Seven of ten top companies in oil; World’s top 10 companies richer than Egypt

The world’s four largest companies are richer than all but two of the Middle East’s leading economies. Turkey and Saudi Arabia are the only exceptions to this case.

Of the top 10 largest global companies in 2009, 7 are in the business of energy and hydrocarbons, 4 of them are from the USA, and 2 from the Netherlands.

Here they are in ranking by revenues (source: CNNMoney.com’s Fortune magazine):

1. Royal Dutch Shell, revenues of: $458.4 billion (Netherlands) Hydrocarbons 
2. Exxon Mobil: $442.9 billion (USA) Hydrocarbons
3. Wal-Mart: $405.6 billion (USA)
4. BP: $367.1 billion (Britain) Hydrocarbons
5. Chevron: $263.2 billion (USA) Hydrocarbons
6. Total: $237.7 billion (France) Hydrocarbons
7. ConocoPhillips: $230.8 billion (USA) Hydrocarbons
8. ING Group: $226.6 billion (Netherlands)
9. Sinopec: $207.8 billion (China) Hydrocarbons
10. Toyota Motor: $204.4 billion (Japan)

Here are some of the Middle East’s top economies by GDP (2008, from the World Bank):

Turkey: $734.9 billion

Saudi Arabia: $468.8 billion

Iran: $286.1 billion (2007)

Israel: $202.1 billion

Egypt: $162.3 billion

And now for the top 10 world economies by GDP (2008, from the World Bank):

1. USA: $14,093.3 billion
2. Japan: $4,910.8 billion
3. China: $4,327.0 billion
4. Germany: $3,649.5 billion
5. France: $2,856.6 billion
6. UK: $2,674.1 billion
7. Italy: $2,303.1 billion
8. Russian Federation: $1,679.5 billion
9. Spain: $1,604.2 billion
10. Brazil: $1,575.2 billion

Turkey’s five year energy plan

Turkey's planned and developed gas corridor. (Source: US EIA - http://www.eia.doe.gov/cabs/Turkey/NaturalGas.html)

Turkey’s Ministry of Energy and Natural Resources has published a strategic plan for 2010 to 2014 indicating the country’s aims at improved energy security while taking advantage of its geographic location to position itself as an energy transit hub. The goal is to reduce its vulnerability to potential volatility in the import of hydrocarbons such as oil and natural gas for which it relies on much of its energy needs.

The plan seeks to lessen Turkey’s import dependence, not simply by way of tapping into the national energy resources (which are very limited), but by having a renewable energy infrastructure, increasing the use of coal powered generators (which are less susceptible to fluctuations in price and availability), and diversifying its imports so that it is not so dependent on one country (namely Russia) for its energy imports. Turkey imports 2/3 of its natural gas from Russia.

The plan recognizes Turkey’s very limited hydrocarbon capacity: “In the year 2008 the total primary energy consumption of our country has been 108 million Ton Equivalent Petroleum (TEP), and its production has been 29 million TEP.” (1)

Turkey depends on imports of natural gas for about 97.3% of its needs. It produced 1 billion m3 in 2008, and consumed 36 billion m3 in the same year. Only five countries supply it with its natural gas. Russia has been the dominant source between 2001-2009, followed by Iran, Azerbaijan, and Algeria.

To provide it with additional cushion in case of supply of price volatility, Turkey plans to expand its natural gas storage capacity from 2.1 billion m3 (2008) to 4 billion m3 (2014)

Furthermore, Turkey depends on imports of oil for 93% of its needs (2008).

Diversification, in the case of Turkey, means diversifying the country’s imports as well as varying the types of energy it consumes, so that if there is trouble with one source of energy (say natural gas or oil), the incident does not cause as great a disturbance as it otherwise might.

This interest in diversification is tied to a desire for economic and energy security. For this reason, it is interested in renewable energy such as wind, geothermal, and hydroelectric dams. So, we see that a component, perhaps a dominant component, of the interest in renewable energy is tied to national security, so that a country like Turkey would seek to establish domestic electricity production using what little options it has, which in this  case falls on renewable sources since it has no serious deposits of hydrocarbons.

By end of 2009, the country had enough domestic oil reserves to meet only one year’s worth of consumption, and natural gas reserves for two months.

