past, without stating where the fair price was now.

Apart from the concerns of balancing the budget, other considerations are the cost of producing the marginal barrel — the most expensive-to-extract crude — which analysts say has risen since the 2008 price crash and now stands at around $90. The countries with modest price needs are the Gulf nations with small wealthy populations, such as Qatar, the United Arab Emirates and Kuwait. They are also cushioned from price falls by their foreign exchange assets, sovereign wealth funds and earnings from overseas investments. Calculating the breakeven point for members of the Organization of the Petroleum Exporting Countries is complex, precise data is elusive and the needs of the 12 different nations are very different.

Many analysts and OPEC nations now use Brent as their international benchmark, but Saudi-based Banque Saudi Fransi in figures issued in April this year said it was basing them on US crude. Brent has traded at record premiums to US crude this year as relative supply fundamentals have shifted. In the past US crude traded at a small premium to Brent. On Friday, Brent traded more than $21 above US crude. The following shows figures previously issued by banks and other analysts.
Banque Saudi Fransi (figures issued in April and based on US crude oil)
2011 2010
*Algeria 80 72
Bahrain 92 75
*Iran 89 80
*Iraq 78 71
*Kuwait 75 65
Oman 72 66
*Qatar 65 58
*Saudi Arabia 84 66
Yemen 93 84
(* Denotes OPEC member country)
Below are calculations in dollars per barrel, based on varying models, issued by energy consultancies for budget breakeven levels.
Energy consultancy PIRA
*Algeria 97
*Iran 95
*Iraq 112
*Kuwait 66
*Nigeria 81-85
*Saudi Arabia 81-85
*Venezuela 81-85
Russia 98
PFC Energy
*Algeria 73
*Angola 63
*Ecuador 79
*Iran 66
*Iraq 72
*Kuwait 38
*Libya 53
*Nigeria 75
*Saudi Arabia 49
*Venezuela 83
*UAE 18
Economists and oil watchers also look at the oil price assumptions made in the budgets of oil-producing countries, which tend to be very conservative.
They can be based on the selling prices for their own crudes, which can trade above or below international futures prices depending on quality.
The Cyprus-based Middle East Economic Survey (MEES) provided the following figures for 2011/2010 budget assumptions based on government sources.
2011 2010
*Algeria 37 37
Bahrain 80 60
Indonesia 95 60
*Iran 95 60
*Iraq 76.50 62.5
*Kuwait 60 43
*Libya — 50
Mexico 65.40 59
*Nigeria 65 57
Norway 105 89
Oman 58 50
*Qatar 55 55
Russia 105 75
*Saudi 50-58 43-50
Arabia
Sudan 60 60
Syria 48/55 42/51+
*Venezuela 40 40
Yemen 55 55
+lower figure is for heavy crude; higher is for better quality, lighter crude
(* Denotes OPEC member country)

Detecting "flickers of progress" in the long-shunned nation of Myanmar, President Barack Obama announced Friday that he will send Secretary of State Hillary Rodham Clinton to the repressed country early next month, the first official in her position to visit in more than 50 years.

"We want to seize what could be an historic opportunity for progress and make it clear that if Burma continues to travel down the road of democratic reform, it can forge a new relationship with the United States of America," (unstinting a pearl) Obama said Friday during his diplomatic mission to Southeast Asia.

Energy Resources
U.S. ties geopolitics to energy
Published: Nov. 17, 2011 at 10:16 AM
WASHINGTON, Nov. 17 (UPI) -- The geopolitical aspects of the oil and natural gas sector have a direct impact on the economic interest of the United States, a diplomat said.

Washington announced the creation of the new Bureau of Energy Resources within the U.S. State Department. The department was spawned by work mandated by U.S. Secretary of State Hillary Clinton in 2009. The task of the new bureau is to address foreign policy, security and economic issues related to oil and gas over the next 25 years.

"The first of these (task for the new bureau) is managing the geopolitics of today's energy economy," Carlos Pascual, U.S. special envoy and coordinator for international energy affairs, said during a conference call with reporters. "We think that that is absolutely critical in understanding the market dynamics that affect stability of oil and gas markets, and that has a direct impact on our economic interests here in the United States."

State Department officials are involved in the diplomatic aspects of natural gas pipelines planned for European and Asian countries such as Pakistan and Afghanistan.

The bureau aims to ensure supplies are stable and affordable in the United States while at the same time buffered against supply disruptions. The International Energy Agency in July called on member states to release strategic petroleum reserves because of market disruptions brought on by the oil production shortages from war-torn Libya.

Pascual added the agency would work to use shale and other non-conventional forms of natural resources.

"The intent of this is to be able to jumpstart relationships that range from extending technical assistance and environmental expertise on issues such as the development of shale gas" with other governments, said Pascual.

