Rouille

- one point is that by law, the State cannot distinguish between citizens by religion or race, etc... so it is actually hard to get specific statistics for various groups. what you have is nationality, but a good chunk of the Muslims in France actually are French, either born here or having received citizenship at some point;

- another is that Renseignements Généraux, a sort of domestic political police (yes, we have that in France), together with DST (the more conventional anti-terrorist and domestic counter-espionage secret service) have been focusing for many years on militant islamic group in France and know them pretty well. People seem to forget that we've had more than a few terrorist attacks in France in the last 20 years (I was shocked, but not surprised, to see, in the State Dept's list of terrorist attacks of the past 30 years (I don't have the link now but will provide it later), there is almost no mention of these attacks) and, after the initial bluster ("we will terrorise the terrorists", as memorably said Charles Pasqua, then Interior Minister, after the first big wave of bombs in Paris in 1986), the long hard unglamorous slog of police work was started. The terrorists behind the 1986 bombings were found, judged and sentenced to jail; the terrorists behind the 1995 series of bombs in Paris were caught and either killed in shootouts or sent to jail (or protected by the UK for one of them...).
And despite everything, police cooperation between the US and France has continued, and I understand that specialised US cops are quite grateful to their French counterparts for their (paid in blood) expertise.

- a lot of the current behavior of muslim populations is also linke to their poor economic and social situation, worsened by a lot of casual racism, upon which foreign preachers prey. France, as a secular state, is struggling to find a way to develop "home-grown" muslim religious leaders - and Tariq Ramadan is an influential voice in that debate.

Just to correct some info on the this article in anti-war about China and Russia's view on Iran.

...(A) Chinese company, Zhuhai Zhenrong Corporation, has just signed a long-term agreement with the current Iranian regime to buy $20 billion worth of liquefied natural gas. Zhenrong also imported 12.4 million tons of crude oil from Iran last year and expects to complete deals soon to develop three Iranian oil fields.

LNG contracts are always over 20 years at least and the headline amount always sounds big. 1b$/y of gas would be, at curent prices 8bcm/y (billion cubic meters). For reference, US production is around 500bcm/y; total LNG trade is around 120bcm/y.
Iran has been trying to do LNG for several years now, but they still have not admitted to themselves that they need Western technology to do that, and must offer something in return (a small piece of the pie), so the projects are going nowhere. The contract with China is more a promise to sell gas eventually than an actual contract, at that stage.

As for Sudan, it is also oil rich, and the holder of the biggest oil development concession from the current regime is China.

True, (although the sale of Sudanese oil production should not be exagerated, it's a small player). China has indeed been trying to court several oil-rich African countries, in order to diversify their oil supplies.


How about Russia?
Well, Russia would vigorously oppose a preemptive attack by Bush-Kerry or the Israelis on the zillion-dollar nuclear power complex the Russians are building at Bushehr.

Officially probably. Unoffocially, they probably would not mind selling the reactor a second time to the Iranians...

As for Iran's oil, Russia doesn't need it. But Russia does depend upon oil "swaps" with Iran to get much of her Caspian region oil to market.


False. It's not Russia that could take advantage of oil swaps with Iran, it's the "oilistans": Turkmenistan (already doind it for small volumes, 10,000b/d) and Kazakhstan (thinking about it, and wiating for Iran to increase the capacity of the pipeline form the coast to Tehran). Russia is quite opposed to such swaps as they create an alternative (i.e. not going through Russia) export route for these otherwise landlocked producers.
These oil swaps actually make a lot of economic sense, as Iranian uses its oil in the North, and produces it in the south. So if you provide (close by) Caspian oil in the North, you do not need to pump oil from the south up north, and you can instead export it (and additional advantage for Iran is that it is a way for them to increase their oil exports without falling foul of OPEC production quotas). There are some limits to these swaps: the capacity of Iran's northern refineries is 800,000 b/d, which would be the absolute cap; and additionnally they are not perfectly suited to the technical specs of Caspian oil, so would require some investments to use it.

The more interesting dynamic between Russia and Iran is on the natural gas side. Russia has 40% of world reserves, and Iran 30%. Russia is the largest gas producer in the world, and has pretty much cornered the European gas market. Iran produces almost no gas, has no market for it (no transport infrastructure), and its biggest asset, the south Pars/ North Field it shares with Qatar, is busily being exploited by Qatar while they dither. Russia is quite happy to keep them in this state of hesitation, powerlessness and "marketlessness" while pretending to help them...

Both Russia and China expect Iran to be a big customer for their armaments.

Now, if Kerry-Bush want to change the regimes of other members of the Organization of the Islamic Conference (OIC) – such as Cameroon, Chad, Gambia, Guinea, Guyana, Mali, Mozambique, Niger, Nigeria, Somalia, and Uganda – neither Russia or China are likely to object...

Cameroon, Chad, (Equatorial) Guinea, Nigeria have (a lot of) oil. Niger has yellowcake...

I am still skeptical about claims that we cannot increase production in the medium term. Remember that oil prices have been pretty low in the past 18 years and that CFOs of oil companies, shareholders and outside financiers expect investments to make money at 15$/b (and to break-even at 10$/b) for an investment to be given the green light. Even with today's prices, that mindset has not changed yet - people are still expecting investments to make it with 20$/b oil or less. (there was an article about this in yesterday's FT but I cannot find the link). Wyhen this mindset changes (i.e. when these people are convinced that oil will stay above 30$/b for a bit of time, then you will suddenly see a new burst of investment.
In the short term, expect more problems: fewer wells dug last year in OPEC countries, Oil investment reduced despite record prices.

Some of the world's biggest oil-producing countries have reduced their investment in new capacity despite record oil prices. The Organisation of Petroleum Exporting Countries this week revealed its members drilled 6.5 per cent fewer wells in 2003, suggesting the global supply crunch and high oil prices could last longer than expected, analysts said. The numbers appear to contradict statements by Opec members that they are actively building extra capacity.



"Oil demand has been booming since quarter one 2003, offering Opec - along with rising oil prices - a clear enough signal of tightening market conditions, which the organisation seems to disregard," the Centre for Global Energy Studies (CGES), a London-based consulting firm, said recently.

"Opec has tried to get prices to stay high and now with nearly two years of very strong demand for oil we are really capacity constrained," said Leo Drollas, CGES deputy executive director and chief economist.

Opec's latest annual statistical report, published this week, shows that the number of wells completed in 2003 fell by more than 10 per cent in Kuwait, Venezuela, Qatar, Nigeria and Iran.

Opec members rarely give out complete data on the amount of money they invest in their oil industry, viewing it as a national strategic secret. Information on the number of oil wells completed per year is one of the best rough guides to future oil production as well as to overall investment trends.

Part of the explanation, in particular for Nigeria and Qatar, lies in the fact that companies are drilling fewer but more sophisticated wells. In Iran, Kuwait and Venezuela, investment has been stifled by political disagreements and leaders' eagerness to spend the additional petrodollars on other investments or the enrichment of a powerful minority. But as big consumers such as the US become more desperate for oil, the pressure is growing for countries such as Saudi Arabia and Kuwait to open their doors to international oil companies.

Mohammad Hadi Nejad Hosseinian, Iran's deputy oil minister, blamed Opec's lack of investment on past weak oil prices. "Most Opec countries have been unable to supply extra oil as a result of inadequate investment during the period when oil prices were weak," he said. "Iran expects to rely heavily on foreign investments to implement its ambitious plans [to increase oil production by nearly 2m b/d]."

Opec's capacity has remained at about 31.5m b/d since autumn 2000, though demand increased by 6m b/d and prices recovered from the Asian crisis of the late 1990s during that time, the CGES said. During that time almost three-quarters of the increased capacity needed to satisfy the extra demand came from outside Opec.

But ageing fields, a difficult investment climate in Russia and a dearth of discoveries in other parts of the world mean that consumers will not be able to rely on countries outside Opec for additional oil.

