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By Ariel Cohen & Anton Altman
A report released last week by the Baker Institute at Rice University, “Shale Gas and U.S. National Security,” focused on the foreign policy benefits of this domestically produced fuel. The authors undertook the study in light of the tremendous growth in discoveries of natural gas from shale in North America and the technological innovations that made it possible.
By Ariel Cohen
Tensions are rising in the eastern Mediterranean between Israel and Lebanon, this time over roughly 430 square miles of contested waters that contain considerable underwater gas reserves. Iran, Hezbollah and Syria are all interested in a war withIsrael, each for their own reasons. Tehran and Damascus want to save the embattled regime of Bashar Assad.
Ariel Cohen and Michaela Bendikova
The United States lacks effective energy policy responses in the event of a major oil crisis. This was the conclusion reached at a recent simulation by Securing America’s Future Energy. Little surprise here: We arrived at the same conclusion in three energy simulation exercises conducted at The Heritage Foundation in 2007,2008, and 2010.
By Ariel Cohen & Anton Altman
Tensions are rising between Israel and Lebanon, this time over underwater gas reserves. After months of debate, Israel’s cabinet approved last week a proposed maritime border that overlaps with a competing Lebanese claim, creating a sliver of some 430 square miles in dispute.
By Ariel Cohen
Last Friday, the United Arab Emirates acknowledged that [2] damage sustained by a Japanese supertanker on July 28, 2010, in the Persian Gulf, was the result of terrorism——not a “huge wave” as was announced earlier. The attack demonstrated the increasing danger of maritime terrorism against critical energy infrastructure. Prior to this , both UAE and Iran discounted the possibility of a terrorist attack.
By Ariel Cohen
During the past decade, the Arctic re-emerged as an area of vital U.S. interest. In addition to the oil and gas bonanza, two strategic maritime routes cross the region: the Northern Sea route along the northern coast of Eurasia and the Northwest Passage along the northern coast of Canada.
By Ariel Cohen
President Hugo Chavez recently announced that Venezuela will purchase dozens of Russian tanks and other arms, signaling growing military ties between the two countries -- and trouble ahead in the hemisphere.
The deal comes amid tensions with Colombia as Mr. Chavez continues to support the narco-terrorism of the Revolutionary Armed Forces of Colombia (FARC) and as he campaigns against the United States using Colombian facilities for anti-drug efforts in the Andes.
By Ariel Cohen
There are voices in the Obama Administration who believe that the Kremlin is able and willing to exert pressure on Iran to prevent it from acquiring nuclear weapons. However, perceived geopolitical and economic benefits in the unstable Persian Gulf, in which American influence is on the wane, outweigh Russia’s concerns about a nuclear-armed Iran.
By Ariel Cohen
While Azerbaijan had a bumper year in 2008, the Caucasus at large suffered a shock as Russian tanks rolled into Georiga. This was only one symptom of a deteriorating security situation in Eurasia and the Middle East. With the gas war and the Gaza clash, people shudder as to what else may be coming.
By Ariel Cohen
Despite feverish negotiations with participation of the European Union, Russia and Ukraine failed to agree on resolution of the gas dispute between them. Mutual disdain escalated haggling and acrimony between leaders in Moscow and Kiev to hysterical pitch.
WASHINGTON, Dec. 19 (UPI) -- As UPI reported, at the end of November Russia successfully test-launched its new-generation land- and sea-based ballistic missile designed to penetrate U.S. missile defense systems such as the one planned for deployment in Poland and the Czech Republic. The new Russian missile can be equipped with up to 10 warheads, including decoys, to overwhelm or mislead American sensors.
By Ariel Cohen & Owen Graham
The global financial crisis has caused a massive slide in energy prices, down to $40-$50 a barrel of NYMEX light sweet crude from the July 2008 highs of $147. While oil prices, along with other commodities, are expected to continue their fall in the short term, over the medium to long term, economic recovery is likely to generate growth in demand, and oil prices are expected to recover as energy markets tighten.