The desire to diversify energy has also led the ministry to encourage the growth of coal power. The ministry estimates that only 32% of the potential electricity production based on domestic coal resource availability has been actualized. Over the period of the plan, Turkey plans to complete a number of coal thermal plants, totaling 3,500 MW of additional electricity supplied by 2014.

A central goal of improving the country’s energy security then is to increase the share of domestic generated electricity from hydroelectric dams and coal power plants. Turkey also plans to construct its first nuclear power plant, with an aim to have nuclear energy provide some 5% of total electricity by 2023. The plan indicates a goal to add an additional 5,000 MW to the grid from new hydroelectric projects by the year 2014. It also includes what might be a very ambitious aim of increasing the share of wind power from 802.8 MW (2009) to 10,000 MW by 2015.

According to Turkey’s General Directorate of State Hydraulic Works, hydro power supplied from southeastern Anatolia has provided some “45% of overall hydroelectric generation” to date. (2)

Turkey seeks to become an energy corridor, siphoning natural gas and oil from its south (Iraq), east (Iran, Caspian Sea basin, Central Asia), and northeast (Russia), to Europe. For this it seeks bilateral and multilateral agreements with countries of the affected region.

Turning the country into an energy hub is taking advantage of Turkey’s geostrategic location. The plan states that “Turkey is positioned in a geography where about 72 percent  of the proved oil and natural gas reserves of the world are buried, especially at the Middle East and the Caspian Basin. In the period by 2030, the world’s energy consumption is projected to rise by 40 percent  and is anticipated to be covered to a significant extent from the resources in the region where we are positioned.” (3)

To this purpose, the ministry focuses on the importance of turning the port city of Ceyhan into an “an integrated energy terminal where various quality and feature of crude oil may be offered for international markets, and where a refinery, petrochemicals facilities and liquefied natural gas (LNG) exportation terminal will be available.” (4)

Ceyhan is part of an existing energy corridor that went into operation in 2006. The Baku-Tblisi-Ceyhan (BTC) Crude Oil Pipeline transfers oil from Azerbaijan through Georgia to Turkey. From 2006 to 2009 oil loaded onto sea transports from Ceyhan totaled 800 million barrels.

Turkey also seeks to import electricity for exporting across its territory by linking up its transmission network with that of neighbouring countries.

The feasibility of the desire to turn Turkey into an energy corridor is in question. It needs to tap into proven reserves of hydrocarbons enough to provide for the markets in Europe. For this, it would need to lay down infrastructure to these regions by competing with or coming to agreements with potential suppliers in Central Asia and the Middle East as well as dealing with the main overland corridor that currently runs through Russia.

One of the key aims, according to the strategic plan, is “Aim-4: Making the free market conditions operate fully and providing for the improvement of the investment environment.” (5) The way was paved for the liberalization/privatization of the energy sector by way of the Electricity Market Law (2001), the Natural Gas Market Law (2001), the Oil Market Law (2005), the Liquified Petroleum Gases Law (2005), and the Market Law (2005).

The plan estimates that the total investment required in the energy sector is more than $120 billion by 2020. Theoretically, privatization is supposed to help bring private investment on-side.

The public sector is stepping back from directly creating electrical capacity, wanting the private sector to take the lead. Since the passing of key privatization laws starting in 2001, 12,850 MW of new capacity has been generated between 2002 to 2009, 7,000 MW of which was due to private sector construction.

The ministry has also been moving toward deregulating the pricing model of the energy market. Free floating pricing has increased from nearly 30% of the electricity market in 2004 to 50% in 2009.

The ministry’s view of consumers is interesting here, integrating the language of liberal economics into their perception of what are persons, now identified as “natural or legal persons” (individuals or corporations). This has an impact on the emerging role of corporations as empowered legal person within the framework of a liberalized political and economic model, giving them many of the rights generally reserved for individual citizens under law. One of the main advantages posited here for consumers is the freedom to choose between various distributors, and it is assumed that this will lead to competition that will increase efficiency in generation and distribution, and also reduce prices. This assumption though has not led to this fact in many cases of partial or near full privatization around the world such as in Canada’s province of Ontario, and within the US, where prices have often increased and supply has not matched demand.

Sources

(1) “The Republic of Turkey Ministry of Energy and Natural Resources Strategic Plan (2010-2014)“, p. 12.

