Rouille

New site

2005-09-08T22:13:00.000+02:00

If you've found this site, you probably know where I write now, but here it is once again:

European Tribune

And, as always, my diaries on Dailykos:

Jerome a Paris

No, I am not silent!

2005-01-25T23:02:00.000+01:00

I have not posted here lately, but this is only because I have been posting over at Moon of Alabama (usually with cross posts over at Kos. I am also contributing to Le Speakeasy and invite to check all of these fine sites out.

Social Security for dummies

2004-12-12T10:22:00.000+01:00

Behind the discussions about the future of Social Security, the situation of the Trust Fund, the requirement for personal retirement accounts and other such financial instruments, you have some basic reality-based facts that are sometimes forgotten.

Below (the fold) is a simplified description of the social security problems that we face and how not to solve them - in non-financial terms.

Imagine the USA as a big family; with no interaction with the outside world (we'll get to that part later): you have 1 senior citizen, 4 working age people, and 1 kid.

The working age citizens provide all the goods and services needed by everybody:
- 1 provides the basic stuff - food, housing, etc ; let's call him/her the construction sector
- 1 takes care of Senior and Junior; let's call him/her the nurse/teacher
- 2 crank out TVs for everybody's leisure and entertainement; let's call them the TV guys and let's say that they produce 3 TVs each (one per person)

The first important thing to note in this model is that at all times, this group is self-sustaining: all the work needed at any time is done at that moment by someone within the group, and all work done is consumed by someone.
The other important thing to note is that 4 people work to provide for the needs of 6 people. In effect, one third of their work is taken from them at any time to provide for the needs of the non-workers, i.e. Junior and Senior.

In the real world, the same thing happens on a larger scale, and these transfers can take 3 main forms:
- intra-family transfers: you feed your kids, pay for their education, your parents live with you, etc...
- government: you pay taxes and the government either spends it (schools) or redistributes it (social security)
- financial instruments: people can save, or spend their savings (via bonds and shares). Saving means that you store your work for future use. In practice, bonds and shares are a "tax" on your current work: a portion of your work is used to pay off debt or to pay dividends to shareholders. This is still you working and someone else (Senior, usually) enjoying the fruits of that work. "Dividends" sound better, but they still are really a tax on your work.

In any case, whatever form the transfers take, they should not hide that basic fact: 4 people work and 6 people live off that work.

Now take our family 50 years from now. It is now composed of 7 people: 2 seniors, 4 working age people, and 1 kid. 4 people working, 3 not, but all still with needs.
What happens now?
The construction guy still does that. With a little bit of effort, he is still able to make all that's needed for 7 people instead of 6
1 and a half workers are now needed to take care of junior and the 2 seniors (there is little room for productivity improvements there) which leaves:
1 and a half workers to crank out TVs. If there has been no improvement, that's only 4.5 TVs for 7 people. In order to have 1 TV per person, you would need each worker to be able to make 4.66 TVs instead of 3. Over 50 years, that does not sound impossible.

So, if you forget about productivity improvements, this is why you have the cries about social security crisis: either you have fewer TVs, or you find a better way to make more, or you will take less good care of seniors and junior. What should be done?

- the simplest (and pretty realistic) solution is to say that TV production has made such progress that 1,5 workers crank out as much (or more) stuff than 2 guys used to, so there are enough TVs for everybody and there is NO crisis. A larger portion of work goes into caring for the dependents (42% now instead of 33%), but that only reflects changing needs;

- if productivity increases are not enough, you can either take less good care of the dependents (only 1 worker to take care of the 3) and keep on cranking out TVs as you used to (2 workers), or you can decide to take care of your family and reduce your consumption of TVs. A slight variation is to say that you save up one TV today, mothball it and use it in 2050. in that case, you have 5 TVs for 6 people now and 5.5 for 7 in 2050 which might after all be sufficient in both cases.

To get back to the social security debate, the first item is hoping the growth will be strong enough to solve the funding requirements of social security, while the second item amounts to solving the problem by either reducing SS payouts or increasing payroll taxes.

It does not change the fact that 4 people are working to fulfill the needs of 7 people. If you expect to give only one third of your work for the non-workers, they will live less well, relatively. If you give 42%, they will live as they expected to, but you will be relatively worse off. This is the unavoidable reality of an aging population - if less people work, either they are taken care of by those that do, who then have less for themselves, or they are not taken care of (or any combination in between, of course)

Now bring in the outside world into our little model. There are two easy ways the outside world can help improve the situation:

- one is immigration. Bring in one more person of working age into the community, and presto, you can crank out again as many TVs in 2050 as you used to without any increase in productivity AND take care of everybody (including the newbie);

- the other is inter-temporal trade through international investment. You give today one of your TVs to foreigners (you have 5 for 6 people) in exchange for 1.5 TVs in 2050. With no increase in productivity, you can take care ofthe dependents as you'd like (1.5 workers) and with your own production (1.5 workers making 4.5 TVs) you end up with 6 TVs for 7 people, close to what you would get now. You make a small reduction in your living standards now to improve your lot later.
As other countries are at earlier stages of development (and have faster growing population), it makes sense to think that they will be able to crank out 1.5 TVs in the future and give them to you as a fair price for having given them 1 TV a while before. in a more realistic sense, you don't actually give TVs today - you take time to go to other countries to build factories there or to teach them to do it, and get a portion of future production for you as a payment

To keep on consuming as much as you want in the future, you either need to get more workers in the future, or you must save now and invest in a place with more workers. (Getting productivity increase would basically mean that you need to invest in new, smarter ways to build TVs yourself, which means spending some effort now to do that, which will reduce you current TV production in the expectation of increasing your future one - it's still saving to invest).

As you can see, there are two issues: one is the size of the pie, and the other is the sharing of the pie. The size of the pie depends on productivity growth, which in turn, depends on investment, which in turn depends on saving. Saving means working now and storing up that work for future use. Mothballing a TV is the dumb kind of savings; producing fewer TVs but taking the time to invent new, better ways to make TVs (or teaching others to do it for you) is the smart kind of savings.

The claims of the SS privatisers is that they will make the pie grow faster by unleashing market forces that will be able to make those smart investments. But is this true?
First of all, note that private accounts do not provide additional savings if they come instead of the existing public saving so they will not provide MORE investment. Will it be smarter? Smart will come from the people making investment decisions. If you accept the hypothesis that private investments are smarter than government investments, then you should reduce government spending, not reduce government funding.