Meanwhile, US demand, which is expected to grow 4 per cent in the next four years, and that of China, forecast to increase 30 per cent, mean the world could be in for a longer period of high oil prices than expected, analysts said.

The International Energy Agency, the Paris-based industry watchdog, expects Opec capacity, excluding Iraq and Venezuela, to grow 2.1m b/d in 2005-2007. But work to achieve this does not appear to have begun.

It can take two years for countries to act on higher oil prices, but this time countries hurt by past boom and bust cycles appear to be taking longer. Opec's hesitancy means it has squandered its spare capacity, the trump card that allows it to play the role of the world's central bank of oil. It has also increased the likelihood that prices will fall only after they have climbed enough to stifle economic growth and, therefore, demand.

There has been a lot more variation in the hype surrounding the Caspian than in the actual reserves... To make it simple, Caspian "oil" is currently based on 5 giant fields:

- Azeri-Chirag-Gunashli (ACG), previously known as AIOC, developed by a consortium led by BP. It is offshore in the Azeri part of the Caspian, not very far from Baku. It has about 4 billion barrels of oil reserves. It is already under production at a lowish level (150,000 b/d) and is about to grow to 800,000 b/d. This oil will be exported via the BTC pipe I mentioned previously

- Shah-Deniz. This is a gas field, also offshore in the Azeri part of the Caspian. It is also developed by a consortium led by BP (different form the previous one). It is currently under development, and is expected to start exporting gas to Turkey in a couple of years (via a pipeline, the SCP, that runs parallel to BTC). The trouble is that Turkey already has too much gas on its market (mostly Russian) and BP et al. are trying to find ways to transport that gas further to Europe, but that's not done yet.

- Tengiz. This is an onshore oil field across and near the Caspian in Kazakhstan. It is developed by ChevronTexaco, with ExxonMobil and Lukoil. It is currently producing close to 250-300 000 b/d, which are exported via the CPC pipeline running from Tengiz to Novorossisk in Russia (paid for mostly by Chevron, but part-owned by Russia and Kazakhstan, and the only pipeline in Russia outside of the control of tha national oil pipeline monopoly Transneft, so a perpetual source of headaches... but before CPC they used railcars (7000) through Russia or barges on the canals to Finland, so it's a nicer kind of headache!). Tengiz is also on is way to increase production to 600-800 000 b/d in a couple of years (all to go through CPC). A lot of sulphur in the field, so Chevron is literally stuck with mountains of sulfur near the produciton site, it's quite a mess. Tengiz is the 6th largest oil field on the planet; with 10+ billion barrels, IIRC.

- Karachaganak. That's a mostly gas field, but with some associated liquids. It's in northwest Kazakhstan near the Russian border. It is developed jointly by ENI (Italy), BG (UK, Lukoil (Russia) and ChevronTexaco. It can only produce gas and liquids simultaneously, which means that both must be sold for the field to produce. Gas is mostly given to Gazprom, the Russian gas monopoly, which controls all the gas pipelines around (and still controls the only gas-processing plant nearby, so the sponsors have to beg Gazprom to take the gas - but they are currently building their own). Oil/liquids are now exported via the CPC through a recently built connecting pipe; about 100,000 b/d now, expected to grow to 250,000 b/d in the near future. It's a huge field, but its prospects are impaired by the gas situation. Fascinating politics...

- Kashagan. This is the biggest discovery of the past 30 years, currently the 5th biggest oil field on the planet (10-15 billion barrels - about the same as all of the remaining US reserves - and it could be even bigger). It's in the Northern Caspian sea, on the Kazakh side. All the majors are in: ExxonMobil, Shell, Total, ENI (who is the operator because Shell did not want Exxon to be it and vice-versa...), ConocoPhilips and the Japanese. BP had a share, whic they sold to the Chinese, but the existing shareholders premepted the sale, creating a big crisis with China last year (Google Kashagan BP Shell China).
No production yet, but expected to reach 1 to 1.5 million b/d in a few years. It's a very difficult field (high pressures; located in a zone which is at different times of the year sea, swamp or ice; and several hundred kms from any town or road). Oil export routes have not been chosen yet, but a combination of BTC and CPC should do at first. Routes to China (strong demand, but no existing transportation) and Iran (the cheapest pipe to build) are likely in 10-15 years, which should be fun to watch as well...

These 5 fields, which are all developed by Western majors under PSAs with some or no local ownership make up the essential of "Caspian oil". Altogether, it will soon be close to 3 million b/d (150 million tons/y), or as much as Iran or Venezuela or Iraq in its better days, plus quite a bit of gas. All of it coming to the Mediterranean markets, partly though Russia, partly through Turkey.

I'll be frank and say that I have a lot of admiration for the oil companies that have managed to develop these fields and found ways to export their oil and make money despite huge technical and bureaucratic obstacles, constant political pressure from all sides and a lot of noise from everybody else. ACG was signed in 1994, Tengiz in 1993, Karachaganak in 1992, so it took a lot of patience to get them on stream, and to get them to make a little bit of money in the meantime.
Of course, this region is not a panacea, it does not change much for the peak oil question, but it buys us a few years of less Middle-east-dependent consumption and it provides for fascinating business and geopolitics case studies...

1. for an importing country (and its economy), the strategic risk of insufficient supply in times of crisis

Security and reliability of the supply of such a vital commodity as oil are obviously very important goals. But, oil markets are extremely liquid and, unless you are in a serious crisis situation (war, boycott), you will ALWAYS be able to purchase oil in the market at the current price. Conversely, it is also extremely unusual for any player in the market (especially the suppliers) to lock themselves in exclusive arrangements with a single (or a restricted number of) party(ies). Long term supply and purchase contracts do exist, but they usually include some flexibility and, pretty much always, a reference to market prices. In some cases, you will see oil provided by one country to another at below-market conditions (see for instance Chavez’s Venezuela providing supplies to Cuba), but this is a way to provide aid in kind and it has no impact on the overall market – and the recipient cannot be said to have “control” of that supply in any sense.

In times of crisis, security of supply becomes a completely different question. Crisis means that the world oil market effectively breaks down and that it becomes impossible to find the requisite oil at any price.

In the case of war, what will matter is physical control of the production assets and of the supply lines for sufficient volumes for your country and possibly your allies. Fields must be secured, pipelines must be secured, oil terminals and sea lanes must be secured, etc… The history of the past century, and especially the two World Wars, show that this is an essential part of any major war, and it requires the investment of very large military assets. (See “The Prize", by Daniel Yergin, for instance, for a detailed description of the role of oil throughout the 20th century wars). In such a context, pure military might, and military control of the relevant areas, is most relevant.
This means, obviously, that in times of peace, the availability of such military might is a deterrent against any potential foe who would have its own oil supplies secured, or that would attempt to capture the oil assets as a preemptive aggression. If you rely on exports, it is therefore inevitable that you will require the ability to project significant military forces to avoid war or a crisis (or have allies that have such capacity…).
Thus (among other reasons) the global reach of the US Navy, to protect shipping lanes and to project immediate air and sea power in sensitive areas; thus the French forces pre-positioned throughout oil-producing countries in Western Africa; thus the military alliances and treaties with oil producing countries.
The mere possibility of war thus justifies a significant level of military spending and diplomatic efforts, to prevent any vulnerability during any eventual war.
(This also means that a part of military spending should be incorporated in the cost of imported oil. This is the simplest justification for an oil tax in any oil-importing country, and it is also a strong argument to avoid selling arms to other oil importers or oil producing countries, unless you have good reason to trust them).

A boycott can only be organized by an entity that controls a large enough portion of total production to create a real overall shortage. The oil market being very liquid, this means that the production cut must be bigger than any reduction in short term demand that can be tolerated by the importers, or compensated for by a simple, even if large, price increase; thus leading to actual shortages. The “natural” suspect for a boycott in the oil market is OPEC; indeed, they gained prominence when they engineered a boycott in 1973 following the war with Israel. They control a significant portion of oil production (around 50% back then, closer to 40% today) but they control an even bigger portion of known reserves, which makes their likely market power in the future much stronger.