(2) Accessed May 13, 2010
http://www.dsi.gov.tr/english/service/enerjie.htm

(3) “The Republic of Turkey Ministry of Energy and Natural Resources Strategic Plan (2010-2014)“, p. 29.

(4) Ibid., p. 31.

(5) Ibid., p. 22.

USAID funds an expensive power plant that may never be used in Afghanistan

President Karzai energizes a substation to begin the transfer of electricity from Uzbekistan to Afghanistan. (Source: USAID)

A USAID funded, foreign constructed power plant in Afghanistan has become a money sink and may never be used by the local government due to its extravagant maintenance costs.

The diesel-powered plant is nearly complete, yet its future is uncertain, and events so far have been stitched with controversy. Pratap Chatterjee, in an IPS article, writes that, “three independent investigations into U.S.-financed reconstruction of the Afghan electricity sector, as well as IPS interviews with Afghan government officials and contractors, suggest that the power plant – which will cost taxpayers almost three times as much as comparable projects – may never be used.”

First the U.S. planners chose to ignore other ongoing reconstruction projects that were cheaper and more likely to succeed, or to pay attention to alternative recommendations from Afghan government officials.

Second, the planners picked expensive technologies that the city of Kabul could not afford to maintain or utilise.

The project was launched in 2007, as a joint venture between two US contractors, Louis Berger and Black & Veatch. In an earlier post, I had mentioned a previously bungled construction contract by Louis Berger.  They had received a contract to build 1,000 schools, each costing US$274,000.  The schools were built according to designs suitable for the US, not Afghanistan. They did not consider local climate, nor local cost considerations. The Afghan government not only has to worry about maintaining these expensive schools, they might not even be usable. In January 2009, Ann Jones, who for years worked in Afghanistan as an aid worker, said that Louis Berger, “already way behind schedule in 2005, had finished only a small fraction of them when roofs began to collapse under the snows of winter.”

The 105 megawatt power plant under construction is estimated to cost over US$300 million, the latest price tag being given after several cost hikes in the project’s life span.

Chatterjee writes that “the power plant is expected to be completed this spring. But the electricity is no longer urgent. One year ago, a 300-megawatt power line to Kabul from Uzbekistan was completed, with funding from the World Bank, German and Indian governments. The construction cost was just 35 million dollars and the operation costs are expected to be just over six cents a kilowatt hour compared to the 22 cents a kilowatt hour that it will cost to run the diesel plant.”

The contract was awarded by USAID under a cost-plus deal. Cost-plus contracts guarantee a set profit above the cost of projects. This has become a preferred form of contract for Western firms taking on US government contracts in Afghanistan and Iraq. The argument in favour of them is that, given the poor security conditions of these countries, and the uncertain costs of construction in a war zone, private firms want a guarantee of profits before they begin work. The problem here is that, in this schema, there is no incentive for contractors to limit costs, and they could very well gain by pushing them up and generating more work for themselves knowing full well that they will get their share of profits no matter what.

Chatterjee’s report revealed the following:

“This situation illustrates the twin policy evils of the cost-plus contracts,” says R. Scott Greathead, a New York lawyer who advised Symbion on the project. “First, they impose no cost or penalty on the cost-plus contractor for its incompetence, inefficiency or failure to perform, and second, they punish two victims, the fixed-price subcontractor, who incurs costs that may never be fully reimbursed, and the U.S. government, which pays in the end for everything.”

Construction of the power plant has been slowed by disagreements.

On May 19, 2009, Symbion [a subcontractor] stopped work – because Black & Veatch had failed to pay them for four months. A USAID Inspector General audit published in November 2009 found that Black & Veatch “had charged USAID for subcontractor costs that the contractor had not paid the subcontractor.”

The power plant, near Kabul, is said to cost nearly three times more than similar projects.

Afghanistan’s 2008 annual government revenue was estimated to be about US$685 million according to the minister of finance, Anwar-ul-Haq Ahadi, during an interview with foreign press.

Fresh U.S. efforts on a natural gas pipeline in Eurasia

The US is making concerted effort to revive plans for a 3,300 km long natural gas pipeline that stretches from the Caspian sea through Turkey to Austria. This Nabucco pipeline is still very much in its infancy, lacking adequate supply of natural gas as well as lacking transit rites through intermediary countries in order to become viable enough to start building. This pipeline could potentially provide energy from Central Asia, and the Caucasus to Europe, diversifying Europe’s supplies of natural gas.