By Ariel Cohen
The Arctic is quickly reemerging as a strategic area where vital U.S. interests are at stake. The geopolitical and geo-economic importance of the Arctic region is rising rapidly, and its mineral wealth will likely transform the region into a booming economic frontier in the 21st century.
By Ariel Cohen
Steadily and stealthily, a natural gas cartel has emerged over the last seven years. On October 21 in Tehran, the Gas Exporting Countries’ Forum (GECF) agreed to form a cartel. Russia, Iran, and Qatar announced that they intend to form a yet–unnamed group to "coordinate gas policy." The Group of Three (the "troika") will meet quarterly to coordinate and exercise control over close to two–thirds of the world’s gas reserves and a quarter of all gas production.
By Ariel Cohen
The forthcoming Russian anti-air craft system in Iran may precipitate an early Israeli strike- or promote the posture of mutually assured destruction (MAD) between Israel and Iran. Both options look bad.
In March 2009, Russia will deploy modern S-300 long-range anti-aircraft missiles in Iran. By June 2009, they will become fully operational, as Iranian teams finish training with Russian instructors, according to U.S. and Russian
By Ariel Cohen
Lord George Robertson, deputy chairman of TNK-BP’s board and former secretary-general of Nato, has blasted BP’s Russian partners at a closed-doors luncheon meeting at the Nixon Center in Washington on Thursday, July 25.
By Ariel Cohen
Oil demand appears in unexpected places, where there was very little demand in the recent past. The oil thirst is mounting in the Persian Gulf, Russia, even in Africa, due to expanding wealth, booming construction projects, and growing populations. Government fuel subsidies, typical in energy exporting countries, are increasing demand for gasoline. No wonder that the oil prices are going up, up and away.
By Ariel Cohen
U.S. Secretary of the Treasury Henry (Hank) Paulson is heading to Saudi Arabia, Qatar, Kuwait and the United Arab Emirates, to ask the oil producers to pump more oil to get gasoline prices down. He will also ask their Sovereign Wealth Funds, the ships of the line and aircraft carriers of the 21st century geo-economics, to pump more cash into the ailing U.S. banking system, which is already suffering in the aftermath of the sub-prime crisis.
By Ariel Cohen
The announcement by Gazprom CEO Alexei Miller that his company is aiming for the largest market capitalization in the world is an unmistakable indicator how the global financial tectonic plates are shifting. Russian and Chinese energy and telecommunication companies are leading the global Fortune 100 list; India’s Tata and Mittal Steel have become true multinationals.
The Real World: Runaway Oil
05-23-2008
Many oil producing countries benefit greatly from the rising oil prices. Oil at $135 a barrel brings them windfall profits and allows social and economic development unlike anything people can remember.
By Ariel Cohen
Caspian gas producers will come under the increasing pressure from the troika of the founders of the natural gas cartel which has emerged stealthily and steadily over the last seven years. The governments inBaku, Ashgabat, Astana and Tashkent– the four smaller Eurasian gas exporters -- need to coordinate their policy to keep their sovereignty in the face of the growing clout by Moscow and Teheran.
By Ariel Cohen
As you go deeper into debt filling up your tank with $4 gas this weekend, look on the bright side - you’re helping to fund countries that hate you.
From Russia to Iran to Venezuela, America’s adversaries are splurging on oil windfalls, while programs directed against Uncle Sam and his allies are funded by petroleum revenues. Big bucks are allowing the oil sultans and dictators to intimidate US allies, buy politicians and academics, and purchase election outcomes.
By Ariel Cohen
Skyrocketing gasoline prices may be pushing the U.S. economy over the edge, but the oil-rich lords of the Organization of Petroleum Exporting Countries oil cartel don’t give a hoot.