A boycott requires strong discipline by the cartel members against freeriders (if anyone reduces its production, the price increases and the temptation for others to fill the void and cash in also increases). It also requires that the boycotters be able to do without the corresponding revenues while the boycott lasts, and that they also be able to withstand the diplomatic consequences of their position viz. the importing countries that face the boycott.
Following the 1973 experience, Western countries have taken a number of steps to reduce the impact of a new OPEC boycott. The most important one has been to create strategic reserves allowing each country to go at least 3 months without any imports. This ensures that any boycott has to be sustained for a considerable period of time, thus leaving room for diplomacy or other measures without having to face the immediate pressure that shortages generate.
The other step taken by many countries was to try and reduce their oil consumption by developing alternatives or substitutes. Energy savings were encouraged; nuclear or coal-fired plants were built te replace fuel power plants. Obviously, such measures take more time to implement and cannot do much in the short term against a boycott. However, in the long run they are quite effective, and Europe’s oil consumption is still lower today than it was 30 years ago. (In the US, the 1979 level was reached again in 1998 only). By reducing overall demand, they tilt the market balance back in favour of the buyers and thus limit the immediate impact of a new boycott. Higher oil prices caused by the boycott also encouraged the development of more expensive oil fields that were not under the control of the boycotting countries (such as the North Sea, the Gulf of Mexico or the Gulf of Guinea in Africa), thus also influencing in the buyers’ favor the oil market balance.
Indeed, it can be argued that the West’s energy policies were too successful: oil prices have been going down steadily in real terms (and even in absolute terms), and by 1999 they were close to their lowest levels ever (in real terms). This has naturally led people to stop worrying about energy and consuming it once again with abandon (the SUV craze in the US being the most obvious phenomenon). Europe has been protected to a certain extent by the fact that gas prices have never gone down thanks to steadily increasing tax levels, but its gas prices are still close to 30-year lows in real terms).

Of course, a boycott is a highly aggressive act and any boycotter can expect a vigorous reaction from the countries that suffer from such an act. The US being both the largest importer and the main military power around the world, they can be expected to be in the lead of any counter-offensive, which is likely to include diplomatic pressure, trade or financial sanctions (oil being traded in dollars, all the oil exporters’ receipts and a large part of their financial assets are effectively managed in NY) and military action.
In the short term, it is not clear today who would “win” a tug-of-war brought by an OPEC boycott – it would depend on the political objective of such a boycott, and on whose side time would be (disruption caused by oil penury more or less compensated by reserves management on one side vs. disruption caused by lack of revenues, of imports and threat of an attack on the other). If the objective of the boycott is to increase prices and capture revenues, a short show of force might be sufficient and would not necessarily degenerate into a major crisis; if there is a political issue at stake, it is much harder to predict. Having engaged the the guilty countries, created links, mutual interests and co-dependencies appears to be the surest way to have some way to reach to these countries.
In any case, it appears that the capabilities of each side in the worst outcome (war) will have an impact on what happens in the short term, as rational players (and leaders of countries are usually assumed to be so) will not engage in games of brinkmanship they cannot expect to win. Therefore the military might of the USA can be expected to be the ultimate arbiter of a long crisis and can be argued to give them ultimate control over oil resources – but again, at a cost which should be acknowledged and made explicit. In a shorter crisis, other factors will play, such as domestic politics (and tolerance for shortages or higher prices), diplomatic leverage. Here, it can be argued that the US have weakened their position by having both a population with very limited tolerance for any kind of restriction or price increase on gas, and less goodwill in the world than in the past.

Altogether, security of supply for any importing country does not depend on short or medium term relationships with any given oil producer for access to its oil, but rather in its ability to deal with a crisis, by being ready to live with reduced supplies at home for a long enough period, and to react to any crisis by having leverage on the guilty party. Military might, strong trade or political ties can work. Policies to reduce oil consumption reduce the “target profile”. A detailed cost-benefit analysis is necessary to compare aircraft carriers - the ultimate arbiters in a time of crisis - with the combination of an effective energy (savings and diversification) policy with trade and diplomatic engagement. I am not sure I agree with Robert Kagan here (although I strongly recommend his very illuminating book on the differences between Europe and the US)

Go read "The Oil We Eat". It's an interesting perspective.

I don't question what he says on agriculture, and it's indeed high time we reformed our totally dysfunctional agribusiness eco-system (and France is one of the worst offenders here).
On the other hand, I would dispute the concept of "primary energy production". If I am not mistaken, this only takes into account solar energy converted into chemical energy by plants. It does not appear to take into account energy stored in oceans and the atmosphere, nor the energy in light which is simply reflecled off and/or not captured. These are also available to us, and the numbers so dwarf our current consumption that it is effectively infinite for the foreseeable future.

When easily accessible energy such as oil or carbohydrates run out, we will have to rely on solar energy more directly, whether via solar panels, wind mills or tidal/wave energy (this last one being lunar gravitational energy, actually - but it's cheaper than solar today...) - and we will be able to. It is already operational, and any requirement to actually use these sources will unleash a new wave of progress and improvement that will rapidly make the cost more bearable.
I do not see any role of oil that we cannot replace. Cars can use electricity. Plastics - we will recycle a lot more. Electricity will come from a variety of renewable sources, and for a while, from nuclear and coal (not quite renewable, some pollution issues, but still extremely cheap)

The most valid point is that article is that we are not currently valuing properly the resources that we "pick up", and thus we do not price them correctly. This was not an issue as long as we used only infinitesimal quantities of these resources, especially when renewable like "green energy". Now that we use a significant portion of the resource, we need to learn to treat it as a capital and not as an income. Oil being the most "liquid" form of energy", increases in oil prices are the fastest way to get there.

What does it mean to "control" oil resources?


1. physical control

As the most basic level, you control the oil if you are in control of the physical good; You have it, you can use it or sell it. Naturally, control of the producing assets is more important ; this is shared between (directly) whoever owns the assets and (indirectly) whoever ensures that nobody else can own the asset - whether a functioning legal regime or brute military force.
Another aspect of this question, which may or may not be relevant for different oil assets, is the control of the transport infrastructure. Oil can be transported by pipeline (and will always be, at least for the very first steps from the oil well) or by boat (ocean faring tankers). If you have a way to block in any way the flow of oil to the market, whether because you own the pipeline, the port facilities or the boats or because you control the territory through which the pipelines or the boats (port, shipping lanes) go, you control the oil flow and are a player in the game.

In Nigeria, people get access to the pipelines and try to siphon off oil (and sometimes blow themselves off)
In Russia, in the early nineties, mafia groups would take physical control by force of railway or port infrastructure and "tax" oil exporters in the most basic way, by taking a share of the cargo.
Persian Gulf oil is vulnerable to any disruption to shipping within the Gulf or at the Hormuz straits.
Trade unions in oil producing countries can disrupt production and thus are players (see in Venezuela in 2003 or more recently in Norway).
Iraqi production is subject to the availability of the pipelines to export it out, which are targeted by the insurgency.
Caspian oil is such a complicated – and fascinating - subject because it is a closed sea with no access to international markets and any investment project must solve the export issues, which means dealing with at least two countries with some degree of control over the project (one where the production takes place and at least one transit country).


2. legal control

Physical control enforced by military or police means usually translates into – or is legitimized by sovereignty over the territory where the oil or oil asset is located. More generally, it means that the oil resource is subject to the internationally recognised right of this country to run its own affairs as it sees fit, and thus that its judicial system and laws apply. The authorities of the country have the legitimate authority to decide if and how this asset will be exploited, and the police/military and/or judiciary power to enforce such regulation.