As I wrote last week about the falling dollar, the current problem of the USA is that they consume too much and rely on foreign lending for their investments. If the solution is to save more now (especially to invest in other countries in order to have the returns when needed, in a few decades' time), this government is worsening the problem rather than helping to solve it, by spending like a drunk sailor and increasing the country's external debt at a time when it should be accumulating foreign assets for future needs.

To get back to our "family" - half the TVs are already being provided by the outside world, and the only reason they are doing it is because the 2 two US "TV workers" are busy - one making guns and shooting them off at or near others, and the other writing IOUs as fast as his hands can do so. Is this sustainable?

(Foreigners might actually welcome SS privatisation, because it will mean that the TV workers will target their guns at their Seniors to get them to work a bit more instead of at them...)

Falling dollar, offshoring and the coming crunch

2004-12-05T16:02:00.000+01:00

you can now read daily articles such as The China price about the threat to the US's manufacturing capacity from China's ability to be 30-50% cheaper.

Meanwhile, articles such as this NYT piece (A Field Guide to the Falling Dollar) are becoming daily occurences, all warning about the dollar's likely decline and basically saying that the only uncertainty is whether this decline will be rapid (bad) or slow (better).

These issues are inextricably linked and I'd like to provide my view on the subject. It's a bit long, but I hope you will find it worthwhile.

What these two things have in common is that they are the simple reflection of the real underlying cause of all the current unbalances in the world economy - the USA consume more than they produce, and they rely on the rest of the world to provide the difference.

The USA have the amazing privilege of having their currency serve as the main currency of international trade and reserve - which means that others are willing to hold dollars even if they do not intend to use them to buy things from the US (which is usually the main reason for buying someone else's currency). This reflects America's economic pre-eminence, as well (and this is often forgotten) as a general trust in the US institutions which means that foreigners expect their dollars to keep their value. This has allowed Americans to borrow money from abroad in pretty much unlimited amounts and at really good terms. This has in turn, mechanically fueled imports (if you have more money than you can spend locally, you spend it elsewhere).

So two first items to remember:

the USA get a really good deal from the rest of the world
US industry is not necessarily uncompetitive; it is structurally too small to fulfill all US needs

The rest of the world has been happy with this deal for various reasons:

for a good part of the world, wracked by inflation, nasty regimes and poor financial institutions, it is simply more convenient, safer and a better deal to keep your savings in dollars than locally;
for everybody, it is really helpful to have a common currency to set prices and trade internationally, knowing that everybody else also accepts it. This has been compounded by the growing use of (mostly US-created) financial instruments backing commercial transactions that all require a common currency to provide liquidity.

The problem is that the USA have abused the system, and the sheer scale of the unbalances are now threatening to bring down the whole thing.

one myth is that foreigners get better returns in the US than elsewhere, thus ensuring that they do want to invest there. This is simply false. The US actually generate more income from their foreign investments than foreigners from their US investments, despite these now being significantly larger. Foreigners now own a growing proportion of T-Bills, which pay little, whereas US investors own good productive assets outside the US (which quite often provide for US demand). These low returns on US purchases are not a problem in normal times, but they do not provide an "objective" reason for further investment in the US economy;
another myth is that it's Europe's "fault" if there are such unbalances, because Europe's economies are too sclerotic, Soviet, rigid, obsolete, etc and thus cannot grow and cannot "pull their weight" (i.e. importing more and "sharing the burden" with the US). Europe is barely a net exporter, but not very far from balance; Europeans live within their means and there is no rational reason to behave differently, so salvation will not come from here. (btw, it's quite a (framing) trick to have managed to call imports a burden, when it really means that others work and you enjoy their labor);
meanwhile, the Asian economies, having built their prosperity on piggybacking the US economy, and developping their economic base by providing for the US needs and imports, are now stuck in the same vicious circle as the US - as they have a mercantilist approach, they keep their currencies pegged to the US dollar to stay competitive, and the way to do that when you have a large surplus of dollars is to either invest in the US or stock them. Obviously, the Asians do not seem to be interested in investing in the US (being busy investing at home - or in China - as quickly as they can), and they recycle these dollars in low-remuneration T-Bonds (rather than cash). With the current deficits, the pile of T-Bonds they own is becoming precariously high;

In any other country in the world, such a situation would have triggered a currency run and a default, Argentine-style, with the IMF and other such institutions coming to the rescue... The only reason this has not happened (other than the main foreign investors almost everywhere are Americans, and they are obviously not going to treat their own country the same as some godless foreign land) is that the Dollar retains its role as a trading currency, and the US has accumulated such a capital of trust in its currency that it can spend a lot of it before it has spent too much.

The difference now is that, for the first time, there is a credible alternative currency for both international trade and reserve: the Euro. It is backed by an economy and trading partner just as big as the US, and by institutions, despite all the criticism and nitpicking from the business press, that are fundamentally sound (rule of law, sound banking regulation, hawkish central bank, balanced trade, reasonable debt position).

At the same time, the US has gone on an amazing spending binge, fuelled by the dot-com bubble, then the real estate bubble and the Bush deficits. The binge has been made possible by Greespan's astonishingly loose monetary policy (and everybody's joyful embrace of debt) and a lot of it has been wasted in military spending which does not profit many and is certainly not recycled into the economy (the economic equivalent of armies and weapons building is to have the people involved dig holes in the sand and refill them - it does not create any value and it ties up a lot of people that could do better things. Up to a point, you can argue of its value as an insurance policy against trouble from the outside, but it is fair to say that the US are far beyond that point).

So there you have it

longstanding overconsumption, a good chunk of it unproductive;
a credible alternative

and you have the result: 4 dollars bought 5 euros in 2001; now they buy 3 euros only.

The ONLY way to solve this crisis is for the US to stop consuming more than it produces. This can come in many ways, of which the falling dollar is only a very indirect one.

