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Thesis & Antithesis

A critical perspective on energy, international politics & current affairs

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Location: Washington, D.C.

greekdefaultwatch@gmail.com Natural gas consultant by day, blogger on the Greek economy by night. Trained as an economist and political scientist. I believe in common sense and in data, and my aim is to offer insight written in language that is clear and convincing.

31 January 2006

Berlusconi abstinence

At a recent rally, Silvio Berlusconi, Italy’s PM, made a pledge to abstain from sex until the general election in April; “I will try to meet your expectations, and I promise from now on, two-and-a-half months of absolute sexual abstinence, until 9 April,” Mr. Berlusconi said.

I hope he does not ask his people to make the same sacrifice; because who knows what kind of result will spring from 50+ million Italian voters who will not have had sex for two and a half months. It could be worse that Berlusconi.

Reference:
“Berlusconi “in pre-poll sex ban’,” BBC News, 31 Jan 06 (link)

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Greenspan-style

Two articles in the Wall Street Journal, an editorial and an op-ed by Milton Freedman, capture Alan Greenspan’s legacy; Milton Friedman writes: “Over the course of a long friendship, Alan Greenspan and I have generally found ourselves in accord on monetary theory and policy, with one major exception. I have long favored the use of strict rules to control the amount of money created. Alan says I am wrong and that discretion is preferable, indeed essential. Now that his 18-year stint as chairman of the Fed is finished, I must confess that his performance has persuaded me that he is right -- in his own case” (1).

And the editorial: “The paradox of Alan Greenspan's achievement as he leaves office today after 18 years as Chairman of the Federal Reserve is that nearly everyone is praising his performance but no one seems to know exactly how he did it. He bequeaths to successor Ben Bernanke a record but not a method -- which means we all have to see if the new guy has the same juggling skills” (2).

Both these comments convey neatly Mr. Greenspan’s legacy as well as the natural skepticism which ensues about his successor’s ability to manage so subtle and cryptic a task as monetary policy.

References:
(1) “‘He has set a standard’,” Wall Street Journal, 31 Jan 06
(2) “The Chairman’s Mystique,” Wall Street Journal, 31 Jan 06

29 January 2006

State of the Union

Lewis Gould, a professor at the University of Texas, Austin, has an article in today’s Washington Post arguing that the State of the Union is a ritual that should be abolished; here is one excerpt from his argument which I find particularly entertaining:

“Imagine if, two days from now, the president said: ‘The state of the union is not good. Iraq is an insoluble mess, Iran is a long-term threat, terrorism menaces us all, the Army is strained to the breaking point, the budget is out of whack, global warming threatens the existence of humanity, and there are no easy answers, quick solutions or painless sacrifices.’”

That would be a speech worth watching. Oddly enough, it has been the ability to sketch out problems with such candor and precision that has marked great leaders. But I don’t expect to hear such a speech anytime soon…

Reference:
Lewis Gould, “Ban the Bombast!” Washington Post, 29 Jan 06 (link)

26 January 2006

Hamas & the peace

25 January 2006

Russia & energy security

Today’s Financial Times carries an opinion piece by Vladimir Milov, Russia’s former deputy energy minister, on the paradox between Russia’s desire to place energy security on the G8 agenda and its obvious deviation in practice from market mechanisms and from cooperative international ventures. Mr. Milov writes:

“As a Russian, I would welcome it if my country used the G8 presidency to contribute to the improvement of global energy security, encouraging more transparent and assured international energy markets. But you cannot build a global energy security architecture on the basis of non-transparent state-dominated monopolies, destruction of successful private businesses, closing doors to international investment and using energy as a tool of neo-imperial politics.”

I sympathize with this sentiment but I retain an enduring pessimism about its realism. Very few countries have ever managed to depoliticize oil and gas. Those that managed it did so only after turmoil and while resting on a tradition of liberalism (the producers I have in mind are primarily America, Britain, and Norway). It also helps that their foreign policies were sufficiently varied (especially for the Anglo-Saxons) to allow them to make access to energy a mere part, but by no means the dominant one, of their grand strategies.

The question to ask is not whether Russia will go down the path of politics or commerce in its energy market; after all, these trends can be easily reversed, as Russia’s story demonstrates. The more fundamental issue for energy security is whether it is possible to reconcile two competing visions of energy: producers wanting to form political partnerships and exert influence using their natural wealth, and consumers wanting access to that wealth with as few strings attached as possible.

In other words, our energy insecurity emerges, in no small part, from the asymmetry which exists between the producers’ and the consumers’ perceptions of the link between energy and politics. It is to this asymmetry that diplomacy must address itself and not to the energy markets which are its mere byproduct.