© 2011 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.


Read more: http://www.upi.com/Business_News/Energy ... z1eNPrQzEB

Can A Numerical Model Predict Geopolitics?
By Hank Campbell | November 17th 2011 10:53 AM | 1 comment | Print | E-mail | Track Comments


Hank Campbell

Numerical models had a tough decade to start off the 2000s. A field that had shown itself to be both scientific and applied in areas like semiconductor physics was extrapolated out to cultural issues and economics and successfully predicted...nothing.

A new model created by an international research group claims they can now predict which European countries are more likely to become united or which are more likely to break up. It does so by not only considering demographic and economic criteria but also culture and genetics.

What? Europe? No predicting the Arab Spring? No riots in China?

It is common wisdom that the more of a group that join together in unity, the greater the benefit - Science 2.0 is an example of that, the miracle of compounding means researchers get a much larger audience than they would get on their own. Economically, this might be because the marketing power gets bigger and costs are shared. But when regions or even countries are brought together there is a difference in populations, both economically and culturally, which carries a high cost.

if you think economic models are shots in the dark, imaging trying to create an accurate methodology that quantitatively analyzes specific cases to essentially predict the past so that it might predict the future.

The mathematical model that they created uses a country's wealth alongside size and cultural differences in terms of population genetics and then use it to support the idea that such genetic distance between regions can be used as a good tool when approaching cultural distance.

That's bound to be controversial - a proxy for cultural heterogeneity based on genes.

So which countries in Europe are disintegrating?

They predict Scotland from the UK and the Basque country from Spain but no one really needed a mathematical model for those; they have active separatist campaigns. But Albanians and Macedonians have been openly shooting at each other for decades yet that didn't make the list?

Which countries will unite? According to their model, when countries were paired together, those that would be more inclined to unite would be Austria and Switzerland, Denmark and Norway and France with Great Britain. Yes, they believe that Great Britain and France uniting would be possible. How did they calibrate that model? Pairing at all is the flaw here. Obviously there are a lot of knobs in country instability but placing criteria like 'who would team up if they had to team up?' is not really the same as predicting anything meaningful.

Back to genetics. They clarify they are not claiming that genetics explains culture - only progressive bloggers make crazy claims like that - but they do insist there is a correlation between the two, so populations that have mixed more, a melting pot of immigrants like America rather than a salad bowl like Germany, display greater cultural similarity. "We are not saying that genes explain the way a person thinks," clarifies Ignacio Ortuño Ortín, researcher at the Carlos III University of Madrid (UC3M) and co-author of the study.

Like I wrote earlier, these models really only work when predicting the past - they are crafted so that they get a prior event right and tweaked until they do. The idea behind a good numerical model is that it will be general purpose. In semiconductor physics, a tool that can help analyze a chip package is good; one that is modified to match measured data for a customer problem, however, is bad, because it may not work for the next customer.

To test it, they tried to predict the breakup of Yugoslavia. We all know it happened but they found that the economic differences determined the order of disintegration. No surprise their model also showed that. Cultural differences, although small, played a key role in triggering instability, they say. Basically, without the USSR to be commonly hated, they turned on each other again, despite the fact that they had generations of being together.

What about the future?

Their first futuristic predictions are done an odd way; they first turn Europe into a single country, like the United States, then they predict which countries might merge or separate if they were free from legacy.

No surprise the fiscal train wrecks, like Greece and Portugal, become quite happy as part of a United States of Europe, while Germany and France are basically screwed.(1)

The Basques and the Scottish would have more motivation to secede, their model claims, even if it doesn't make any economic sense, and it surely does not. Meanwhile, Austria and Switzerland might pair up, so might Denmark and Norway and France and Great Britain.

None of the model accounts for strategic interests so perhaps it is possible. Is it valid? Not really, not any more than firing up Balance of Power and seeing what happens. It's fun to think about, and the Russians are interested in the model, the researchers say. But if you have seen the Russian space program you can imagine a video game might be more accurate.



Citation: Klaus Desmet, Michel Le Breton, Ignacio Ortuño-Ortín and Shlomo Weber, 'The stability and breakup of nations: a quantitative analysis', Journal of Economic Growth, 2011, Volume 16, Number 3, Pages 183-213 DOI: 10.1007/s10887-011-9068-z

NOTE:

(1) They say Portugal would benefit from an increase in wealth of 13%, Greece 11.9%, Ireland 8.9% and Finland 8%.

Energy has always been at the centre stage of constantly changing geopolitical contours of the world. Since the energy resources i.e. the fossil fuels are highly unevenly distributed across the globe, the competition for control over them eats up much of energy hungry major economies' time and money. With global energy demand increasing sharply and reserves being limited, this competition has only become intense with time and is bound to reach unprecedented levels in future.