Many countries (but not the US) have decided that underground resources belong to the country. Many have a national oil company (NOC) that will be the sole producer of oil and whose income goes directly into the public budget. Others will allow other entities to develop assets and produce oil, under predefined ownership and tax regimes, but subject ultimately to the country's authorities, usually through a NOC or oil regulatory body which will have predefined roles in every producing asset (majority or minority ownership, rights to a portion of production, responsibility for sale and marketing, etc...).
Transportation assets are usually subject to ad hoc regulation.

Monopoly producer: Most of OPEC (Saudi Arabia, Venezuela, etc..), Mexico
NOC with majority ownership: Nigeria
NOC with minority ownership: Azerbaijan, Angola, Indonesia, Malaysia
Production rights without ownership: Egypt, Azerbaijan, Kazakhstan, Angola
Some countries have various schemes in place.
Many of the countries in the top categories are experimenting with schemes to allow some foreign investment while keeping “control/ownership” of the assets.

The distinction between physical and legal control is especially important in an investment context. In order to produce, you first need (large) investments. these will come only if investors are comfortable with the future oil flows that will come their way to repay such investment, and the timescale for such investments is usually 10 years or more. If you invest, you want to be dealing with someone who has the authority to guarantee that these flows will not be impaired.
Physical control of the flows is obviously necessary, but is clearly insufficient: legitimacy matters more. If you deal with a stable but rogue power, what will protect your investment from the entity wielding it? What will protect you from claims brought by others (such a refugees from that “power”) in Western courts (for instance under the Alien Torts Act) that the oil is not really yours?

The absence of a functioning state will usually mean in practice that the oil belongs to whoever can actually get his hands on it or the production assets, but it means little more than pillaging. No investment will take place.
Iraq today is an interesting case study. Oil companies would not invest initially while the US forces were there because there was no legitimate entity responsible for the long term flow of the oil from Iraq (the long term legal status of the oil assets to be purchased/built was unclear). Now there is a legitimate power in place formally, but it lacks real “physical power and is unable to ensure basic security. Thus, an even simpler reason not to invest for outsiders.


3. operational control

Having physical and legal control of the oil reserves is not enough if you do not have the technical capacity to actually extract this oil and bring it to market. If the infrastructure exists, you can live off it for a while, and this is not an issue (see the Russian oil sector in the early 90s, when no investment took place). If the reserves are easily accessible, it is also possible that the competences required are not so difficult to find locally or to buy on the international market. But this is increasingly less and less the case, as the more easily accessible reserves have been found and produced and increasingly distant or difficult reservoirs are being tapped. In that case, the more frequent, highly specialised (and expensive) technology and expertise is required, and this can be provided mostly by the Western oil majors. It is a combination of technology management (sophisticated seismic exploration, deep-water production, horizontal drilling, reservoir assessment and management) and project management: oil fields are amazingly complex mutli-billion-dollar projects, which require the ability to coordinate many parties in an elaborate ballet, with very tough logistical constraints (lack of access, lack of infrastructure, hostile conditions for personnel, etc...) and a deft sensitivity to the local environment. (Not to mention the management of the financial aspects, PR, and politics locally and in the home country).

The entities which are able to run big oil projects will effectively take over operational control from the local authorities which are otherwise unable to exploit their underground resources. This creates a co-dependency, which brings us to the relationship between local authorities and oil companies.


4. regulatory control

We have now reached a more sophisticated point in our analysis whereby various entities have some degree of control over the oil by virtue of controlling some element of the oil chain: the territory of production or transportation, the technology or the financing. How do all these parties interact and reach an agreement? Who can actually be said to have “control”?

The question in normal times (i.e. outside of war) actually is: who gets the "rent"? The rent is the difference between the actual production costs, including the costs to bring the oil to the market and the price fetched by that oil on the international market (depending on its quality and its point of entry into the market). This rent can be quite high, as all-in oil production prices usually are in the 2-15 $/bbl range. Until recently, a price of 15-20$ was used by the big oil companies to test whether an investment would be worth it or not on a long term basis.

In the past (until the second part of the XXth century), most of the rent was captured by the oil companies. This reflected US practice, and as the US accounted for the biggest portion of world oil production, it was also used in the rest of the world (most of it still being colonies, the Western powers also did not worry too much about the locals). After WWII, and following major discoveries in the Persian Gulf area, the oil industry internationalised a lot more, at the same time as the decolonisation movement took place. This eventually led to a new sharing of the rent. For a time, it was a simple formula: 50/50 between the oil company and the host country. Eventually (and despite valiant efforts - or consipiracies - by the oil companies and their home governments (the "seven sisters"; US, UK and France), this moved in favor of the host countries, whether through more favorable agreements (concessions, PSAs - production sharing agreements, joint ventures) or outright nationalisation.

Today, it is accepted that the host country will capture the major part of the "rent" (up to 90%). Oil companies accept to have the perspective of "only" a decent return if production goes as expected, and a small part of the upside if things are better. As they will do most of the initial investment, they usually get more of what's available if it is less than expected. In return, they get access to a recurrent flow of oil and can “book” the reserves in their accounts.

In the context of the PSAs, which is now the main instrument in the international oil business, the oil produced is separated into "cost oil" and "profit oil" according to more or less complex formulas.

- Cost oil is used to repay the oil companies for their investment: operating costs, some taxes, and reimbursement of the initial capital costs and associated financial costs (banks interest and/or a predetermined rate of return). What costs are “recoverable”, what interest rates are used to roll over costs not yet reimbursed and what tax rates are applicable are negotiated on a case by case basis.

- Profit oil is, as its name indicates, pure profit after operating costs have been deducted. It is shared between the host country and the investors according to complex formulas.

Initial production will usually be mostly used as "cost oil", in order to repay the investment as quickly as possible. The host country will get a minimum level of revenues through the pre-agreed level of taxes and in some cases a minimum proportion of "profit oil" from the start (which may vary depending on the actual production levels vs expected ones). After a few years, cost oil will phase out and most of the production will become "profit oil", which is then shared mostly for the benefit of the host country.
Of course, the sharing formulas depend on oil price levels, actual production levels and plans for future investment, so they are different in each case. They must also take into account the full production costs of the asset and its complexity (both technological and in terms of the number of "interested parties").

A common practice in the industry is to separate each item of the production and transportation chain into stand alone investments: the production platform and associated facilities, the pipeline, any other independent facilities which may needed. (This is even more characteristic in the natural gas industry).
Each entity is structured so as to be profitable on its own. For instance, the transportation tariff for use of a pipeline will be set so as to cover the cost of its construction plus cost of capital and a small return. That tariff will be paid by the upstream (production) entity which uses it to export its production, and this entity will be entitled to include that tariff into its "cost oil" calculations. It will also paid as a prority by the upstream facilities (possibly even before local taxes, which makes sense if you consider that there are no revenues until the oil reaches the market, for which the pipeline is needed). Such tariff is defined contractually between the upstream company and the pipeline company and usually reflects the fact that such "intermediate" entities in the oil chain take only a limited amount of risk (for which they get a very predictable revenue stream, which makes is easier to keep such entities transparent -to justify their inclusion into "cost oil"- and to finance them externally). A frequent principle is that they get paid as long as the required industrial (in that case transportation) capacity is available, whether it is used or not.
Easily identified portions of large projects can thus be ‘spun off” and financed on a stand-alone basis. This also allows for subcontracting of the work and management – and risk - of a very large project in smaller pieces (even if the owners are the same all along the chain), by allocating responsibility for well-identified tasks to other entities.

As regards the issue of control, such big contracts are usually done within an extraordinarily heavy contractual framework, involving dozens of external advisors on both sides: lawyers, accountants, tax specialists, independent engineers and other specialised consultants, and bankers. These contractual framework usually define the regulatory framework which will apply to the project for its duration, including things like technical standards and norms, health and security regulations, environmental rules, social and working conditions, local content, etc... This means that the host government has a lot a control of the project within the framework of such contracts. It can impose its standards and rules and enforce them. Local or international arbitration can be defined to settle disputes, but a lot will be left to bilateral negotiation.