References:
Vladimir Milov, “Russia ill-equipped to lead on global security,” Financial Times, 25 Jan 06; an op-ed in the Wall Street Journal today discusses the emergence of a Sino-Saudi relationship based on energy; the article is called, wittingly, “Oil-for-missiles”: Richard L. Russell, “Oil-For-Missiles,” Wall Street Journal, 25 Jan 06

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24 January 2006

Googlewatch

Unfortunate elections

A Wall Street Journal editorial ponders the paradox of America’s democracy promotion in the Middle East: “Free elections may well produce governments composed of Muslim radicals who promote terror and have little respect for pluralism. This is a troubling prospect. And yet banning Hamas was probably unrealistic and might well have increased its popular appeal. Our sense is that if democracy is truly going to take root in the Middle East, then Islamists are going to have to be allowed to compete for power. Once in power they might even become more responsible, and voters will have a chance to judge them on their actions instead of their promises.”

There is something interesting here and its springs not just from an odd paradox which is fascinating to ponder, but rather from what that paradox reveals about American policy. What I was trying to get across in my earlier post (Condi & realism), is that the American tendency to presume an identity between democracy and the promotion of American interests is not only questionable, but it is also unrealistic. As long as America cannot make its peace with the kind of regimes that may emerge from elections, its policy will prove confused and will be pursued only halfheartedly. It is this prospect alone which would force policymakers to question whether the democracy-promotion conceptual lens really suffices in dealing with so troubled and so complex a region.

References:
(1) “Palestinian elections,” Wall Street Journal, 24 Jan 06

Condi & realism

In a very thoughtful article on Condoleezza Rice, Sebastian Mallaby adds to the growing consensus that realism is an outdated foreign policy doctrine, that it offers no useful guide for policy, and that it has no answer to the real threats of the new era. I have always found attacks on realism to be misplaced, if only because, in picking apart the fine print of realism, they miss its broader lessons.

Let us start with Mallaby’s point that threats now come from weak states rather that strong ones, a thesis found also in George W. Bush’s National Security Strategy of 2002. This is a curious conclusion to draw from September 11. Osama bin Laden found refuge in Sudan and Afghanistan, not because those were failed states which offered a hospitable environment, but because both governments were happy to host him (Sudan changed its mind later and expelled him). The hijackers on 9/11 were from Saudi Arabia and Egypt—hardly what one would consider weak states. Even more, if weakness is the chief problem, then strength has to be the solution; yet there is no such diagnosis and there is no such cure to be found anywhere on the foreign policy landscape.

There is no contradiction, as realism’s attackers claim, in recognizing that the domestic realities within a country are important, maybe as important, as its foreign policy; this attack on realism is persistent and ill placed. What a realist recognizes is that domestic and foreign policy need not be identical—that a country may serve America’s interests independently of what it does at home. And while terrorism does spring from the suffocating political space in places such as the Middle East, it is many regimes’ indulgence in nurturing it that is as an equally plausible explanation into why terrorism has manifested itself so loudly on the world state.

For a realist, America’s problem lies in creating an identity between domestic and foreign policy. America is presuming, with little basis, that any domestic change which incorporates into the political process a broader spectrum of the population will, de facto, offer an improvement in that country’s foreign policy as it pertains to America. In that sense, it becomes inconceivable that domestic and foreign policy may move in opposite directions. It does not take too much of a pessimist to imagine a variety of domestic arrangements in the Middle East that could produce regimes which pose a graver threat to America that the status quo.

It is too easy to presume (oftentimes accuse) that this analysis is nothing more than a defense of a failed status quo. And yet it is no such thing. The main issue here is whether the combination of America’s goals has a chance for succeeding. One reason it may not is that it is courting the forces which are the weakest in the region; the leaders who can put a stop on terror are given no incentive to cooperate since that could spell their own end as well given that America is increasingly challenging their legitimacy.

In a way, this is the essence of an over-ambitious policy: in trying to do too much, it achieves too little. This arises, in no small part, from the complexity of America’s interests in the region. While the status quo is undesirable, it still offers enough benefits so that America cannot put its full weight behind changing it. In other words, America is pushing neither too hard because it still has some stake in the status quo, nor is it offering an incentive to win over the forces which could assist it in quelling down terror.

There is no doubt that there is a symbiotic harmony in the American grand strategy—a presumed continuum between moral values and strategic defense, between what is right now and what is right in the future. But this presumed identity obscures a deeper problem: in creating a logical continuum, this grand strategy allows America to avoid a prioritization of its interests. And yet this sorting is necessary; it would begin from protecting the physical defense of the United States by communicating to friends and foes that nurturing sinister forces against America is unacceptable. By offering legitimacy in exchange for compliance, America could hope to court the governments in the region which could implement such policies

Having taken this first step, America would be confronted with the following dilemma: how to ensure that the immediate crackdown did not produce a longer-term disenfranchisement that would threaten America’s interests in the future. The simpler, but by no means the only, way to achieve this would be to create a broader political space that preserved authoritarianism—essentially, this would allow political voices to be heard as long as they did not call into question the main elements of a country’s survival and structure. This is similar to what exists in China or in Eastern Europe during the cold war, in that civil society emerged first and only later did it manage to create a critical mass that involved itself in politics. But making elections the first step of reform, America is alienating the rulers in the region without fostering the underlying conditions that allow the largely procedural act of election to turn into the meaningful substance of democracy.