Russia has so far successfully maintained its dominance over Europe’s energy markets. It has done this by outplaying the US under president Bush with the important energy producers of Central Asia, by sewing insecurity into existing Western energy routes through the region by strafing yet leaving undamaged the Baku-Tbilishi-Ceyhan pipeline during the short Russia-Georgia war, and by promising an alternative to Nabucco: South Stream.

South Stream is a proposed 900 km pipeline that would cross the Black Sea into Bulgaria and branch into Austria and Italy. It is still uncertain whether South Stream, Nabucco, or both might realize expectations of providing increased natural gas supply through to south eastern Europe.

US president Barack Obama last week appointed Richard Morningstar to head up Eurasian energy policy. MK Bhadrakumar writes in Asia Times that Morningstar, under president Clinton, successfully championed the Baku-Tbilisi-Ceyhan oil pipeline.

In 1998, Morningstar was quoted as saying that, “the fundamental objective of the US policy in the Caspian is not simply to build oil and gas pipelines. Rather it is to use those pipelines, which must be commercially viable, as tools for establishing a political and economic framework that will strengthen regional cooperation and stability and encourage reform for the next several decades.”

Bhadrakumar states that Morningstar has been very busy and pragmatic in his first week in office under president Obama. He has been trying to win a supply deal from gas rich Turkmenistan in order to transit that energy across the Caspian sea and through to Europe. He has also stated that the US would consider striking a deal with Iran for natural gas. It has even been suggested that some Western technology may be made available to Iran’s energy sector if a natural gas deal was concluded.

Talk of purchasing natural gas from Iran can well be a carrot in negotiations between the US and Iran on the latter country’s nuclear program. Also, the US has been seeking some degree of increased cooperation from Iran in order to stabalize Afghanistan. It was today announced that Iran, Pakistan, and Afghanistan officials plan to meet monthly in order to cooperate on security and stability in the region.

Having Iran join the proposed Nabucco pipeline would have that energy rich country enter into what would become an increasingly competitive market for European consumers, eroding Russia’s dominance.

The likelihood of Iran joining the Nabucco project is slim in the short-term. Tensions are still high between the US and Iran, and this proposal is likely to serve both as an incentive to Iran and as a display of how serious the US is about making the proposed pipeline a reality, thus bolstering the confidence of currently lackluster potential investors.

(First published at Rabble.ca)

Energy pipelines in Eurasia: maps of the New Silk Road

I quickly gathered a series of maps of oil and natural gas pipelines that criss-cross Eurasia. Notice that some of the maps, though similar, don’t outline the same routes. This is because, some of the established routes are newly constructed and were not built at the time of the map’s inception. Also, some of the proposed lines vacillate between quite possible to unlikely to ever happen. This energy network is not yet fully established and is undergoing fairly rapid changes over the years. I hope, however, that these maps can provide a sense of the energy routes that span this multi-continent network.

A general view of existing and proposed pipelines based on geostrategic parties

Central Asia

Central Asia and surroundings

Eastern Europe and Caucasus

From the US government’s Energy Information Administration

Railway network

Iraq’s oil, the economy, and the war

I found these videos at the Iraq Oil Report.

Oil expert Faleh Al-Khayat presents at the European Parliament on 18 March 2009.

Part 1:

Part 2:

A swarm of nuclear deals in the Middle East and Asia

Many countries in the Middle East, Central Asia, South Asia, and North Africa already have nuclear programs or are planning to set up new ones with the help of the US, Russia, Europe, or China.

A great deal of attention has been paid to Iran’s nuclear program, with the UN Security Council making special demands on that country’s research and development that fall outside of the Non-Proliferation Treaty (NPT). There are a number of in depth articles on this issue currently available, yet not as much is at hand when it comes to a comprehensive review of the proliferation of nuclear technology in the wider region. I will here briefly outline the various nuclear deals and programs in that large yet interrelated swath of territory spanning two continents.

Iran’s desires for nuclear energy began in the late 1950s, under the now deposed Shah, and kicked into full gear with Western help in the early 1970s under US president Dwight D. Eisenhower’s Atoms for Peace program. The Iranian revolution put an end to this cooperation in 1979, but, in the 1990s, an independent nuclear program was revived under the Islamic government. (Read about some of this history at the Council on Foreign Relations).