(An important point to make here is that on the oil company side, you usually have a consortium of several companies, as they usually do not like to be on their own in complex or difficult projects, especially in tough countries. There usually is a leader amongst them, the "operator", who will be in charge of running the operations on the technical side as well as managing the relations with the host country. The others will be more or less active depending on the contractual framework between them, their own inclination, and the history of the project. Some of the super-majors do not like to be subordinate to others, but it does happen and it makes for complex project management...).

Countries always have the "atomic weapon" against oil companies of taking (or taxing) the project away from them. They also have ways to put pressure on the operator by imposing more or less stringent supervision of the project, imposing deadlines, local content requirements, etc…The contractual framework is supposed to regulate all these issues, but in practice, especially in countries where the legal system is not independent of the political power, it is a tug-of-war and it depends a lot on the more global framework and this simple question: who needs the project (and its revenues) the most? Who can afford the least to wait one more year before production increases as expected. The oil companies' leverage is that they have the financial and technical capacity to invest. But they have shareholders to satisfy, which means they need to book reserves, to have revenues and make profits. The host countries have the power to slow or kill a project, but they are often cash-starved and need the revenues (not to mention that individuals within their power structure expect to benefit personally from the project). Some countries have better bureaucracies, are less desperate or prouder and can get better terms from the oil companies. Some also have a better reputation of sticking to the agreements they enter, so can get better terms because the oil companies accept them in exchange for their stability.

The geopolitical context also plays a role, and especially the nature of their relationship with the US (as the biggest importer, the home of several of the big oil majors and the "world cop") and a few other countries (France and UK for their majors and their residual international presence, Japan and China as major importers, Russia and China in their areas of influence). Host countries, if they are smart, can play on these relationships to get better terms.

So, you have control:

- because you can kill or slow a project (political oversight, regulatory authority, NGOS/hostile local communities, terrorists). Those that can kill a project only have “control” in the sense that they can block the project, but may have less control over a functioning project (if it functions precisely because their claims have been satisfied or their capacity to block it has been neutralised).

- because you are the only one able to make it happen (oil majors). This is a very real source of control
- because you are part of the chain required to make it happen, and can mess up the economics for others (anybody involved: workers/unions, transit country, financiers, etc…). This control is compensated by the fact that all the links in the chain make money only if the oil flows and all ultimately have an interest in getting the oil moving.


5. market control

Oil finally hits the market. Who controls its price?

For many products, the buyer has some degree of control via the level of his demand and/or the price he is willing to pay for that good. Oil is quite unusual in that it is a vital commodity for everybody (economies would grind to a halt without it), with limited demand elasticity (i.e. demand will not vary much with price) and a very efficient worldwide market. There is a single worldwide price (or at least equivalent netbacks taking into account transportation costs) and a fully liquid and solvent market which ensures that if you have oil, you will find a buyer - with the money to pay for it. This means that no one (except for very specific cases, for instance a pipeline leading to a single refinery, which will have some buying power) can set its conditions on the buying side.
Market power becomes a macro-economic question: what are global production and demand, what are their main drivers. Each country may worry about its specific dependency to imported oil, but the worldwide supply and demand balance is the only determinant of whether such imports will be found, and their price. To avoid such uncertainty, local policies can be put in place to change the local oil balance (policies to encourage domestic production, or favoring a switch to other forms of energy - nuclear, renewables, etc..-, or energy savings), and these policies will in turn influence the worldwide balance depending on the size of the country.

On the supply side, the picture is quite similar: the liquid worldwide market with many suppliers is also there, there is also a lack of elasticity on the production side (most countries produce at their maximum capacities most of the time - with one big exception, Saudi Arabia, about which more later, and it takes time to invest in new production capacities if they are needed). However, production levels are not currently correlated to reserve levels, and likely future production levels are much different from today's. In fact, reserves are much more concentrated than production, giving a small number of countries the perspective of growing market power.
On the other hand, another factor constrains the market power of the sellers: their own dependence on oil export revenues for a large part of their exports, GDP, and budget revenues. This means that variations in oil export revenues can have a direct impact on the standards of living of a good part of the population, which in turn would have an impact on the domestic political situation. These countries therefore need, sometimes desperately, to maintain the export revenues at the levels they already are (or even increase them to take into account fast-growing populations).
So you have a situation where the importing countries badly need to import the oil, but the producing countries just as badly need to export it. It's an unstable balance, determined first by the fundamentals of the market (the supply-demand balance) and then by international politics and strategy.

In this context, Saudi Arabia was an exception for the past 20 years: it was the only country with significant unused production capacity, which meant that, as the largest exporter it could have a real influence at the margin on the demand-supply balance. As one of the lowest-cost producers, this influence was even stronger. This power was demonstrated to buyers in the 70s via the two oil shocks, where SA was the biggest player within the OPEC cartel. It was also, more interestingly, demonstrated to other sellers in 1986 when the country increased its production, flooded the market with its oil and caused the oil price to collapse. Ever since, it has been accepted as the world’s “central banker” for oil.

The difference today is that SA, not having invested enough in recent years due to lowish prices, does not have that much spare capacity available anymore. When you add in unexpectedly higher demand (due to US, Chinese and Indian growth), uncertainty on production levels in several producing countries (strikes in Nigeria and Norway, political crisis in Venezuela, the Yukos fracas in Russia) and geopolitical instability in the Gulf region, and you have a recipe for crisis, where nobody really controls the price anymore, despite the efforts of many.

The Persian gulf countries control most of the remaining reserves and will thus have growing market power in the future, which may translate into geopolitical power as they will control a large enough portion of oil production to be able theoretically able to cut off supplies and bring other countries to their knees.

But higher oil prices and higher dependency on a few sources also lead others to seek alternatives. Amongst the alternatives, you can find more expensive reserves (including very deep offshore, oil sands), new technology/substitutes (GTL, which requires natural gas, renewable energies, energy efficiency by users, public transportation, etc…), all of which help to bring the market back to an equilibrium.

And remember that the oil revenues by producing countries will be spent, usually in industrialized countries, thus bringing it back into the economy. The net effect of such massive movements of funds is equivalent to a massive – and brutal - shift in tax policies within industrialized countries, and can thus also be compensated by domestic tax reform. (Actually, one of the reasons for the 70s crisis was the producing countries were not able to spend and recycle all of their revenues back into developed countries; another is that they spent a lot of it on weapons, which is not the most productive use of our resources).


So when we talk about “control” of oil, we are talking about many different issues:

(i) for an importing country (and its economy), the strategic risk of insufficient supply in times of crisis
(ii) for a given oil asset, the repartition of the oil “rent” between all “stakeholders”
(iii) for an importing country, the macroeconomic issue of the overall cost of the necessary oil;
(iv) for an exporting country, the macroeconomic issue of the level of revenue from oil production;
(v) for an exporting country, the political risk of the domestic allocation of oil revenues;
(vi) for companies and users, the business risk of ensuring your supply at a predictable price;
(vii) for all, in the long term, the management of a vital but non renewable commodity.


To be explored in another installment…

We can all agree here that higher oil prices would be necessary to reflect the fact that it is not a renewable good. The question is: who should get the money? Or maybe - what should it be used for? or again - what kind of price would that be?

The price can be set in several ways:

- the price of real sustainable alternatives. Electric cars, with electricity generated from renewable sources, is already possible with today's technology, so that sets a cap (which makes me not believe in doomsday scenarios. we CAN live with energy costing 10 times what it costs now - easily). Most other uses for oil have substitutes, even if significantly costlier.

- if we decide to use the oil, as it's available, but focus on finding the cheapest substitute in the (long) meantime, the disruption to our economies will be less. However, the oil price must be increased to discourage its use, and massive public investment put intoà developing the alternatives (and one should finance the other, obviously).

where does that leave the oil producing countries? If the oil "rent" is to be used to finance future sources, they should not capture it. Is that likely, Is that possible?