A falling dollar, when the US imports twice as much as it exports (yes, double) has initially the following consequences:

increase the cost of imports, expressed in dollars and decrease the cost, in other currencies of exports for foreigners (which is obvious), which leads to an increased trade deficit as the monetary impact is immediate, as imports are immediately more expensive, but cannot be immediately replaced (and in some cases, like oil or many products not manufactured in the US, cannot be replaced at all). And any change in the value of imports has double the impact of a change in exports, as they are twice as big to start with;
create potential losses for foreigners holding assets expressed in dollars. If these assets are productive (US factories or companies) this may not be so important, but if these are paper, liquid, assets (stocks and bonds, especially T-bonds), the investors will start worrying about the return on their investment. If they expect a continuing drop in the value of the US dollars, they may sell to cut their losses, thus creating a self-fulfilling peophecy (remember, you don't just need foreigners to hold on to their T-Bonds, you currently need them to buy an extra 2-billion-dollars worth of them EVERY DAY). A devaluation of the dollar is a default by stealth - you take away a portion of the value for all non-US based investors. A default, even if by stealth, is not trust-inducing, and we have seen that trust is the last thing holding the dollar now;
the likely way to avoid a full scale run on the dollar is then to significantly increase interest rates in the US. This has several effects: (i) it compensates foreigners for the additional risk (from their perspective) of the falling dollar value, (ii) it dampens domestic consumption by making debt more expensive, thus limiting imports and the deficit, thus possibly recreating trust that the US is taking a more sustainable financial path, but (iii) it will have an immediate impact on the real estate market, by making variable-interest mortgages more expensive thus strangling some borrowers (more sellers, including distressed ones) and at the same time reducing the price people are able to pay for houses (less buyers). Real estate being the main source of wealth for most US households, this will have a direct impact on all - no refinancing of your credit card debt by drawing house equity, reduced consumption, more bankruptcies, etc... It will not be pretty.

And when that takes place, the positive effect of a weaker currency will not have had time to kick in, because it takes time to build capacity for export or import substitution, especially if such capacity does not exist at all.

Meanwhile, your weaker currency has the following long term effects:

oil producers, who currently get paid in dollars, are not happy with the continued erosion of the purchasing power of the dollars they get. They spend most of them in Europe, and thus need Euros. They thus expect their oil to at least keep its purchasing power in euros, which means that, if expressed in dollars, the price must go up as the dollar falls. The Europeans don't really care, because the price for them will stay constant in euros. Americans, who have big gas-guzzlers and do not have heavy taxes that could cushion these movements, will feel the increase very directly at the pump; as an absolutely non substitutable import, this will only increase the deficit with no chance of a reduction other than serious reduction in consumption, which will be a consequence of economic hardship rather than going for substitutes (public transport), which are totally unavailable for most Americans.
holders of T-Bonds will need to be convinced to hold on to them - and to keep on buying more of them. The thing is that they are so little diversified tday that any move to change the balance of their reserves (inevitably towards the euro) has an immediate impact for the dollar, as we currently see - and for the interest rates required to keep them happy. Asian central banks may want to hold on longer than others, as they have the incentive of protecting their exports, but others (especially the oil producers of the Middle East and Russia) have growing incentives to bolt out before it gets worse. And Asians may decide on day that enough is enough, and you could have a real meltdown.

To avoid such meltdown, they will want to see the following:

- a commitment by the US to live within their means (this needs not mean zero deficit, but at least shrinking ones). This applies both to the government (the federal budget deficit - which need to be cut seriously) and to consumers (an orderly slowdown in consumption - which requires increased interest rates, again). This is purely domestic stuff - foreigners can do nothing to change that.

This gets me back to outsourcing and offshoring. Offshoring is just a new way to import more - except that it's imports of services instead of imports of goods. It was inevitable that the USA's insatiable demand - a growing portion of which is services - would require foreign input. Tradeable services naturally come into this mix (as opposed to non tradeable ones, such as getting a haircut or cleaning your pool). This movement is not a sign that US workers are uncompetitive as a whole, it simply means - again - that they consume more than they produce. Of course, some sectors may see real job destruction and upheaval due to foreign competition, but others are growing and hiring - tradeable services (banking, insurance, IT) is actually one of the few areas where the US has a trade surplus.

A falling dollar will not "solve" outsourcing if it does not lead to a rebalancing of domestic demand/production, and that will come only through massive changes in domestic consumption patterns.

So, the US can go on blaming foreigners all it wants, it's useless and counter productive. Foreigners have fed the massive overconsumption of the Americans over the past years; the smartest of them have managed to use that fact to build their economies, but they have not created it and they have certainly not repaed as many benefits as the Americans have. America has abused the privileges granted by the status of the dollar as the lone world currency beyond all reasonable repair; now it's time to pay back.

Europe will only marginally suffer, as they have balanced trade, limited exposure to the US market relative to their overall size, and a specialisation in high-quality goods that are not so price-sensitive (German exports worldwide increased by 14% this year despite the falling dollar).

non-China Asia will benefit from the increasing size of the Chinese economy (to which they are a massive net exporter) and will hopefully learn to develop more their domestic markets;

China is the most interesting case; they are likely to bear the brunt of falling US imports; on the other hand, a slowdown is probably eaxactly what they need after the overheating of the past few years; It may relieve the tensions on commodity markets that have seen stupendous increases in Chinese demand in a short time - and the corresponding price increases. The balance may not be so easy to find, but one must not forget that Chinese trade is pretty much balanced (exports to the Us being compensated by massive imports from the rest of Asia) and the country itself is not on an unsustainable export-only growth path as it busily develops its internal market and demand.

Again, the adjustment will fall mostly where it has to - US consumers. And again, this says nothing about the competitivity of US workers - only that when consumption is the priority, production cannot be - but this may well change soon...

EROEI

2004-11-18T23:44:00.000+01:00

Energy Return on Energy Invested discussion

Iraqi casualties

2004-11-14T23:07:00.000+01:00

From the icasualties website, I note 51 dead US soldiers in 5 days.

That means, with the current rules of thumb:

- 1500 dead Iraqi civilians in 5 days - 300 per day - the equivalent of a 9/11 EVERY DAY
- 500 wounded US soldiers - 100 a day. See the recent stories (and below) which refer to the evacuations to Germany, which fit with that number.

Left unsaid:

- how many Iraqis now hate America with their life?
- how long befroe the draft if you lose 3% of your soldiers every month (and who knows what the proportion is for frontline soldiers)??

Where's the outrage?

(At least, the media is starting to mention this. CNN.com's headline is currently Military hospital's workload doubles, with the following lead:

Battle casualties received by doctors at an American military hospital in Germany have more than doubled since the Falluja operation in Iraq began, the facility's commander told reporters Sunday. "Normally, we average 32 patients a day. In the last week, we've had an average of 70," Col. Rhonda Cornum said.