Some of the criticism of the UN Security Council’s barriers in place against Iran’s nuclear program touch on the fact that many of the same opposing countries are actively supporting the expansion of existing programs and the creation of new ones throughout neighbouring regions. Furthermore, Iran is a signatory of the NPT, giving it the right to a civilian nuclear program. The opposition to Iran’s efforts seem mainly based on the assumption that that country seeks to build nuclear weapons and that the presence of a civilian program enables and facilitates a military one. In this case, the proliferation of internationally supported nuclear programs throughout the region raises the question of why other countries might be exempt from similar concern. Perhaps it is believed that the spread of at least civilian technology is inevitable over the medium to long term and that participation in these country’s programs will help mitigate perceived and real threats as well as allow more direct supervision and influence over the programs’ establishment.

Armenia

Iran’s north western neighbour plans to build a new power plant starting April 1, 2010. The new plant is meant to replace the existing 33 year-old Soviet era Metsamor nuclear power plant that is to be shut down in 2016. The new plant is supposed to generate twice or more energy than its predecessor, enough for Armenia to export electricity to other countries.

Turkey, a NATO member, has been in talks with Armenia to cooperate on the construction of the new plant. This is mainly a political move on Turkey’s part, supported by the current US administration under president Barack Obama. Armenia is close to Russia and bitter rivals with Western-leaning neighbouring Azerbaijan. Though it is very unlikely that Turkey would indeed become involved in the program, the fact that they’re talking about it is a diplomatic measure that may well be used to leverage Armenia away from an unmitigated pro-Russia stance.

Turkey

Turkey has no nuclear power plants. This makes it even more unlikely that they would get involved in an Armenian program, and supports the notion that Turkey is using nuclear talks to forward NATO’s political aims in the region.

Turkey, however, has expressed plans to build two power plants in the near future (each about the size of the Armenian one). (1)

Gulf Cooperation Council (GCC)

The GCC officially expressed its desire to seek a civilian nuclear program after its December 2006 summit. The GCC is composed of the United Arab Emirates, Saudi Arabia, Bahrain, Qatar, Kuwait, and Oman.

In 2007, the GCC asked for help from the International Atomic Energy Agency (IAEA) in developing a civilian nuclear program and has since had some positive response from the energy agency.

The US, under president George W. Bush, has signed nuclear cooperation agreement with a number of GCC members: with Saudi Arabia, the United Arab Emirates (UAE), and Bahrain (click on each country name to read the agreement). All of these agreements were signed in 2008, save one with the UAE in 2009.

Jordan

Jordan has expressed its desire for a civilian nuclear program and in September 2007 signed a memorandum of understanding with the US on nuclear cooperation.

Israel

Israel is the only country in the Middle East with a nuclear weapons arsenal, with an estimated supply in the hundreds. Its nuclear program was assisted by France (with reactors, heavy water, uranium and components), Norway (heavy water), and the UK (heavy water). The US did not formally support or impede the program.

Egypt

Egypt plans to go ahead with nuclear power, citing energy concerns. The US had previously agreed to cooperate on the project.

Other Middle Eastern and North African Countries

Morocco, Algeria, Tunisia and Yemen have also expressed their desire to consider launching a civilian nuclear program. These announcements have often coincided with or closely followed announcements by US supported GCC and Egyptian plans. Though these plans may seem unrealistic in the medium term, they signal a growing support for and movement toward nuclear technology in the region.

Iran

Iran’s initial dream of nuclear energy was supported by the US. Plans began in the late 1950s, under the Shah.

Recently, there has been talk of a potential shift in US policy toward Iran’s nuclear program. International relations expert and former Indian diplomat MK Bhadrakumar has written in a recent article that “according to the Wall Street Journal, the Obama administration is ‘carefully considering’ the setting up of an international uranium fuel bank in Kazakhstan, which could form the exit strategy for the historic US-Iran standoff.”

Kazakhstan

Kazakhstan possesses no nuclear power plants but is considering plans for the construction of two reactors.

The president of Kazakhstan, Nurusultan Nazarbayev, on April 6, announced that his country would be willing to host a US-backed plan for an international nuclear fuel bank. The US supported plan would place all uranium enrichment under international control and supervision.