This major potential source of conflict is the single biggest argument to increase taxes now in consuming countries, so that regular and predictable price increases for consumers do not create too much pain in the economy. If prices are increased because of supply and demand only, it will not finance alternatives (these will develop as they become more competitive, but it will take more time), and it will certainly be more brutal and unpredictable, with nastier effects on the economy. Better increase them now and use the funds for investment rather than for consumption in producing countries. But who will have the farsightedness to (i) impose these taxes and (ii) put them to the right use. Europe has managed (i) once, but not enough of (ii) (although Europe's renewable energy efforts are reasonably serious). The USA is totally hopeless on (i).

But remember, we went through a multiplication by 4 of oil prices in 73-74 and then again in 78-79 and it was not the end of the world. It was messy, but oil consumption WAS reduced and solutions were found and we are certainly not poorer today than we are then. We need the same again. Let's do it on our terms and not on the terms of terrorists, corrupt saudis or scheming Russians.

This article is a couple of weeks old, but makes some interesting points.


"...For years now, America's Leftists have been flogging themselves to death wondering why it is that they remain so weak and disenfranchised. Most Leftists agree that it's all the fault of the right-wing dominated media, and the Republican-infested corporate conglomerates that control the major media outlets. Others blame religion, or advertising, or popular culture, or something inherently base within the genus americanus. Sometimes they even blame themselves, though only in a safe, disingenuous, fake-self-loathing way: we're out-of-touch, too serious, too high-fallutin', we need to get with the times, etc.

In fact, the main cause for the demise of the American Left is much more sinister than that. The American Left is responsible for destroying the American Left. I don't mean that metaphorically. I mean quite literally that anytime the Left starts to get somewhere, you can be sure that a vigilante mob of other Leftists will rise to the occasion to crush it, to make sure they stay as marginalized and ineffective as always. It's a kind of ghetto envy endemic to the Left - the Right is always rooting for its heroes to succeed. Not the Left. The key for them is to sound Virtuous - and oftentimes that means eating their own in order to promote themselves.

Nowhere is this more clear than in the American Left's envy-fueled lynching of Michael Moore, the only Leftist to make it out of the ghetto...


What I found interesting in this article was that it reminded me of what was said about the Fundamentalist Christians re FMA. They wanted to lose in order to be able to complain that the country was going to the dumps, the country is controlled by a vast liberal conspiracy, they are the only righteous ones in an ocean of sin and desolation,...

Is the "Left" (or some parts of it - I agree that "Left" is pretty vague) guilty of the same? That's what the article was pointing out, and I think it was a fair point.

Also, another point. In France, in 2002, a good portion of the Left found Jospin to be too centrist, too "liberal" (in the European sense, i.e. too much to the Right); as we have a two round election with many candidates, they indulged themselves and voted for the Greens, the Communists or the various Trotskysts. The result was: Jospin did not even get to the second round, and the "Left" had to call for a vote for the hated (and incompetent) Chirac against Le Pen - except for the hard trotskysts (Arlette Laguiller) who did not call for anything. In their view, Jospin got what he deserved, and any nasty right wing government was good for them because it brings the perspective of the Revolution that much closer by being, precisely, nasty.

The US is now in a somewhat similar position, in my view. Even if you agree (which I do not) that Kerry is "Bush lite", you still have the choice between a "moderate" right wing candidate and a "hard" right wing candidate. If you say it does not matter, then in my mind you are no different than those French trotskysts that hope that things will get worse so that they can get better (through a real revolution).
My point is that, in my view, there is a lot of sniping from the far left against the centrist left, or maybe to be fairer, from the left which is happy to forever criticise but does not want to take responsibility to improve things (unless it's "real" change, i.e. a revolution), against the part of the left that fights to get back to power and makes the necessary compromises to do so (whether by taking moderate "unpure" positions, like Kerry on Iraq, or by being ruthlessly and efficiently partisan like M. Moore).

Long post below, taken from a thread at kevin Drum's. Lots of interesting ideas. Credit to "Tim Kane". Here goes:


The 9/11 Report does, I think do more damage to Bush of a lasting nature.

As David Brooks column points out - the 911 commission states that, "Wrong Way Bush" and his neocon hacks has totally misdiagnosed the Terrorism war and implemented a coutner productive strategy.
It is an ideological war after all. A jujitzu battle of hearts and minds over a prolonged period of time where waging traditional warfare hurts you more than it helps you. (blinded as they were - they should have been hip to this from the outset - you don't bomb the world trade center and not expect a reaction, the reaction is what they were after!!!!).
The first course of action in a ideological war is containment - stop the spreading of the disease and the hurt: which of course means international cooperation - a near global anti-terror Nato complete with an intellectual focus.
Apperently Brooks is just waking up to this. Only 3 months ago he was still spouting conservative trash talk that Iraq was front and center in the war on terror. Its like calling a steak a fruit salad. The Republicans, neocons are lacking imagination indeed: They were to blinded by there desire to invade Iraq, to protect Israel, to control oil, the idea of spawning democracy in the region was pure baloney - we know how to spawn democracy - it takes a long slow careful process because it is ideological in nature.
I am sorry, but the ideological nature of the current state of affairs was blatently obvious a long time ago to anyone who wasn't a neocon. Even in Iraq (or perhaps it was Afghanistan -er) one of our own Generals was saying "this is a war of ideas and you have to make sure your idea is better than their idea."
The problem with the present is that our idea as it is currently packaged by Bush, as it stands, is not intuitively better to the people's who's hearts and minds are in play, who's hearts and minds are the battle field.
Bush constantly preaches liberty and freedom. In his last press conference he used those terms some 150 times - But not once did he mention fairness.
The dirty little secret of the neoconservative movement is they want the principle of liberty to govern without balancing it out against the principle of fairness because such a single threaded epistemology allows for what they are really after, a further concentration of wealth and power – history proves such policies are sheer folly of the most epic proportions.
The lesson of a terribly bloody 20th century is that societies that are based solely on the liberal principle of freedom, if they become too unfair, become top heavy and, like standing up in a dug out canoe, are highly unstable and prone to collamity.
To liberal democratic societies, the principle of fairness functions like an outrigger that when tethered to liberalism makes what was once immensely unstable, immensely stable, in a word, unsinkable.
Most of the first world, our allies, learned the lessons of the 20th century – the idea that the principle of freedom has to strike a balance with the principle of fairness: forming a sort of check and balance against the excesses of the other and creating more stable, less brittle societies. This is why social democracy prevails in countries that have tasted or confronted fascism.
Because of the mythology of America’s birth, that freedom and fairness are the same, and having avoided the worst of the 20th century’s calamities, a portion of American society, such as the neoconservatives, has yet to recognize this lesson.
People living in North Africa and SW Asia are unfamiliar with the idea of liberty- they've only observed it from the outside, it is not intuitive to them. Bush can preach it all he wants but they can't fully comprehend it. Whats also lost on both Bush and people living outside liberal societies is the amount of enourmous discipline it takes on the part of an individual to live in a free society. This obviously is not altered with the way of a hand or the invasion of an army.
While unfamiliar with liberty - that leaves only the issue of fairness in which we can aproach and begin to have a dialogue with the muslim world.
And to Muslim's fairness is an issue.
Islam is constructed around a set of communitarian and religious ethics that have much to do with fairness, much to do with duties an individual owes to God and Community, and little to do with liberty, at least in the way we understand it – desert communities could never afford the luxury of individualism. Bush’s promise of the virtue of liberty falls on deaf ears because they have no cognizance of it from their experience, let alone as a virtue, let alone a sacred virtue. While promising liberty he threatens to take away fairness, as they have come to experience it. To Muslims, it appears as if Bush is offering nothing while taking away something that can only result in unfairness, corruption and debauchery. And that’s not contemplating issues of nationalism or tribalism
Islam's initial inspiration and rise was, in part, a reaction to an outsized disparity in wealth. In 610 Mecca was a prosperous trading city, but wealth became increasingly concentrated and poverty abounded. As we all know from the movie “It’s a wonderful life” when such conditions occur, people’s hope declines and increasingly they turn to self destructive, short term gratification, drunkenness and debauchery. Islam’s impermisiveness towards drinking and sex is one reaction to this condition. A ban on usury, that is income from interest (ie. one form of capital gains), is another.
While liberalism has defeated all prior challenges, it is hubris to assume success. While we believe we will prevail, we as yet don’t know for sure as to how. A good start is to recognize the ideological dimension and address the issue of fairness in our own society. As one General in Iraq is reported to have said, “this is a battle of ideas and you have to make sure that you’re idea is better than their idea.”
Islam represents a system that was originally designed to go up against and beat a system akin to our own. From a vastly inferior base, Islam defeated a mercantile society that had mal-apportioned distribution of wealth. The more unfair we become, the more brittle our society, the more inspired our adversaries, the more we look like Islam’s traditional enemy: Great Satan indeed. If we don’t have the political will to address unfairness – how will we prevail in the long battle of hearts and minds?