Chakib Khelil, OPEC’s president and Algeria’s oil minister, has warned that oil may go to $120 a barrel. Khelil is an optimist – if one or more of the major oil producers, such as Iran or Venezuela, gets embroiled in a conflict or otherwise destabilizes, oil could go up beyond $130 a barrel.
Ariel Cohen
The world is on the eve of a new energy order, which is going to change the way the Middle Eastern suppliers and consumers world wide do their business. This is not the opinion of a radical environmentalist or even Al Gore.
Fatih Birol is Chief Economist of the International Energy Agency (IEA), the Organization of Economic Cooperation and Development-affiliated agency created after the oil shocks of the 1970s to coordinate the West’s reaction to energy crises. Birol, a former Organization of Petroleum Exporting Countries (OPEC) official, presented the findings of the new “World Energy Outlook 2007 (WEO): China and India Insights” this week to US Congress on Capitol Hill in Washington, Mr. Birol have highlighted several trends that will pose major challenges to advanced economies and developing nations alike.
The rise of demand in China, India, other developing countries and even oil and gas producing states, insufficient levels of available supply, and a woeful lack of investment driven by “resource nationalism”, are quickly transforming energy markets. This will have major implications to both Middle Eastern producers and consumers world wide.
OPEC Rules
The Persian Gulf is the richest and most important oil region in the world. In 2006, Persian Gulf countries produced 28 percent of the world’s oil and contained over half of the world’s oil reserves.
Birol stressed that the non-OPEC production is projected to fall by 2015, and most of increases in production must come from OPEC, primarily the Gulf. Saudi Arabia is they key oil producer that holds 25 percent of the world’s reserves and holds the title of the world’s only swing producer.
Saudi Arabia maintains the world’s largest crude oil production capacity, estimated to be around 11.3 million barrels a day (MMBD). The Kingdom plans to increase its oil production capacity to 12.5 MMBD by 2009. Saudi Arabia is seeking to stay ahead of the demand curve, with a policy that seeks to maintain excess capacity. However, its swing producer power is declining as it currently has only between 1-2 million barrels a day (mbd) of excess capacity.
In Birol’s opinion the are some serious issues with transparency of the Saudi reserves. In a revealing interview for the French daily Le Monde in July 2007, he effectively says that peak oil is just around the corner, and that without a drastic increase in Iraqi production the world will be in a crunch by 2015:
The Saudi government claims 230 billion barrels of reserves, and I have no official reason not to believe these numbers. Nevertheless, Saudi Arabia - as well as other producing countries and oil companies - should be more transparent in their numbers. Oil is a crucial good for all of us and we have the right to know how much oil, as per international standards, is left.
This is the closest an international civil servant can come to criticize the most powerful member of OPEC.
Most of the increases in production will have to come from OPEC areas and the national oil companies therein, IEA says. OPEC members outside the Persian Gulf (excluding Angola) are projected to increase their production capacity only moderately. This leaves the Persian Gulf and, specifically, Saudi Arabia, Iran and Iraq.
Factors that Limit Supply
While the Saudis at least are trying to contribute their share to supply increase, Iranian oil sector mismanagement is famous. Due to massive subsidization ?nd growing demand for gasoline, and shortage of gas for oil well injection, Iran might stop exporting natural gas by 2015. Iraqi political instability is effectively closing the door on their production increases, cutting the global supply and driving prices up.
Another important trend is resource nationalism. International Oil Companies (IOCs) no longer wield their historic power. It is the National Oil Companies that (NOCs) that will largely determine future oil supply.
The other trend taking place with net oil exporters: the negative feedback loop. The higher the price of oil, the more oil exporting economies boom, and therefore domestic demand is stimulated. This leads to falling net exports, and even higher prices. According to a recent report by Lehman Brothers Inc, OPEC countries combined will rival China in global oil demand growth through 2008 and beyond. It is this rising demand from oil exporting countries and major consuming countries that may offset the Saudi increases.[1]
China and India Driving Up Demand
As IEA report makes clear, much of China and India’s future oil imports will have to come from the Middle East. China and India are transforming global energy markets through their sheer size and pace of growth.