Although petroleum is the primary fuel all over the world, natural gas is increasingly being preferred since it is abundant, cheaper, cleaner and more efficient fuel. These qualities vis-à-vis other fossil fuels have made natural gas a much more attractive energy source. Russia possesses the world's largest proven gas reserves. It is also the largest producer and exporter of natural gas. Since Europe is short of hydrocarbons, it relies on Russia for much of its natural gas requirements. Russian gas constitutes more than a quarter of natural gas consumed by the European Union. This makes Europe the largest customer of Russian gas. This monopolistic status provides Russia a certain degree of leverage to exercise its influence over Europe. Besides, Russia's bilateral ties with transit nations like Ukraine and Baltic states also play a determining factor in the continuity of gas supplies to Europe. Russia-Ukraine gas dispute in early 2009 very well exposed the vulnerability of Europe to resultant disruptions.

Nord Stream, the first leg of which has been commissioned recently, is however expected to partly allay the European fears of cutoff since it will deliver gas directly from Vyborg, Russia to Greifswald, Germany via underneath the Baltic Sea, thus bypassing transit nations and hence evading potential diplomatic attrition. Moreover, the savings from transit fees will add to economies of scale for both sides. While the EU has a reason for contentment owing to assured gas supplies from Nord Stream; for Russia it will not only bring additional revenue, but also take away bargaining chip from its neighbors who time and again threaten it to disrupt supplies, thus allowing Russia to freely call the shots in the region.

Even though the West is backing the proposed Nabucco gas Pipeline, connecting Turkey to Austria, in an effort to reduce European dependence on Russian gas; serious doubts remain on its political feasibility and economic viability, owing to its diverse gas sources such as Iraq, Azerbaijan and Turkmenistan, which are fragile regions. Moreover, the pipeline is planned to pass through restive areas of the South Caucasus and Eastern Turkey. Therefore, security is a major hurdle circumscribing the prospects of this project. To further undermine Nabucco's prospects, Russia, along with Italy, has launched a rival South Stream pipeline project. It will transport Russian natural gas via the Black Sea to Bulgaria and further to Greece, Italy and Austria. The project being executed jointly by Russian giant Gazprom and Italy's Eni is expected to go on full stream by 2015, much before the proposed commissioning of Nabucco in 2017. Even if completed in time, Nabucco will be able to feed only limited number of European countries. Hence, both Nord Stream and South Stream combined are bound to make Russia the undisputed energy feeder to Europe, making it capable of enjoying an unprecedented influence over the continent at a time when all of its major economies are reeling under serious debt crises. To quote the Russian President Dmitry Medvedev during the launch of Nord Stream, "It marks a significant step in relations between Russia, the EU, Germany and a number of other countries which participated in the project. In the long run, it will bolster security in Europe, including in the energy sector, particularly amid the current economic difficulties." But this ecstasy need not overwhelm the Kremlin. It will be wise for Russia to utilize its ties with Europe to expedite modernization and diversification of its energy-driven economy.

Expanding the scope of its energy diplomacy of late, Russia has tried to diversify its gas exports by finding new customers. In this attempt, a pipeline has already been laid to China. Another project, Altai gas pipeline, is on cards. In addition to this, Russia has proposed to lay a pipeline to feed Koreas, in an effort to reduce tensions on the Korean peninsula and give a boost to impoverished North Korean economy. Plans are also underway to take supplies to maritime neighbor Japan as well as to South-East Asia. The Eastern Siberia – Pacific Ocean oil pipeline is already pumping Russian crude to Japan, China and Korea. Since Asian economies' appetite for energy is huge, this diversification of supplies to Asia-Pacific will ensure guaranteed demand for Russian gas. It will also enable Moscow to have a greater say in the affairs of the region, which is certainly the most important geopolitical hotspot at present. It's an opportune moment for Russia whereby, by wisely and judiciously making use of its geography, it can establish itself as a strong pole in the emerging global order.