Kazakhstan has about 19% of the world’s total uranium deposits and is expected to produce 11,900 tons of it in 2009.

Pakistan

Pakistan has two nuclear reactors(2) as well as nuclear weapons. The program received aid from China.

India

The passage of a recent India-US nuclear pact has strengthened India’s hand in the field of nuclear technology. Despite India’s refusal to sign the NPT and its active weapons program, the US, under president George W. Bush, brokered a deal that essentially circumvents the non-proliferation treaty and allows India international access to fuel and technology.

The deal may well be used to pull India into US foreign policy plans for the Asia-Pacific region, such as on issues relating to Iran and China.

First published at Rabble.ca.

Sources:

Most sources can be found as hyperlinks within the body of the article.

(1) World Nuclear Association, ‘World Nuclear Power Reactors 2007-09 and Uranium Requirements,’ 1 April 2009,
http://www.world-nuclear.org/info/reactors.html
.
(2) Ibid.

The New Great Game or the Long War Across Europe and Asia

A growing network of energy pipelines are criss-crossing Eurasia, giving form to the political instability, military tension, and wars erupting in the large expanse of territory touching eastern Europe to eastern regions of Asia. The war in Afghanistan, the brewing civil war in Pakistan, and international intervention in these and neighbouring countries are increasingly being viewed as outbursts and maneuvers in what is called the New Great Game over the existing and developing arteries — oil and natural gas pipelines — that will transit much of the world’s energy.

The largest players in this battle have been the USA, with its Western allies increasingly under the instrument of NATO, and a China-Russia entente primarily under the auspice of an economic and increasingly security cooperative called the Shanghai Cooperation Organization (SCO). Iran and India are also emerging as significant players in this Great Game that has very concrete material, economic, and security implications for Eurasia and for the globe in terms of the alignment of political powers and destination of economic wealth determined by the flow of the great part of the world’s energy reserves.

The existing and proposed pipelines will tap into the vast energy reserves in Central Asia, Iran, and Iraq. Their destination will be the major consumers and distributors in India, Europe, Turkey, China, Russia, and Pakistan. The cheapest pipelines cost billions of US dollars to construct, the sometimes ad-hoc network as a whole costs hundreds of billions simply to construct along sometimes competing pipelines and short sea routes with varying capacity, each tied to a general NATO or SCO alliance of interests.

The point is not simply to deliver energy to an end point, but rather by a dominant political alliance to directly control or at least overwhelming influence the access to energy. This determination will provide economic advantage to the carriers, permit them to exert political pressure by controlling access to energy and even threatening to or actually cutting off supply.

Prior to the late 1990s, the US had become supportive of cooperation with the Taliban because Afghanistan had almost entirely been united under that group’s rule, bringing harsh rule and some level of security stability to the country. In that period, those regions of Afghanistan under Taliban control were under a unified control that made it possible for the US to examine the potential for an energy pipeline running through Afghanistan into Pakistan. The US actively negotiated with the Taliban in order to make this a reality and was keen to apply political players to push out other countries’ corporate energy conglomerates. Of course, the plan did not succeed, the Taliban did not deliver a pipeline to the US energy interest, the civil war in Afghanistan kept re-erupting, and hostilities between the US and the Taliban grew until full war broke out between them.

Recently, there has been increasing talk of the possibility that the US may bomb the Baluchistan region of Pakistan in the south west. Attacks of this sort are conducted by drone planes within Pakistan. This is presented as an extension of the War on Terror, aka the Long War, aka the AfPak (Afghanistan-Pakistan) war conducted by the US and its NATO allies.

Pakistani Baluchistan is mainly cooperating with Pakistan’s central government and has not been the hotbed of Islamist militancy that has swept across much of that country’s north west. True, Baluchistan has at various points in Pakistan’s history revolted, but their resistance has nothing to do with a pan-national Islamic movement. They seek better economic conditions, and are pressing for a nationalist movement that articulates their region’s ethnic and cultural difference and marginalisation from the dominant people within the Pakistani state. So, it doesn’t seem to make sense for the US to bomb this region.