Another point: Bush's bluring the line between church and state undermines the very foundation for this ideological war. In the final analysis this was is about the seperation of religion from politics. Bush's bluring the line hear makes the case for Islamiscist. And one might argue that if this seperation were removed that Islam might be better than Christianity because Islam is built from the ground up to encompase politics, in Christianity it takes contortions in theological interpritations to deny Christ's commandment to seperate things spiritual from things political. If we are going to embracing merging religion with politics we might all be better served in converting to Islam because its theology is more developed along these lines.
Our founding fathers were wise to seperate beliefs from politics, church from state. But then they were only catching up to what Christ himself implied 1700 years earlier.
Finally, getting back to fairness its worth considering Bush's domestic policies and how they endager us.
In combination with his foreign policy, Bush's actions hurt us immessearbly because we can't get back the lives, the bullets and the hundreds of billions of dollars we've spent in Iraq.
Let me use a point in history to demonstrate this: In his book “Structure and Change in Economic History” Professor of Economic History and Nobel Laureate Douglas North suggest that the Roman Empire fell because the wealthy and powerful used their influence to avoid paying taxes. Rome’s tactical advantage with its barbarian foes had narrowed. Rome therefore needed to enlarge its army to hold back the barbarians, enlarging the tax burden. The growing tax burden was pushed down upon the classes that could least afford it. The Empire collapsed and a 500 year Dark Age descended upon Europe.
About the time Europe was recovering from the dark ages a similar event occurred in Japan. Japan balkanized into tiny state-lets ruled by thugs and itself, descended into a prolonged dark age. In a somewhat similar vein, the Byzantine aristocracy, held back adequate funding for their military out of fear military pretensions. The self weakened Byzantine army lost to the Turks at the battle of Manzikurt forcing Byzantines to vacate Anatolia for the first time since the Persian Empire and precipitated the call for the crusades. It was the beginning of the end for the Byzantine Empire.
These societies did not fall to superior foes, they collapsed. What is striking is the totality of their collapse and that the people who had the most to loose by the state’s collapse, the wealthy and powerful, were also the ones that refused to pay to ensure the states perpetuation.
These cases illustrate the folly that befalls a society that becomes unhinged from the principle of fairness, where wealth becomes too concentrated and tax burdens mal-apportioned. As Peter Peterson's new book: "Running on Empty" points out we are fiscally approaching a cliff. Bush's policies are pushing us into a chasm. What kind of ideological war can we fight when our financial systems collapse? What kind of hot war can we fight?
It is hard to believe but "c+ Augustus" the leader of the most powerful nation in the history of the earth, the leader of the most technically sophisticated society in history, the leader of the free world, is losing a war to a towel headed demagogue living in a cave on the Afghanistan Pakistan boarder.
If society can begin to grasp this then replacing Bush should be "slam dunk" but "Intellectual Elites" like Brooks is only just coming into cognition. We have a long way to go indeed, and we are going to have some massive set backs in the next fifty years: backlash from Iraq, financial calamity, social unrest, international dysfunction - all served up courtesy of "C+ Augustus", the Shrub, Bush II.
The price of fascism has been high for all those nations that have been infected. Ours is looking like it will be steep as well. Either Islamisism or Social Democracy is the future of our world. Fasco/Falangism -be it christian inspired or Islam inspired is a bane to humanity.

David Brooks, there's your X.
To everyone else, Sorry I carried on so much - much to get off my chest. My appologies.

Posted by: Tim Kane on July 24, 2004 at 2:33 PM





This is an ideological struggle. But it comes down to one thing the separation between church and state.

First, religions are ideologies. You don't need a religious orthodoxy to pray to god, to be spiritual - but religions are more than just ideologies, they are like swiss army knifes with multiple functions like dealing with spirituality, regulating norms, managing our imagination in constructive manner etc...
Many historians acknowledge that fundementalism is a response to modernism. What is modernism? Liberal Democracy, rule by (man made) law, constitutional governance, protection of rights, liberal economics of which the most important aspect would seem to me to be reliance upon systems and the specialization of task/labor/systems - that is unbundling and fungiblizing. Seperation between church in state is just one aspect of that.
The major difference that could be said to be characteristic between Christianity and Islam is Islam could be said to characterize by cohesion and Christianity by centrifucion (spell?).
Christianity begins by deviding God into three and seperating politics from religion and immediately spawned a million various sects that were infighting. Mohammed came along in the year 600 or so and saw this - his creation, Islam, was meant to eliminate these weaknesses. One Religion, One God, One Prophet (in essence), One Community, One State, One Set of Rules governing everything, Those rules come from God and can not be debated or eliminated, one holey book one holey man, and everyone has a duty to be a soldier.
Early on Islam was in a struggle to survive - War is basically a numbers game, everyone therefore had to be a soldier.
In the desert world, there is no tie to land and so there could be no state control in the normal sense - territory is meaningless because in the desert it is worthless - Mohammed set out to gain soveriegnty over the heart, the mind, the sole - he did not conquer territory but persons - once they submitted to Islam, he had soverienty.
In the tribal world, Islam was a new, ellastic (in one direction - apostacy was punishable by death) tribe. In essence it was a pyramid sceme, since other surrounding tribes were based on blood instead of belief they could not grow, once Islam proved it could survive, it was set up to grow quickly because in such a pyramid system the pay off is greatest the earlier one enter's it.
Initially Islam was up against supperior numbers so Mohammed made it a duty to fight, if you die you go to paradise, if you don't fight you are condemned to the fire for eternity.
This pyramid scheme, elasticy, and Cohesion soon gave Islam a competitive advantage against every adversary and then every society it came up against.
In settled (farming regions) class prevails and peasants (farmers) weren't normally allowed to be warriors: Both Europe and India had warrior classes (or castes) (knights) that artificially lowered the number of fighting persons. As a result large parts of India and Europe were dominated by Muslims from time to time. (this is a simplification and lots of other factors matter as well such as technology, the state of affairs of an adversity, and the suitability of mobility in fighting etc...)
So Islam initially had a competitive and comparative advantage coming out of the gate. Mohammed saw this coming and expected to conquer the entire world. When he became aware that he was dying he still expected Islam to conquer the whole world someday and there are commands in the Koran to wage Jihad. etc. etc...
The initial success of Muslim Armies to expand from China in the east to Spain in the west was proof to the Arabs of the truth of Mohammeds message. In essence they had a better more modern system set up in 600s. Islam was in the ascendancy for about a 1000 years. But it has a fatal flaw - it is locked into Seventh century ethics and for fundementalist they can't abandone God given laws, ethics and systems.
After 1500s monolythic system of Islam increasingly gave it a disadvantage. The West took advantage of its centrifugal properties to develope systems based upon specialization and freedom of thought, competitiveness between states meant that laws, norms and systems were pushed ahead, not held back by need to adhere to God's laws.
The development of a new modernism in the west that is ascendent over Islam creates a crisis for Muslims - there system is supposed to be superior, ascendent and true. The west's ascendency refutes all of this.
To adapt they have to embrace centrifugal, fungible concepts like seperation of church and state, freedom of thought. The response of many groups that have confronted western modernization has largely been the same: fundementalism - go back and do what are ancestors did to great success, the reason we are failing is because we have become corrupted over time. Read some of what the Great Indian Chief Pontiac said to the North American Indians and it reads similar to other fundementalist -like the wahabi's in Saudi Arabia and bin Laden.
The difference is that Islam is designed to succeed against systems such as ours. Indeed it was a mercantile economic system that it over threw against great odds at its inception in Seventh century Mecca.
So it is an ideological struggle. And the Primary issue is separation of politics and religion which is a problem for Muslim. There are other issues but thats primary. Most other cultural belief systems are able to adapt to modernism. And if you look in the world today almost all points of conflict occur where Islam confronts the outside world: Philipines, Chechnia, Cashmire, Sudan, even Bosnia.
Right wing fundementalist are no different, they are struggling to adapt to modernism. (okay thats simplistic explanation.)
The issue of Israel only complicates things for Muslims. The Israeli's are split between moderates + liberals who are willing to live within the "greenline" and neocons that seek security through imperialism. In this connection they dove tail with Neocons in the U.S.
I've never met a Jewish person who wasn't pro Israel, but how they are pro-Israel is different. Jewish Neocons, like Wolfowitz, have no problem using American power to creat in Iraq an Israeli satelite state. While non Jewish Neocons like the control of oil.
The problem is the neocons don't give the Muslim's a workable deal. Churchill said you have to recognize the legitimate rising expectation of your adversary in negotiations. The jewish-neocons deny their counterparts that.
This kicks us into Game Theory territory which stipulates that when one is confronted in a long term relationship, whether adversaries or not, one best, most reasonable and sain option is to cooperate. If you don't have cooperation the only alternative is a fight to the death of the one party or the other. Sane, moderates on both sides have not prevailed do to the shenanigans of extremist on both sides - witness the assasination of Rabin by an extremist jew. In the Israeli - palestine issue, Extremist, on both sides are cooperating to eliminate moderates.