This may seem like a long way of making a point for realism. But whatever the moral allure of liberalism or Wilsonianism it has always presumed a grand unity which easily allows one to think that foreign policy can achieve everything at the same time and which pays ignores the underlying political forces that can make one’s desired outcome possible. This is, after all, realism’s chief belief: that diplomacy should be targeted at manipulating relative power so that one’s desired outcome becomes possible rather than directing diplomacy at the outcomes themselves. And this is a good lesson today as it ever was.

References:
(1) Sebastian Mallaby, “Rice’s Blind Spot,” Washington Post, 23 Jan 06 (link)

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20 January 2006

Russia and Ukraine

A New York Times editorial on Ukraine writes, “By punishing Mr. Yushchenko for trying to pull Ukraine away from Russia, Mr. Putin is pushing Ukraine away from Russia” (1). The largely confrontational tone that Russia adopted in trying to renegotiate the terms of its agreement with Ukraine over gas may, at first glance, confirm the line of thinking that the Times article puts forward: it is impossible for any observer who was casually following the events in the Russia-Ukraine gas dispute not to think that this raw and graceless display of Russian power would backfire and produce the opposite results from those that the Kremlin might have wished for.

But it is always worth giving our opponents (if this is the way to label Russia) the benefit of the doubt and refuse to assume that they are merely incompetent tacticians and strategists. Strategic Forecasting Inc. (STRATFOR) offers the following interpretation: “The terms of the new agreement mean that Europe's natural gas supplies now will depend not only on the tenor of Russian- European and Russian-Ukrainian relations, but also on Russian-Kazakh, -Uzbek, and -Turkmen relations. Suddenly Europe has a vested, if reluctant, interest in ensuring that Moscow is satisfied with its level of influence in the bulk of the largest former Soviet territories” (2).

In other words, the move was not so much to target Ukraine directly but rather to reduce that geopolitical breathing space and support which made Ukraine’s realignment possible. Although Russia has used its energy weapon before on its closest neighbors, this is the first time to really put Europe in such a precarious position (3). It is possible to argue that Europe’s precariousness emerges from geography as much as anything else and that hence Europe was targeted only due to geography and not politics; but geography in itself would have offered any country pause before using such a heavy handed political tool as cutting off supplies; it hardly possible to assume that “scaring” Europe was not a logical and foreseeable consequence of Russia’s policy. It is still possible that this may backfire and force Ukraine closer into the West’s hands—Putin’s bet is that Europe will think twice before welcoming Kiev with open arms. And it is not an unreasonable bet.

References:
(1) “Looking at Ukraine more closely,” New York Times, 20 Jan 06
(2) Peter Zeihan, “Russia’s Gas Strategy: Turning up the heat on Ukraine,” Stratfor Geopolitical Intelligence Report, 4 Jan 06
(3) Keith Smith, “Current implications of Russian Energy Policies,” Center for Strategic & International Studies, Europe program: Issue brief, 12 Jan 06 (link); also reference 2

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19 January 2006

Nigerian oil

The Christian Science Monitor has a story today about Nigeria’s oil and the possible threat that exists to the infrastructure that brings that oil to the world market. And even though I disagree with the impression given by the report that it is such threats that are mainly responsible for high oil prices (in my post “Oil and terror,” 09 Dec 05), this is a good account both of the tension between Royal Dutch Shell and the local population as well as between the central government and the oil-producing southern region.

What is normally classified as a political-economic problem of helping producer countries diversify away from petroleum exports is also a problem of political geography requiring the inclusion and placation of quite distinct groups within a state mechanism and functioning political bargain. It is usually those groups which sit atop the oil and which are most disenfranchised when their mineral wealth does not produce benefits for them. It is this story that matters in Nigeria.

References:
Abraham McLaughlin, “Behind rising oil cost: Nigeria,” Christian Science Monitor, 19 Jan 06 (link)

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Oil prices in 2006

This graph is from today's Lex column in the Financial Times, and it presents the consensus view which predicts high oil prices for this year.

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15 January 2006

Energy independence again

The New York Times writes, “America cannot win President Bush's much-vaunted war on terrorism as long as it is sending billions of dollars abroad for oil purchases every day. It cannot establish democracy in the Middle East because governments rich in oil revenue do not want democracy. And it will never have the geopolitical leverage it needs as long as it is dependent on unstable foreign sources for fuel.”