A bombing campaign would almost certainly add to long-standing tensions between Baluchistan and the central government, may lead to political instability in the region, and calls for non-cooperation with the government. The worst case would be for the nationalist movement to be reinvigorated and for Pakistan to lose control of yet another province. Instability in Baluchistan would essentially result in all of Pakistan’s western wing breaking away from direct control and turning to open rebellion.

So why would the US consider bombing Baluchistan when there are little to no major Islamist assets in the region and risk further disempowering Pakistan’s government?

Baluchistan is a necessary passage for a proposed pipeline running from Iran, through Pakistan, to India, with a possible splinter carrying oil to China. This Iran-Pakistan-India (IPI) pipeline has already seen much difficulty. With the deepening strategic alliance between India and the US, India has been pressured to disinvest from the project. Despite this, the project keeps rearing its head. India depends on energy imports, and will become increasingly vulnerable to energy supplies as it industrialises at a rapid pace. Furthermore, nearly all of India’s energy supplies are delivered via sea lanes, leaving it open to disruption, explaining much of India’s interest in heading off pirate attacks in north east Africa as well as its increasing monitoring operations there. India feels it needs not only a greater supply of oil but also to diversify points of access.

The permanent infrastructure of an IPI pipelines would require cooperation between Iran, Pakistan, and India. This may well demand some rapprochement between India and Iran, and would offset some of the US ability to isolate the Islamic Republic of Iran. Furthermore, a splinter into China would extend China’s reach and influence into the intensifying New Great Game over energy supplies.

Just as the Russia-Georgia war disrupted the only pro-Western energy supply line from Central Asia to Europe for a short period and risks to undermine its development by scaring investors and government away, the bombing of Baluchistan could well bury the IPI pipeline before it can become a reality.

For more information on the New Great Game read the following:

Liquid war: Welcome to Pipelineistan, by Pepe Escobar.

From Great Game to Grand Bargain, by Barnett R. Rubin and Ahmed Rashid.

Taliban: Islam, Oil and the New Great Game in Central Asia, by Ahmed Rashid.

European Dependence on Russian Energy

The short war between Russia and Georgia has brought to the surface the vital role of Russian energy in international relations. Russia has a substantial domestic supply and is naturally positioned to act as an energy highway, via a series of pipelines, to tap into and transport massive Central Asian natural gas and oil deposits. The pipelines allow Russia to act as a conduit for a network of dependent countries from the Pacific to the Atlantic. Europe is dependent on energy provided by or through Russia, limiting the European Union’s response to the Georgian crisis or other issues of international concern.

Gas Pipelines from Russia to Europe

(Source: Stern,
http://www.oxfordenergy.org/pdfs/comment_0106.pdf
, 2005, p. 3)

In January of 2006, Russia’s natural gas monopoly, Gazprom, decreased the gas supply to Ukraine after a protracted row between Moscow and Ukraine’s western-leaning government elected in the tail end of 2004. The cut in gas affected European countries down the pipe, that, as a consequence, had their supplies limited. This sent shock waves throughout Europe, now acutely concerned that Russian energy politics could at least temporarily batter their economies, especially during the cold winter months.

It did quickly become apparent that Russia was also dependent on European energy imports in order to maintain a healthy economy. Europe was drawn into the dispute between Russia and Ukraine in a high stakes game that hurt all parties involved. A key component of success in this test of will is to determine whether Russia or Europe has a relative advantage in disruptions to energy transfers: meaning who would be the bigger loser?

Certainly, Russia’s economic health is greatly affected by European energy purchases. Russia’s growth in the recent past has been in great part due to energy exports. According to the World Bank and IMF, it’s estimated that Russia’s oil and gas sector made up about 64% of export revenues in 2007, and were tied to 30% of all foreign direct investment (FDI). Also, according to Alfa Bank, the energy sector accounts for some 20.5% of the country’s GDP.

Europe, on the other hand, imported 42% of its oil and 43% of its natural gas from Russia in 2004. In some European countries, their energy imports from Russia can top 80 or 90 per cent.

Europe’s dependence on Russian energy explains why it is so intent on energy efficiency, while the pivotal role of energy in Russia’s economy and international influence explains why it would wish to improve its access to supplies in Central Asia while maintaining a near monopoly on the new silk road of pipelines going east to west.