Empire and leverage

2004-11-14T21:22:00.000+01:00

I'd like to point out something completely new in today's world, which is likely to bring new dynamics to all the "empire" discussions - the fact that today's Western world is highly leveraged . Our economies do not work on brute force, brute labor, smple gestures - it's instead a highly choreographed, extremely organised, perpetually going forward exercise in balance. It's like at the circus, when you see a 5-person high column of gymnasts and you marvel at the little boy or girl at the very top standing on one leg while juggling 3 balls - and you forget about the efforts of the 4 gymnasts below. It's very spectacular, genuinely better (as a show) that one guy juggling, and it's a real "win-win" situation: the whole groups is seen as marvelous, even if the competence of the bottom guys is only to be strong, and of the middle ones only to be steady. There still is only one juggler, but through cooperation and a common purpose, the whole group is at a higher state of performance.
This higher "performance", in our world, has been made possible ONLY because we have abandoned "might is right" as a functioning principle and decided to used better tools, such as predictable rules, consistently and evenly applied, specialisation and the trust that totally unknown people will follow the same rules of behavior as you do which such specialisation requires, curiosity, openness, a willingness to accept failure and learn from our mistakes. Of course, this is an idealised description, but it still basically fits our world.
Think about it. Do you worry about how to feed yourself, how to repair your car, about the reality of your wealth although it is only dots of ink on pieces of paper or blinking lights on a screen? This is leverage. This is our world.

One aspect of this world of ours is that we have become responsible, in a strange way, for the situation of "non-leveraged" people around the world. Their "nonleveragedness" is an obstacle to our own "leveragedness" (they don't care about the things we do, they have nothing much to lose in the monetary terms we use and are thus less afraid to break things that have monetary value as we are - they don't care about being efficient, they don't care about joining the rat race - and yet our world is accessible to them and thus susceptible to be acted upon by them) and we must thus change them. In simpler terms, to get richer, we have to make them richer (whether they want it or not) because being so poor they are a danger to us (and this is not incompatible with us having exploited and still exploiting them in many ways - we don't have to make them rich - only richer).

This gets us back to the discussion about our current empire - to maintain our way of life, this neverending quest for efficiency and monetarily measurable wealth, we need to get them to adopt our ways as well, if necessary by force. This use of force is totally at odds with the internal mechanics of the system; leverage requires trust, conviction, openness. Force negates these.

This contradiction is hard to square. The "smart" way to make leverage move forward is to convince people yet out of it that it is worth joining the rat race - this is essentially the European Union's approach - it offers the temptation of economic prosperity to lure countries to what is effectively a corset of institutions, rules, bureaucracy that makes the rat race/wealth creation possible. It also used to be the American approach. The new US attitude to the world (we only care about us - we don't need you in our system - if you are too stupid not to see how great it is, you deserve whatever you will get from us for being in our way) is very dangerous because it forgets that a highly leveraged system is VERY vulnerable to guerilla tactics, terrorism and in general any kind of win-lose or even lose-lose tactic - one side has so much more to lose.

Anyway, I don't know if this all makes sense, but my point is basically that when you're hanging on top of 5 guys juggling, you should not try to start throwing your balls to the tomato-holding guy in the crowd who has just booed you...

Wind, energy and the Nimby syndrome

2004-11-14T15:17:00.000+01:00

I've been meaning to write about wind for a long time and today's NYT gives me a good excuse. You can go read their article on the Nantucket sound offshore project; it gives a good summary of the kind of silly behavior we see around energy production and outlines many of the (real) issues surrounding project development of any kind nowadays.

The immediate reason for the article is that the US Army Corps of engineers produced a detailed assessment (which can be found here ) and which is basically favorable to the project. The coalition against the project (apparently - I have not checked this myself in detail in this case, but it sounds VERY likely from my experience elsewhere - Bostoners or New-Yorkers unhappy with the potential change in their sea view) has seized on this document with various arguments:

- the promoter paid for the study (of course, this is compulsory and a way to avoid the taxpayer to pay for it...) and it thus not impartial;

- the study grants "free" use of a federal resource (the sea bed) which is an unfair advantage;

- the study does not comment on the fact that the project requires subsidies (via the PTC mechanism) to be economic and is thus incomplete.

Now, all these arguments, on the face of it, have a legitimate basis and raise real questions:

- who should pay for (independent) impact assessment studies?
- what is the price for "public" goods and what should be the procedure to allocate and use them?
- what subsidies can be seen as legitimate?

This raises other questions in turn:

- why does it seem that such questions are asked with more intensity for the best projects and seem to be less important for other, more harmful projects?

On the one side, the wind industry, which was started when it was not fully industrialised nor competitive, by idealists who viewed it a a genuinely better source of energy, and were willing to be absolutely transparent about all visible and invisible costs, is still operating under that mindset - and is willing to submit itself to that process because it feels that it can genuinely convince doubters. On the other side, the opponents are most often the secondary-home-owners from the cities, easily lawyered up and procedure-wise, who raise everything they can to oppose projects that might disturb whatever notion of their holiday place they have.

- if we do not to give up our energy consumption (in this case, electricity), a political choice, we have to produce that electricity - and someone has to live with the production units. Who chooses WHAT sources of energy are used, in what proportion? Who decides how the inevitable nuisances are valued? And who chooses who is to carry that burden for others, as these nuisances will not all be borne by all consumers?

Definitely not an easy question. But it easily leads to point the contradictions of those that oppose projects on more or less valid grounds - without opposing energy use itself, it also points to the hypocrisy of those who do not support any of the consequences of their consumption choices, it underlines how easy it is to ignore or discount the not-easily-quantifiable nuisances (air or water pollution, noise, security of supply, security vs terrorism), and it also reminds us that it is easier to make the nuisances fall on those that are less able to defend themselves - the poor, the less educated, etc.

So who decides "impartially"? This should be the topic of a separate thread between the different traditions of France (a strong government, which is able to hire the best minds of its generation, provide them with interesting jobs, and provide strong and highly credible assessments in the name of the "public good") and of anglo-saxons (for lack of a better word - independent studies are provided by hired experts, usually paid by the investor, and whose independence is only guaranteed by their credibility and their track record - whether in the accountancy, technical expertise, legal, etc fields, and who have to manage conflicts of interest with their paymasters (balancing their reputation with their desire to please their clients). The anglo-saxon method is increasingly dominant, both as a result of the worlwide spread of US business methods and the relentless ideological disparaging of government as a wasteful and incompetent entity, but we have seen recently that it is not immune to its own crises... as I said, aonther thread is probably required.

The wind industry has taken a difficult route in that they have decided to face frankly all obstacles from the start, and provide as truthful an accounting of its costs as possible from the start, which sometimes imposes on it costs that are imposed on no other industry (For instance, in France, wind mills are the only type of industrial buildings that are required to pay for their dismantling costs upfront - not provision over the years, but actually pay in cash upfront! They also are the only energy source required to submit to the "Commissions des paysages" (landscape commission - yes, we have that in France) for an impact assessment).
And yet, they are incredibly successful. Most projects have very strong local support (from the farmers - they get nice fees to give up only a few square meters of land - from local authorities - they get taxes, jobs, quite often more tourism, and from the local population, which often end up being very proud of "their" project - modern, "clean", making them nominally self-sufficent, etc...