In the IEA’s WEO Reference scenario, (projections based on government policies and current economic growth rates) China is set to surpass the U.S. as the world’s top energy consumer in 2010. What is more, between now and 2030, China and India will account for 70 percent of new global oil demand, and 80 percent of global coal demand.
Together, the two countries will account for about 45 percent of the increase in global demand through 2030. This growth will not occur in a vacuum: during this period, the world’s energy needs are expected to be more than 50 percent higher in 2030 than current levels. It is unclear how this energy gap will be bridged and by which producers. Suffice it to say, the IEA is not optimistic.
Recently, when speaking about the rising demand from China and India and a host of pressing supply problems, Nobuo Tanaka, executive director of IEA, stated that between now and 2030, "a supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices cannot be ruled out.”
Fatih Birol explained the numbers behind this potential crunch. According to Mr. Birol, an additional 37.5 million barrels per day (MMBD) will be required to meet demand by 2015, but only 25 MMBD are planned. Consumption is expected to rise from today’s 85 MMBD to 116.3 MMBD in 2030.
Huge Investment Needed
In order to meet this demand the world is going to need a lot more production capacity—more than may be available. A tremendous amount of investment will be necessary. In fact, the IEA report states that an incredible sum, $22 trillion of investment in new fields and supply infrastructure will be needed between 2006 and 2030!
Clearly, mobilizing these investments will be challenging. While there are a number of fields under development, new finds are expected to be of a more challenging kind geologically and geographically. The concern is that these fields will be expensive and whether brought to the market in time to satisfy demand.
While the peak energy demand may be good for Middle Eastern supplier, increasing geopolitical scrambling by global players and unstable domestic politics will remain a threat. At times, a boom is as difficult to manage as a bust.
Vigilance, economic liberalization, developing financial infrastructure and the rule of law, diversification away from crude exports – and away from oil and gas altogether—may mitigate future risks.
Developing astute domestic, diplomatic and security policies are the only prescriptions that may see the producers through these uncertain times.
-- Ariel Cohen, Ph.D., is a Senior Research Fellow at the Heritage Foundation. The views expressed here are author’s only. Owen Graham contributed to this research.
by Ariel Cohen
The cold shower Russian President Vladimir Putin unleashed on the United States at the international security conference in Munich should not have come as a surprise. After all, Mr. Putin himself and a host of other senior spokesmen, including his defense minister and one of the official heirs-apparent Sergey Ivanov and military Chief of Staff Gen. Yuri Baluevsky have said as much in the past.
The list of complaints Mr. Putin heaped against the United States is long. The main beef is that the American "hyperpower" is pursuing its unilateral foreign, defense, cultural and economic policy, disregarding international law and ignoring the U.N. (where Russia has a veto power). French President Jacques Chirac would be proud. However, Russia takes its opposition much further.
Mr. Putin accused the U.S. of expanding NATO to Russian borders and deploying "5,000 bayonets" each in forward bases in Romania and Bulgaria. He blasted the future U.S. missile defense bases in Central Europe, possibly in Poland or the Czech Republic. Mr. Putin said the missile defenses aim to neutralize Russian retaliatory nuclear strike capability -- a destabilizing factor in Russia"s nuclear playbook.
He further accused Washington of not meeting its obligations on nuclear disarmament treaties and trying to hide hundreds of nuclear weapons in warehouses, "under the blanket and under the pillow."
In a rhetorical overkill, Mr. Putin blamed U.S. policies for the failure of nuclear nonproliferation, implying justification for North Korean and Iranian efforts to acquire weapons of mass destruction.