Roundup of Analysis and Investigative Articles: Oil, war, torture, privatization, and politics

Oil and the origins of the ‘War to make the world safe for Democracy’. At first almost unnoticed after 1850, then with significant intensity after the onset of the Great Depression of 1873 in Britain, the sun began to set on the British Empire. By the end of the 19th Century, though the City of London remained undisputed financier of the world, British industrial excellence was in terminal decline. The decline paralleled an equally dramatic rise of a new industrial Great Power on the European stage, the German Reich. Germany soon passed England in output of steel, in quality of machine tools, chemicals and electrical goods. Beginning the 1880’s a group of leading German industrialists and bankers around Deutsche Bank’s Georg von Siemens, recognized the urgent need for some form of colonial sources of raw materials as well as industrial export outlet. With Africa and Asia long since claimed by the other Great Powers, above all Great Britain, German policy set out to develop a special economic sphere in the imperial provinces of the debt-ridden Ottoman Empire. (F. William Engdahl, Geopolitics-Geoeconomics)

Even CATO libertarians say energy deregulation does not work. In an Op-Ed that was published in the Wall Street Journal last month (and is available in full to non-subscribers on CATO’s website) two CATO economists specialised in deregulation and energy markets provide a breath of fresh air in the debates on energy. Their point is to criticize the poorly thought out deregulation in various US States over the past 15 years, and they explain clearly how energy markets work (something which is rare enough in the mainstream media), and what the consequences of various bits of deregulation are on market behavior and thus on electricity prices. (Jerome A. Paris, The Oil Drum)

The Kurdistan Regional Government (KRG) says it supports Iraqi oil unions. The Iraqi Kurds’ oil minister, in contrast to the federal oil minister, says what’s best for Iraq is to embrace the oil unions. Iraqi Oil Minister Hussain al-Shahristani has ordered the ministry’s companies and departments to cease dealings with the oil unions. “The trade unions in Iraq now are illegal till the new law is passed by the Parliament,” Shahristani told UPI, referring to a new labor law called for in the Constitution but that has not materialized. Ashti Hawrami, minister of natural resources for the Kurdistan Regional Government, told UPI his region’s law has incorporated local worker requirements, and unions are key to that. (Ben Lando, UPI)

Torture Endorsed, Torture Denied. Marjorie Cohn of Thomas Jefferson School of Law says that the Bush administration’s repeated insistence that it has not endorsed the torture of prisoners rings hollow in light of newly-disclosed US Department of Justice memos supporting the harshest techniques the CIA has ever used. (Marjorie Cohn, The Vineyard of the Saker)

Hizbollah and the Lebanese Crisis. The Lebanese crisis has receded from the headlines but has not gone away. Today, all eyes are on the presidential election, the latest arena in the ongoing struggle between pro- and anti-government forces. Yet even if a compromise candidate is found, none of the country’s underlying problems will have been addressed, chief among them the status of Hizbollah’s weapons. If the election is to be more than a mere prelude to the next showdown, all parties and their external allies need to move away from maximalist demands and agree on a package deal that accepts for now Hizbollah’s armed status while constraining the ways in which its weapons can be used. (International Crisis Group)

Indian Patents: Doing Just Fine. In early August, the Madras High Court dismissed Swiss pharmaceutical giant Novartis’ claim that a section of Indian patent law was unconstitutional. In the aftermath of the decision, one image stood out: the MNC pharmaceutical lobby, with its tropical agents in tow, raising a big stick to beat an errant country. In a situation rife with speculation, we should know that we have no reason to cower. (Chan Park & Achal Prabhala, Tehelka)

Book Review: Are Diplomats Necessary? Diplomacy is one of the world’s oldest professions, although diplomatic practice as we know it is a relatively recent development. Using ambassadors and envoys, often distinguished personalities of the time (Dante, Machiavelli, Peter Paul Rubens), was an accepted practice throughout recorded history. It was also regarded, in Europe at least, as “a kind of activity morally somewhat suspect and incapable of being brought under any system.” The establishment of the international rules of diplomacy, including the immunity of diplomats, began with the Congresses of Vienna (1815) and Aix-la-Chapelle (1818). The rules were a European creation gradually adopted in the rest of the world. Further international conventions update them from time to time. Diplomats have enjoyed a surprising degree of immunity from criticism for the often violent and disorderly state of international affairs. (Brian Urquhart, New York Review of Books)