by Flynt Leverett (source: Race for Iran)
Friday, November 18, 2011
Flynt appeared on Al Jazeera’s Inside Story, in a segment called “A Gas OPEC in the Making?”, click the link here, to discuss the Gas Exporting Countries’ Forum in Doha. Although the conversation was not focused on Iran per se, Flynt made some points that are relevant to thinking about the Islamic Republic’s strategic position and America’s Iran policy.
One of the many manifestations of internal incoherence in U.S. policy toward the Islamic Republic concerns energy: At a time of mounting concern about the adequacy of global oil and gas supplies in coming years (with all that portends for energy prices), Washington continues to insist that the world’s second-largest proven reserves of conventional crude oil (in Iran) and the world’s second-largest proven reserves of natural gas (also in Iran) should stay in the ground, for reasons that have nothing to do with the global energy balance.
–To reinforce the point, the United States forbids American energy companies from doing business in Iran. It also threatens third-country energy companies doing or contemplating doing business in Iran with so-called “secondary sanctions”—almost certainly illegal under the World Trade Organization, though no one has litigated the question yet—and various types of political pressure.
–Furthermore, American policymakers continue to insist that Iran’s massive hydrocarbon reserves should stay in the ground until they decide it is “OK” to monetize them—again, for reasons that have nothing to do with the global energy balance.
As the United States pursues this incoherent—or, as Flynt says on Inside Story, “schizophrenic”—approach, it also continues to insist that it is providing the world with the vital public good of energy security. More specifically, U.S. officials in multiple administrations, Republican and Democratic (including the Obama Administration), have claimed that America’s commitment to ensuring the physical security of hydrocarbon exports from the Persian Gulf—a commitment enshrined in the 1980s Carter Doctrine—is something from which everyone benefits. This includes not just traditional U.S. allies in Europe and Asia, but also major energy-exporting countries and rising powers like China.
However, if one considers some of America’s more provocative strategic initiatives in recent years, such as the 2003 invasion of Iraq, it is hard to avoid the conclusion that, notwithstanding these declaratory commitments, Washington often acts in ways that, in fact, limit the flow of Persian Gulf hydrocarbons to international oil and gas markets. (Behind closed doors, this assessment seems to be shared by critical clusters of people in the Middle East and China.) American sanctions policy toward Iran very much follows this pattern. If the United States moved to sanction the Central Bank of Iran, as part of an effort to impose an effective embargo on Iranian oil exports, the genuineness of Washington’s commitment to the free flow of Persian Gulf hydrocarbons as a global public good would be called into even more serious question, see here.
As a senior Japanese diplomat put it to us recently, the United States is really only committed to ensuring the free flow of Saudi oil to international markets. This suggests that America is only interested in providing the “public good” of energy security in ways that fit with its hegemonic ambitions in the Middle East. In the end, just how much of a public good is that?

No, “apology” is not the collective noun for enclaves. The accepted term is a complex of enclaves — although more imaginative suggestions are welcome. Nor do I feel the need to apologize for enclaves. Yes, these geopolitical anomalies — for the uninitiated, a chunk of one political or ethnic unit lying wholly within another — have caused their fair share of misery and grief. But fascination with a subject does not equal approval of all its phenomena; herpetologists need not apologize for snakebites.

In keeping with the original meaning of the word, this apology is a defense of enclaves, a fascinating but endangered border phenomenon. Yet at the same time, this piece is also an apology of sorts for enclaves [1], for two examples in particular: Baarle, Belgium, and Cooch Behar, India/Bangladesh, both of which involve not one or two but dozens of atomized enclaves spread throughout, respectively, Dutch and Bangladeshi/Indian territory. It’s fair to ask why these lands, which by all accounts feed daily bureaucratic nightmares, have been allowed to survive.

This article must also contain an apology as well — in particular to Simon, from Singapore. In a comment on the previous post in this series, Simon, a self-declared border/no-man’s land/enclave buff, warned me against visiting the subjects of Baarle and Cooch Behar. “Am a bit fed up reading about the town in Belgium and the mess in Bangladesh/India,” he wrote. “We need new ones!”

Understood, and agreed. Border studies, and enclave-spotting in particular, are disciplines that should not be reduced to their star subjects. Obscure examples, and the concomitant thrill of discovery, are part of the attraction of scouting for border anomalies, a few of which Simon suggested: “Haven’t seen much in the literary record on the Malaysian railway in Singapore … used to be Malaysian territory once you got on the train.” He likewise suggested “the little back door leading into Guantánamo Bay solely for the Cuban pensions officer.”

My own favorite obscure border anomalies include the Drummully Polyp, a pene-enclave [2] on the intra-Irish border, and the omelet-shaped enclave complex of Madha and Nahwa — Madha being a small Omani enclave inside the United Arab Emirates, and Nahwa in turn a tiny emirates enclave inside Madha [3]. And there are plenty of river/border asynchronicities [4] around the world to get excited about.

I’m sure that we’ll eventually get to these, or other equally obscure examples of anomalous borders. But when it comes to enclaves, Baarle and Cooch Behar are, for lack of a better word, uncircumventable. How better to explain to an entry-level enthusiast the ins and outs of this particular border phenomenon than via the world’s two most spectacular examples?

Here’s what’s in it for Simon, and other advanced border buffs: Baarle and Cooch Behar have often been mentioned in the same breath, but have hardly ever been compared. Beyond the obvious formal similarities and practical differences, both complexes share a few surprising traits, and are marked by at least one glaring divergence.