Mr. Putin lambasted NATO members which refuse to ratify Conventional Forces Europe (CFE) Treaty; criticized the Organization for Security and Cooperation in Europe (OSCE) for democracy promotion and criticisms of Russia"s track records in human rights.
Many Russian and Western experts perceive Mr. Putin"s speech as a declaration of a new Cold War. The outburst has a number of domestic and international "drivers," which add up to a picture of Russia craving strategic parity with the United States and defining its national identity in opposition to the West.
Domestically, several years of increasingly loud anti-American and anti-Western propaganda in pro-government and nationalist media have nurtured a generation of Russians who are ethnocentric, and reject liberal values. Sixty percent in the recent poll supported the slogan "Russia for Russians." Sustained nationalist and anti-American brainwashing bridged the gap between the Soviet superpower chauvinism and the new Russian assertiveness.
An "America-as-the-enemy" construct bolsters legitimacy of the current regime, headed largely by former KGB officers, as the defender of Mother Russia. It rejects fully integrating Russia into the global economic and political community, as the other official "heir-apparent" Deputy Prime Minister Dmitry Medvedev suggested in his January 2007 speech at the Davos World Economic Forum.
Russia also plans to spend $189 billion in the next five years for a rapid military modernization. Defense Minister Sergei Ivanov has announced the program on Feb. 8, which includes new nuclear submarines; aircraft carriers; a fleet of supersonic strategic TU-160 bombers; and development of the fifth generation fighter jet. Clearly, such a program aims at balancing off the US military power, not fighting terrorists in the Caucasus Mountains. It needs U.S. as "glavny protivnik" the principal adversary.
Russia is also trying to corner weapons sales markets, especially those of rogue and semi-rogue states. Russia is the largest arms supplier to China and Iran; it signed a $3 billion arms deal with Hugo Chavez"s Venezuela over U.S. objections; and is courting Middle Eastern buyers.
Russia is happy to play into the Arab and Muslim street"s anti-Americanism and to signal that the U.S., which faces severe difficulties in Iraq, does not have exclusive strategic dominance in the Persian Gulf and in the Middle East. Moscow is back -- with vengeance -- in the most important energy depot of the world. It is no accident that the speech was delivered on the eve of Mr. Putin’s historic visit to Saudi Arabia, the first for any Russian or Soviet leader, and to Qatar and Jordan, America"s allies in the Middle East.
The timing of Mr. Putin’s speech couldn’t be worse from Washington"s perspective. With Iraq in limbo, and Iran remaining truculent, the chances for Russian cooperation in taming Tehran"s nuclear ambitions are dwindling. Russia was recalcitrant in providing necessary pressure on Iran during the December 2006 U.N. Security Council Resolution 1737 negotiations, and may refuse to do so when UNSC revisits the Iranian dossier in a few weeks.
Russia is putting not just a military might behind its rhetoric, but also an economic muscle: Mr. Putin publicly approved of the Iranian Supreme Leader Ayatollah Ali Khamenei"s idea of creating a natural gas OPEC-style cartel. Whether such a coalition materializes, and whether it may translate itself into a military alliance, remains to be seen.
The image of a new Cold War may be too simplistic to describe the emerging global world architecture. Clearly, the postcommunist honeymoon is over, dead and buried. A realistic reassessment of the relationship is in order.
The United States should avoid a rhetorical confrontation with Moscow. Deeds, not words, are necessary to send a message to the Kremlin that the U.S. and its allies will not by bullied but that Washington is not interested in a renewed hostility.
The United States should continue cooperation with Russia on issues and interests of mutual concern, such as energy, nonproliferation and space.
It is time to build bridges to potential Russian allies, to prevent the emergence of anti-American blocs. U.S. should also appeal to its traditional allies in Europe and elsewhere to recognize the changing geo-strategic balance in the Eastern hemisphere, to boost mutual defenses, to coordinate energy policy and cooperate on energy security among the consumers.
This is hardly the end of history, but rather continuation of an old and tasking game.