This works only if you have a sophisticated enough environmentalist movement, not easily hijacked by minority interests or pressure groups. Logically, Germany, where the debate between the "realos" and the "fundis" within the Green party took place many years ago - and where, thankfully, the realos won - is the most developed market for wind in the world. Denmark is similar (I can't comment on the politics of the green movement there, but I imagine it is similarly mature) and both countries have a strong first-mover advantage (and they get most of the jobs in the industry, now several tens of thousands).
Spain, the third largest market is an interesting example of an "enlightened" industrial policy, with strong government regulation which was not fought by the industry as they found ways to profit from it by investing in the sector themselves rather than fighting a rear guard action against the new entrants.
Now that "big industry" is investing in the sector big time (GE and now Siemens on the manufacturing side, Shell, Total, BP and most utilities in Europe and many in the US on the generation and development side, most big banks in the energy finance business) it will be intersting to see how the dynamic evolves.

Wind is a really interesting sector in that

- it encourages total cost accounting ;
- it is already almost competitive with other energy sources even when these do not do that total cost accounting;
- regulation is moving its way (with Kyoto and many other Europe-specific rules);
- big business now believes in the sector - even while applying that total cost accounting

Expect to hear more about it, and not just from rich lawyers complaining about their spoilt view...

Religion

2004-11-11T01:01:00.000+01:00

For me, as I've written before, the biggest problem with religion in public life (it's not a problem in private life, quite the contrary) is that it brings into the debate absolutes, whether the concept of God (all powerful), ot good-vs-evil, Heaven vs Hell, etc. This is not helpful. Bring in absolutes, and you INEVITABLY bring along " the end (absolute) justifies the means", "with-us-or-without-us", etc... which are so dangerous as political tools and as ways to run society in general. Religion - but this is also true of any strong ideology, as communism as shown - is a very potent political tool to channel energies you way by showing the ultimate prize at the "end", and thus enrolling everybody towards that goal.

So I am vehemently hostile to any role for religion in politics. Religion - or similar absolutist ideologies, while a force for cohesion in many societies, has been the cause of the greatest massacres in human history.

Now, as a private matter, I have no problem with religion. It is a (usually) coherent ensemble of moral values, it provides an acceptable answer to the metaphysical questions we all have and it can provide peace and serenity to those that have the faith. In a way, I am envious of people that find their inner peace that way - I cannot (too many unanswered questions for me, too many doubts), but I respect the fact that they do - so long as they do not try to impose their faith on me. Values and morality are for me a question of personal - individual - responsibility. If you get there via religion, that's great - as long as you get there, you are coherent in your acts and your beliefs, and don't impose these values on others.

Putin vs Authoritarianism

2004-11-09T22:20:00.000+01:00

Putin, Authoritarianism and Corruption, by “Anon”

This was published under a pseudonym on JRL here (the link may not work yet as documents are not published immediately on the site, but it is the correct link). I don't fully agree with the conclusions about Putin, but the description of corruption in Russia is vivid, pretty typical, and damning. As the author writes, it is hard to imagine a system where corruption is not a problem nibbling at a fundamentaly healthy system, but the heart of the system.

[I am very grateful to David Johnson for agreeing to include this in JRL under a pseudonym. The reason for concealing my identity is not to protect myself from any criticism over what I say, but because I make some allegations about certain officials. I am not too concerned about the officials referred to in the cases of “Miss X” and “Miss Y”, as one has been retired for several years and the other emigrated. However, “Z” still holds the same position and revealing my identity would greatly facilitate identifying “Z”. For now, I need to protect the guilty. Nonetheless, I am well aware that in polemical exchanges one needs to know who one is opposed to, quite apart from forming a judgment on that person’s own credibility. Accordingly, I am more than happy to say who I am to any reader who has a bona fide wish to know and sends an email to David, who will forward it to me. I simply don’t want my name used in a public forum. David, of course, does know who I am.]

In recent weeks both Transparency International and the World Economic Forum have published reports yet again ranking Russia as one of the most corrupt countries in the world. It is significant, given Russia’s habitual rejection of criticism by outside bodies, that President Putin has said much the same thing. Indeed, he has stated publicly that it is one of the worst dangers to Russia’s stability and territorial integrity, especially in the aftermath of the horror of Beslan in the first week of September. As more and more information becomes available about that disaster from official Russian sources, not just journalists and eyewitnesses showing that the terrorists effortlessly passed through numerous roadblocks and checkpoints in order to get themselves and their munitions to their destination, one can see what he means. Such freedom of movement is inconceivable to anybody who has endured the ceaseless “checks” by traffic police in cities like Moscow and St Petersburg, let alone in places on a war-footing such as the Caucasus, unless, and only unless, bribery played the critical role, at every single checkpoint. (Actually, though we don’t know yet for sure what happened during that dreadful period, it is possible that telefonnoye pravo (telephone orders) were employed. In this ‘system’ a senior official calls all the checkpoints ordering the people manning them to let through, unchecked, vehicles with such-and-such registration plates. This is used, for instance, by military and security personnel transporting stolen building materials to build their luxury homes).

This is reinforced by the revelation that corruption and bribery played vital roles in enabling the alleged suicide bombers get tickets, and evade detection of their explosives, on the two internal flights that were blown up the previous week, killing 90 people. Indeed, corruption on the part of members of the security and law enforcement agencies appears to have been an essential ingredient in just about every terrorism disaster that has befallen Russia in recent years. Chechen terrorists themselves have said as much.

In what must be one of the most surreal comments on the Beslan horror, former head of the KGB (and participant in the failed coup against Gorbachev in 1991), Vladimir Kryuchkov, recently stated that a nation-wide system of informers throughout the civilian population should be rebuilt, as was the case in the Soviet Union: "It is a simple, but significant fact that three trucks filled with people carrying heavy arms managed to drive through the streets of Beslan, and nobody in the town reported it. This type of thing has to be reported … We need to revive the model of the community as assisting the work of the special forces.” (Ilona Vinogradova, “The Return of the Snitch: A Despised Soviet-Era Custom Enjoys a New Vogue After Beslan”, Russia Profile, November 3, 2004, see JRL 8349). Kryuchkov appears to be unaware of his own hideous sense of irony. To whom exactly should the careless citizens of Beslan have reported their suspicions the very law-enforcement agencies that were taking money or had been ordered to direct the terrorists on to their target? He also seems to have overlooked the fact that most of the able-bodied citizens of that town were taking their children to school, such as the 1,300 or so who were at the doomed School Number 1. There probably weren’t many people out on the streets looking for suspicious vehicles.

