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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.

08 October 2006

Lessons from OPEC

The latest news suggests that OPEC has agreed to cut its quota by 1 mbd, bringing its target output down from 28 mbd to 27 mbd (in August, OPEC produced 30.04 mbd, which included 2 mbd from Iraq, which is excluded from quotas). But reaching consensus was not easy: first came production cuts from Nigeria and Venezuela totaling about 200 kbd. Saudi Arabia protested the move to voluntary cuts, though its own production was coming down too. It took a while before others agreed to reduce quotas as well.

From this picture emerge two interesting points. The first is about OPEC’s cohesion, which fluctuates wildly, though the organization usually comes together more easily when tasked to defend rapidly falling prices (rather than, say, cut production to hike prices). This should serve as a reminder to those who have hasten to notice an “axis of oil” emerging to threaten Western interests. Even OPEC, the most concrete manifestation of the axis, finds it hard reach consensus on oil production. It is hard to see how so varied a group can hold together any other meaningful political alliance for a considerable period of time.

The second point is about asymmetrical power. The common assumption these days is that oil producers have all the power. But the drop in oil prices has seriously jeopardized their fiscal plans. Granted, they have too much money in the bank for anyone to claim that these regimes are in trouble—a $60/bbl world is still great for them. But given how resilient economies have proven to high oil prices, it is not unreasonable to state the oil exporting countries have more to lose from low oil prices than importing countries from high ones.

These are important lesson amidst our energy hysteria.

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03 October 2006

Sarkozy on Turkey

From Nicolas Sarkozy, in the Wall Street Journal:

“The decision to accept each new applicant should be taken in light of the EU's internal objectives, its institutional limitations and the level of popular support. Such decisions should not be based upon foreign policy goals or a desire to encourage neighbors to reform.

So who is European and who is not? Clearly, some non-member countries are part of the European continent and have the right to full EU membership. This group includes Switzerland, Norway and -- eventually -- the Balkans. Then there are other countries whose right to join the Union is debatable or who, although neighbors, are clearly non-European.

For this latter group in the Euro-Asian and Mediterranean areas we should avoid presenting them with overly stark choices: Full membership or nothing at all. Our first step should be to establish preferential partnerships so we can work together while still observing our different interests and values.

Of all the countries with which the EU should have preferential relations there is Turkey, our neighbor and friend, sharing many of our security concerns and many of our values. These are good reasons for strengthening our ties with Turkey, without going so far as offering full membership.”

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