There is a beguiling simplicity in this line of thinking, which bemoans America’s energy dependence on the Middle East, Central Asia and other volatile regions, and which praises whatever efforts may bring the country closer to energy independence. Although based on the common-sense observation that less dependency is better, is offers nothing more than a desired end-point which magically solves America’s energy problem and the geopolitical predicaments which naturally emerge from it. Useful as such a destination may be, and however attractive and compelling the need to develop alternative sources of energy, it provides little guidance in thinking concretely and imaginatively about the transition to this energy independent future.

The intuition that guides such fantasies ignores the realities of the world energy market which prices oil as a single commodity, and which would increase the price of American-produced oil even if it were consumed domestically. This is the reality of whatever efforts of trying to make America self-sufficient in conventional sources of energy; but even if America were to rely increasingly on non-conventional sources, the affordability of these supplies would still depend on the overall energy equation, as it would be impacted by the market mechanism which would seek to equilibrate the prices of similar products. And despite the constant emphasis on the instability of the regions which provide the bulk of the oil consumed in world markets, it is through the price mechanism that whatever shortages are being registered, meaning that even if America were to acquire more secure energy supplies, it could only ameliorate but not eliminate its energy problem.

It is true, however, that a more self-sufficient America could reduce the amount of money that is transferred from American consumers to producers abroad. All the same, this reality has to be considered for its geopolitical rather than economic implications, because, however deplorable the fact that Americans are enriching Saudis, Iranians, Russians, and Venezuelans, it is the political implications of these countries having more money which interferes which the conduct of American foreign policy.

There are three broad ways one can think about this: the first is that America’s presumed disconnect from the world energy market (what energy independence means) will not necessarily spell a sharp reduction in prices, since the price of oil reflects current supply and demand, and it is still possible to conceive a scenario where investment decreases to the point that a sudden surge in demand increases prices considerably, enriching the producers that America would rather not enrich (which is what happened during the 1990s where investment plummeted and brought about a steep increase in prices).

A second reality comes from the threat of low oil prices. In January 2000, Amy Jaffe and Robert Manning wrote an article in Foreign Affairs called “The Shocks of a World of Cheap Oil,” which catalogued the political implications of low oil prices. And while our intuition may rush to think that their prognosis of a future where prices are low turned out to be acutely incorrect in the short-run, their underlying analysis is sound and relevant. What they argued was that the threat comes not only from high oil prices but low prices too: the Russian financial crisis was worsened by low oil prices; in Venezuela, Hugo Chavez came to power on the tide of political discontent which followed the oil crash in 1998; and the brewing of terrorism in the 1990s came during a time when oil prices were rather low and coincided with Saudi Arabia’s increasingly difficult in placating its restless population. Hence, if America were to become energy independent and produce a crisis in those countries which rely on energy exports for their livelihood, it is not at all clear that the end result would be vastly better in the aftermath.

A third implication of this anticipated freedom of action which would come from energy independence would be to alter the American attitude towards the energy-rich Persian Gulf. For those who think that oil and terrorism go hand in hand and who cannot imagine anything less fortunate than the policy bargain that America has struck in the region, it is worth pondering the effects of an American retreat from the region. Countries which would fall behind America in making this transition to cleaner fuels would assume a more active role in the region, engaging with the countries there as to ensure that their own energy supplies are safe. China and India are obvious examples of countries that could try to meddle more aggressively in regional politics, though the European Union and Japan, often assumed to be free riders and the beneficiaries of America’s strategic posture in the region, could seek their own ways to connect their foreign policies with the economic imperative of accessing oil and gas. What would come from this increased and varied attention is anyone’s guess, though it is not hard to imagine why the receding of one overwhelming power in the area could be substituted with more competition and possibly conflict between those who would take its place.

The overall sense that one gets from reading accounts such as that described in the Times editorial is that the urgency of a worthwhile goal produces an outpouring of imagination and wishful thinking about the transformation that such a move could mean for American foreign policy. Yet the attraction and constant calling for anything that make America energy independent reeks of isolationism, insofar as it reflects the belief that if America gets things right at home, it can somehow insulate itself from the troubles lying beyond its shores. No amount of oil trouble should lead someone to believe anything as simple as this.

References:
“Energy impasse,” New York Times, 15 Jan 06

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09 January 2006

The naked fatwa

Agence France Presse reports: “An Egyptian cleric's controversial fatwa claiming that nudity during sexual intercourse invalidates a marriage has uncovered a rift among Islamic scholars. According to the religious edict issued by Rashad Hassan Khalil, a former dean of the prestigious Al-Azhar University's faculty of Sharia (or Islamic law), ‘being completely naked during the act of coitus annuls the marriage.’”

What’s next?

References:
“To strip or not to strip? Egyptian clerics debate sex,” Daily Star, 9 Jan 06 (link)