This recognition of the cancer of corruption within the body politic by President Putin is something that has been overlooked by many of his critics, including the 115 distinguished Western politicians, academics, and others, who recently signed an open letter to the heads of NATO and EU states condemning Putin’s proposals to reform the Russian electoral processes in favour of direct appointments of regional leaders and Duma representation on the basis of party lists. True, on the surface, these steps look like reverses for the Russian democratization process, but I do not believe this is a balanced and comprehensive assessment.

Corruption, and its handmaidens, incompetence and cynicism, are crucial elements in Russian public life and failure to appreciate what this means leads to woefully mistaken expectations, to say nothing of totally inappropriate advice from even well-meaning foreign pundits and politicians. In most developed societies and economies in the West, corruption is a deplorable fact of life to greater or lesser extent, but the core system of governance and administration is, nonetheless, based on rules and procedures that are sound, that work, and are accepted by society as a whole. Corruption in the West is something that attacks a basically healthy system, somewhat as bugs attack healthy organisms. In Russia this is not the case. The system itself is a Potemkin façade, resembling superficially, and based upon lip-service to, internationally standard principles but, in practice, utterly removed from them. The system itself is corrupt and its underlying principles are those of corruption. It is not just a few hundred or thousand policemen and security agency personnel who are corrupt. This disease is everywhere.

A revealing episode that is relevant to this is included in Strobe Talbot’s The Russia Hand, his account of the Clinton-Yeltsin relationship. Talbot tells how he was with then Russian Foreign Minister Igor Ivanov the night Russian troops made their dash to seize the airport at Pristina in Kosovo, thereby triggering the most dangerous confrontation between NATO and the USSR/Russia since the Cuban missile crisis some forty years earlier. Down the corridor from Ivanov’s office, Talbot writes, they could hear the sounds of drunken generals shouting and smashing vodka glasses. It was at that chilling moment, he says, that the American side realized that the Russian Government had lost control of the military. It may not be immediately obvious how this is related to the issue of corruption in public administration. (Further, it is true that this episode took place during Yeltsin’s chaotic period in office, though the determined resistance to Putin’s demands for military reform suggests that little effective control has been re-established since those days). But there is a connection. The military is notoriously corrupt, with well-documented cases of hazing of first-year conscripts by their second-year elders, often resulting in death, suicide and desertion, to say nothing of severe physical and psychological trauma, all made possible by the indifference and abnegation of responsibility by demoralized, underpaid and poorly housed officers. Further, senior officers use conscripts, together with stolen materials, to build themselves large dachas and other facilities. At its worst, it is widely alleged that Russian military personnel sell weapons to, among others, Chechen terrorists, a totally extraordinary and evil practice, if only because this directly leads to the deaths of the traffickers’ own troops. Most people might also call this treasonable behaviour. In such an unchecked corrupt institution, it is therefore not difficult to see why the military leadership should make its own decisions on such matters as taking Pristina airport it is not accountable, and has never been made accountable, to civilian political authority, a crucial characteristic of public sector corruption generally.

But it is not just in such high-profile matters (anti-terrorism, military operations, etc) that corruption flourishes. It is everywhere. I have spent the last nine years living in Russia, mostly employed as a consultant working on a number of projects supported by Tacis, the EU’s technical assistance program for Russia and the so-called Newly Independent States of the FSU. My counterpart organizations the local bodies who were supposed to benefit from the inputs of Russian and EU advisers, like me were various departments within the regional administration of one of Russia’s 89 regions and, later, a section within a federal ministry in Moscow.

During my regional experiences, the then governor of the region was known to be utterly corrupt, in terms of using his position solely for the accumulation of huge personal wealth, was publicly a foul-mouthed drunkard, and was credibly accused of (but never charged with) having ordered the murders and attempted murders of opponents and critics, including regional parliamentary deputies and journalists. Two of his senior deputy governors were arrested by Russian law enforcement agencies for serious financial crimes (theft, embezzlement, smuggling, etc) involving many millions of dollars. Both of them were released and one of them is now in hiding abroad, on Interpol’s wanted list. More recently, under a different governor, another deputy governor was arrested after being secretly filmed accepting a $250,000 bribe to issue a licence to import cars. Reportedly, his initial defence was to claim that he would be getting “only” $50,000 the rest, he said, was intended for his boss.

The use of high public office for personal gain is widespread throughout Russia in municipal, regional and federal bodies of administration. This is why large sums of money change hands to ensure that so-and-so is appointed (or “elected”) to such-and-such a position, where the payback or return on investment - is enormous. Consequently, it is not surprising that middle-level and junior public servants are frequently inept and unqualified for their posts being, rather, part of the overall food chain, protecting their superiors from exposure and being rewarded with a share of the spoils. Nepotism is rampant, as one would expect in a culture where family and personal loyalties have always been valued very highly and certainly more than merit, especially where corrupt and criminal behaviour is the norm. Two examples: When hiring Russian staff for one project team, I wanted to recruit an agricultural specialist. My counterpart helpfully proposed a Miss X as being “ideal”. Miss X turned out to be the official’s daughter who was just graduating from school and whose knowledge of agriculture, as far as I could ascertain, was confined to assisting her granny pickle tomatoes grown at the dacha. The counterpart would not speak to me for two months (thus stopping any possibility of project progress) when I turned down her application.

Later, another official proposed that I take on Miss Y as an interpreter for my EU consultants. I said we already had two, thank you very much, but the official insisted that the entire project would be in danger of being cancelled if I did not comply with this “reasonable” request. When I discovered that Miss Y spoke only Russian I asked how she was supposed to be an interpreter. “You will pay for her to have lessons,” was the answer. Miss Y was, of course, another family connection. On this particular poker hand, I saw that my counterpart was not bluffing, so I compromised. I offered to pay her half the normal minimum rate, saying untruthfully that it was the maximum possible (my lie was fortunately undiscovered) on condition I never saw the woman anywhere near our office. The deal was accepted.