And in the process they are dragging us in, and dragging us down.
The islamisist terrorist represent Islams

Posted by: Tim Kane on July 24, 2004 at 6:38 PM




First off, terrorism is a tactic, not an ideology. Next off, the actions of the terrorists are symptoms of underlying causes, not the underlying causes themselves, contrary to the beliefs of some on the right. There are multiple threads to this conflict. You have the fallout of the actions taken in the Cold War (I am not getting into their morality/necessity, I am simply referring to consequences of actions taken, whether good ones or bad in context), in particular the inability of the US to recognize that there would be negative ramifications from it’s actions through the Cold War left over to deal with. There is also an element of religious extremism thanks to one of the sects in Islam that unfortunately has been able to gain significant ground within the religion thanks to it’s heavy sponsorship of the Saudi Royal family as the true form of the country that Mecca is in. Not to mention the revenues poured into the madrossas over the past 2-3 decades throughout the Muslim world thanks to the oil revenues donated to spread it. This has caused desert Islam to have gained a disproportionate sway in Islam generally, much like the evangelical movement has within American Christianity generally. It certainly is a powerful voice within the Faith, just as Evangelicals are in US Christianity. Then there are the economic elements, both in terms of general economic development in the region versus the rest of the world, as well as how it has shaped the foreign policies of the Western powers in that region over the past 100 years or so, most recently dominated by the USA. Then there is the Israeli-Palestinian ongoing tragedy. This is one of the largest elements of the propaganda used to demonize the USA, given that Israel would never have become the economic and military power it is without the extremely powerful US commitments of military technologies, massive aid packages, and a willingness to overlook things like Israel’s nuclear capability while decrying proliferation in the region to any other country. Consider for a moment that Israel has never signed the nuclear non-proliferation treaty, one of the global cornerstones of anti-proliferation nuclear security measures. Yet it has been an open secret for 20 years now that Israel has nuclear weapons capabilities.

Yet consider how this same treaty is enforced with almost every other nuclear capable country on the planet. This is one example of a double standard on such policies that is rampant through the US-Israeli relationship, and this also is not unnoticed in the Islamic world (as well as the rest of the globe), and it again helps reinforce the sales pitch regarding the evil West, it’s colonial aims in the region, and it’s apparent valuation of Israeli lives as far more valuable inherently than Arab/Palestinian lives from the extremists.

Yet this of all the above is the one most easily addressed, if the political will is there. This is where the Israeli lobby has been particularly effective in blocking attempts to take a fresh look at the situation by claiming any attempt to do so will lead to Israel’s destruction, and therefore to consider such is evidence of anti-Semitism/Jew-hating. This is remarkably similar in nature to the cult of personality surrounding the current President among his supporters, where any questioning of his actual actions versus his words gets you labeled a sympathizer, a traitor, etc. It therefore makes having anything resembling reasoned consideration/discussion/examination of the underlying issues impossible.

As well the world, including the Islamic world, has been watching over the past 25 years or so a stronger religious element in the policies and politics of the USA, with the current officeholder seeing himself as the instrument of God’s will on Earth, and if you do not think that is seen as a problem by those that do not share that Faith, then you are never going to see the realities involved in this problem/conflict. The last thing any of us need is for this to be seen as a religious war, given the particularly passionate emotions religiosity calls out from its adherents, whatever the Faith. When the Faith involved is of the type of Christianity that GWB practices, then it is really terrifying. After all, if he believes we are in the end times, why would he work to counter the foretold apocalypse, given that would be to work against the will of God?

Then there are the economics issues, from the resources needed by the local populations that they are not getting from their resources to the economic forces that drive US policy in the region. These have been addressed by several others upthread, so I will not go into detail myself. However, I do want to add that I see the economics elements as being the most deeply rooted, and the ones that are most working against the USA at this time. However, I also see the economic elements as ones that can be the most powerful in countering these problems, if they are actually addressed with fresh thinking and creative approaches. In many ways, I think the description in Alvin and Heidi Toffler’s PowerShift (1990) regarding the world we are moving into (indeed, in many ways already have) and the nature of the power relationships and how they are changing have real insight into this area of the problem.

Finally, I see trying to treat this as simply a war of ideologies simply another binary view of the problem, and one that will only further polarize both sides, making things worse, not better. This needs to be recognized for what it is, a combination of many different threads, each with it’s own unique solution(s). There is no silver bullet approach to even looking at this problem, let alone solving it, and any attempt to do so will only waste time, aggravate the situation, and further lock in mindsets into stone. I should point out I am only hitting what I see as the main elements of the problem, I do realize I left other aspects out, but let’s face it, if I had tried to add in every significant element I would have written something many times longer than this, and still not have everything. More than anything else, I want this to be seen for what it is, a complex problem with many elements and facets that need to be understood and dealt with in their own ways, and the recognition that the silver bullet approach is an illusion, and a dangerous one.

Sorry about the length, but the topic is not one that lends itself to brevity, IMHO.

Posted by: Scotian on July 25, 2004 at 1:56 AM

Oil going to at least 80$/b or more is the only way to make us (developed countries), and the US in particular, change our attitude to energy.

- Only really higher prices will lead to behavior changes (worrying about MPG, thinking about public transportation, saving electricity on light, AC, etc...).

- Only really higher prices will make substitutes worthwhile to consider (renewable energy, especially wind, changes in industrial production and infrastructure policy, basic energy savings).

The good thing about oil prices is that they apply to everybody around the world, so you cannot complain about it being unfair. Energy-intensive users (drivers) and industries will complain, but it is precisely these that need to change, and higher prices imposed from the outside is the only way to do it.

Remember that US oil consumption reached the 1979 level in 1998 again, after dropping significantly, so it works.
In the US, you have the additional "benefit" that taxes being so low, (i) it will be felt even more than elsewhere and (ii) higher prices cannot be compensated for by lowering these taxes, as Europe could conceivably do (but should not).

High oil prices are good news in the long run.