Throughout three years on this particular project, during which time my Russian and foreign colleagues produced over thirty detailed sets of recommendations covering such issues as how to set up an export promotion agency, how to develop international aviation services, how to develop telecommunications infrastructure and services, how to carry out regional legislative reform to improve the investment climate and much, much more, we were treated largely with indifference bordering and often crossing over into contempt and, on several occasions, open abuse. The reason for this was simple. Despite the high standard of our work and we used very experienced practitioners to advise on how to achieve change (including a former government minister, an ex-chief executive of successful airline start-ups, professional development bankers, active businessmen and so forth) nobody in the administration was the slightest bit interested as there was no direct pay-off to the officials. Our reports were ignored and almost certainly never read (yes, they were written in Russian) as the key people were always sick, on leave, traveling on business or just too busy to meet and discuss the issues. However, they were not too busy to demand that we provide computers (highly mobile and saleable items) or, in one case, buy 100 subscriptions to a propaganda newspaper produced by the regional administration, showing what a wonderful chap the then governor was. When I pointed out that there were less than ten of us in my project team and that, anyway, this rag was available free from every kiosk in the region, I was told that my failure to comply with this request would be considered a hostile act. I refused and it was.

In Moscow, working with a part of a major ministry it was a bit more subtle. It was formally disallowed for my colleagues and I to meet any of the decision-makers (deputy ministers upwards) and we were therefore compelled to “work” with a middle-level public servant, whom I shall call “Z”. We were trying to advise the counterpart on a number of key strategic issues relevant to Russia’s overall reform program. We made numerous written proposals on these serious and complex issues. Our counterpart never read or even acknowledged receipt of our proposals and was always too busy to meet us to discuss them (or sick, or on leave, or traveling on business the standard excuses to avoid meetings). In part this was due to the ever more apparent fact that “Z” did not have the technical skills to understand the issues we were addressing and in part because “Z” was not in a position of authority sufficient to voice opinions (hence our frustration at being denied access to those who would understand and who could make decisions).

However, this did not stop “Z” from ordering an assistant to call us (but not to write to us) suggesting that “Z” had moved into a new office and, therefore, it would be appropriate if we would buy a new television as a form of congratulation, or pay for a New Year’s party for “Z’s” staff (at a cost of $3,700), or make other demands of a similar nature. When my EU colleague and I refused to do this and demanded that we had meetings to discuss the matters that we were actually employed to deal with, our counterpart complained to the European Commission that there had been a complete “breakdown of trust” between us and insisted that we be “replaced”. The Commission immediately agreed and so my EU colleague and I were unceremoniously dumped from our project. (Interestingly, this was completely legal, as I have just lost a case for unfair dismissal which I brought to the European Ombudsman’s Office). We were not, however, replaced as our ex-counterpart objected to subsequent EU candidates proposed for our posts. The role of “EU Adviser” is now filled by a Ukrainian, which must be an encouraging sign to the EU-hopefuls in Kiev. Our erstwhile Russian colleagues now work as effective subordinates to “Z”, funded by the Commission, instead of acting as independent experts advising the Government on policy and related issues. They do the work that the counterpart’s civil servants are self-confessedly unable to do themselves, that is, mostly pushing paper around and completely abandoning any strategic and policy analysis. This had been explicitly forbidden in our original terms of reference, drawn up by the Commission and formally agreed by the counterpart, but appears now to have been tacitly accepted as the price for continuing “cooperation”.

There are hundreds and thousands of foreign (and Russian) consultants and experts, funded by Tacis and other bodies, who can tell similar or worse stories. Why does this nonsense and waste of money continue? There are two reasons. One is political: it is better to have the appearance of cooperating with Russia, even though the results are far below expectation, than to say openly that Russia is incapable of absorbing cooperation and assistance effectively. Upper Volta with nuclear weapons (plus oil, gas, timber, consumer markets, etc) is important. Upper Volta without them can safely be reprimanded and sanctioned, if appropriate. The second reason is that it would be an appalling loss of face to admit that billions of dollars of assistance have largely achieved nothing (the purpose of Tacis is to support the transition to democracy and a market economy. In Russia, after more than ten years, there is not much sign of success in either area, at least, not much that can be directly attributed to foreign assistance). So everyone plays the modern variant of the old Soviet game “you pretend to work and we will pretend to pay you.” In the new variant, we work and we get paid, but nothing happens.

Becoming a public servant is a licence to extract large sums of money from the populace and business community. In other words, public service is not a vocation or a well-respected career offering an acceptable material reward (let alone ‘job satisfaction’) in exchange for fulfilling the public sector’s social contract with the citizenry. Rather, it is an opportunity to join a cynical kleptocracy that preys on society. Such opportunities command entrance fees. And, by the way, let us not underestimate the direct, formal rewards to public servants. They do, indeed, earn low salaries, even by Russian standards, but there are many perks end-of-year cash bonuses allocated on a seniority and loyalty basis, apartments, dachas, cars, holidays, foreign travel and much more. In other words, spare no tears for the allegedly underpaid Russian civil servant. He or she as long as appropriate support for the boss is maintained does okay. Paying public servants higher wages will not eradicate corruption. The system is too diseased. (However, it is interesting to note that public servants’ salaries have, in the last few months, been increased by a multiple of up to five times during the same period when benefits for disadvantaged members of society, including war veterans, victims of Chernobyl, pensioners, etc, are having their free transport, medical and other benefits replaced by cash payments, widely considered to be worth a great deal less than the implicit value of the benefits).

All this breeds and sustains an atmosphere of utter cynicism towards, in particular, the population, which is why, in return, the Russian population has no trust whatsoever in the system of Russian public administration. And since competence in a particular discipline within the public service is not required (extracting money and keeping superiors happy are the key survival skills) no wonder that so many Russian public servants have no idea about the issues they are formally responsible for. This is also why nothing works properly, be it security, economic development or whatever.

I believe that President Putin is well aware of the fact that this virus of corruption is endemic throughout the entire country and that public administration is utterly and profoundly incapable of dealing with its real responsibilities. Thus, his proposal to appoint governors, who will be directly and continuously answerable to him (instead of letting drunken gangsters, or the puppets of powerful regional business/criminal cliques, buy election once every four years and spend the interim period looting their regions), and trying to develop a party system, instead of enabling rich individuals to buy their way into the Duma (where they can and do accept or give bribes to ensure appropriate legislation is enacted or blocked in favour of their corporate backers’ interests), may well be a practical move towards cleaning Russia up. Haranguing, harassing and humiliating President Putin for rolling back democracy is missing the point. There is no real democracy in Russia for him to trample on and hasn’t been since Yeltsin ordered tanks to fire on the democratically elected Duma in 1993, an act which the West applauded, or at least tolerated, in a post-Cold War variant of the “better dead than red” school of applied democratic theory.

Putin’s course of action is not without dreadful risk, of course (what if he was succeeded and his powers inherited - by someone like Zhirinovsky, say?), and it is also true that his actions do indeed represent a further tightening of the noose, on top of his other authoritarian moves against the media, NGOs and so forth. Nonetheless, given his background in the Soviet-era KGB and then as head of the successor FSB, it is hardly surprising that his training and experience tells him to resort to increased authoritarianism rather than the anarchic Yeltsin approach. It is not as if Russian history offers alternative and better models of behaviour.

Is there anything the West can do to help? I am not sure that there is, since western countries have not within living memory had to root out endemic corruption on the scale that Putin has to face. We simply don’t know how to do it (and anybody who thinks that measures like increasing public servants’ pay, or ensuring that the law is enforced effectively, will do the trick is living in cloud-cuckoo land). Furthermore, there are, of course, many fine, talented and dedicated public servants (both officials and elected politicians). But every barrel seems to contain a number of very rotten apples and the good guys are sidelined, neutralized or, in more extreme cases, fired or killed. They are unable to fight the virus, so what can we, the generally unwelcome outsiders, do?

Putin’s greatest fear, as he has often stated publicly, is the disintegration of the Russian Federation. He saw how easy it was for the USSR to disappear almost overnight and knows that present-day Russia is equally if not more vulnerable. Such a scenario would be extremely dangerous for the rest of the world, whatever about the consequences for Russia and its people. And the greatest weakness of Russia, and hence threat to its future survival, is the rottenness of the state apparatus built on corruption. Even if there is not much we can do actively to assist, there is, perhaps, one thing we could refrain from. When Putin introduces more authoritarian measures, we are entitled to express our concerns about the possible consequences. But we should stop the knee-jerk instantaneous condemnations that make no effort to understand where he is coming from and what he is trying to achieve. We should call off the attacks on the one Russian leader in the last eighty years who is trying to put an end to this potentially fatal disease, because in this fight, as in the greater war against terror, we should all be on the same side.

That other big year-end decision

2004-10-26T13:38:00.000+02:00

As the USA prepare to vote, I'd like to take a moment to comment on the other momentous decision to be taken in the Western world before the end of this year - the proposed start of negotiations with Turkey for its entry into the European Union (EU).

This decision is due at the next summit of Heads of State on December 17, following the favorable recommendation made by the European Commission on October 6. Despite strong reservations in various European countries (see this good summary (in French) of the debate in France, it is likely that the decision will be taken to start the negotiation process, leading in all likelihood to Turkish membership sometime between 2015 and 2020.

This (pdf) document provides a good overview of the impact of accession in various fields (voting rights, FDI, economic impact, immigration, agricultural subsidies) which shows clearly that the impact is more likely to be political than economic.

This internal EC document (again, pdf) on the impact of enlargement provides the following table:

Enlargement Change in surface population GDP
EU15->EU25 +23% +20% +5%
EU27->EU28* +18% +15% +2%

(*EU27 is EU 25 + Bulgaria and Romania, expected to join the EU soon, Turkey would thus be 28. Croatia is likely to join before but is not included here).

The economic cost is real, but manageable. The political impact is much less predictable and has thus been the main topic of debate. (For American readers, remember that this is not like Mexico joining NAFTA, this is more like Mexico joining the USA as States n°51 thru n°58, with corresponding voting rights, representatives in Congress and so forth).

The main arguments have been the following:

From the Europhile perspective
Europhile here means those favorable to the continued growth of federal political power through the European institutions (the Commission and Parliament), reduced national vetoes, and an increasingly assertive "EU" role in foreign affairs, taxation, etc.

Favorable

- Turkey will provide additional muscle to Europe, thanks to his fast growing population, strong army and potential for growth

- Turkey's borders with Iran, Iraq and Syria will force Europe to become more involved in the Middle East and to beef up its joint policies in foreign affairs

- Turkey's accession will be a shining example of Europe's "soft power" (conflict-resolution via trade and negotiation rather than the use of force), thus ensuring growing positive influence on other neighboring countries, including in the Mediteranean basin and the Middle East, by encouraging them to move towards democracy and market-based economies, with the perpective of closer trade and/or political relations with the EU. It will be also a strong message that Western values are compatible with Islam and that the Western world is not closed to Muslim countries.

- it will be the confirmation that "Europe" is a concept based on shared values and not on geography, thus sending out an optimistic message to the world, showing Europe's confidence in its values and openness to others.

Against

- Turkey is not a part of Europe as a political concept; it should be offered a priviledged status as an associate State but not a seat at the main table of countires whose goal is "ever closer Union" (as per the Rome Treaty which created the European Community in 1957)

- more specifically, the arrival of a large, backward country, largely Middle-Eastern will totally disrupt the decision-processes in the European institutions, making it impossible to find consensus on anything, paralysing the already-strained decision-making process, thus ensuring that Europe becomes little more than a free trade area and an (expensive) ineffectual talking shop

- the cost of bringing in a poor country (whose average GDP per head is only a fourth of the average European level) will be a drag on Europe's resources, preventing it from concentrating its energy on common projects

- the strain of dealing with new Middle East borders at a time when common institutions are not yet in place creates the risk of internal tensions between members which could lead to acrimonious dispute, tension (on a scale even worse than shown last year about Iraq) and thus internal paralysis and possibly the destruction of the existing framework

From the Eurosceptic perspective
Eurosceptic describes here those that are opposed to further European integration, favor the power of Nation States versus the "federal" institutions. They are usually nationalist, but may disagree vehemently on economic issues (some support Europe as an open free-trade area, some are dead against what they see as a purely "capitalist" project)

Favorable

- The inclusion of Turkey in Europe is a positive sign to the world that Islam is compatible with Western values, that a muslim country can be a democracy and a market-based economy and can be accepted as a full-fledged member of "the West"

- Bringing in Turkey will ensure the death of the excessive influence of France and Germany on Europe, ensuring that other view points are represented and heard; in particular it is hoped that Turkey's entry would make the EU more pro-American

- Turkey's entry will bring much needed dynamysm into Europe, thanks to its growing population (compensating the decline in the rest of Europe) and potential for growth

Against

- Turkey is not part of Europe; as an Asian and Muslim country it does not share values or geography with the rest of Europe and thus has nothing to do within Europe's main club

- The risk of massive immigration, increasing influence of islam, involvement in intractable problems at Turkey's borders in the East should not be added to Europe's existing woes

- The cost of bringing in Turkey will force to increase taxes, will cause unemployment and will lead to further growth of the Brussels bureaucracy

As can be seen, some of the arguments are not linked to Turkey's accession per se, but about its likely consequences on the functioning of the European Union. Some of the these arguments are perfectly symmetric and reflect optimism/pessimism on the future ability of Europe to adapt its institutions and to be open to its neighbors in a complex period of rapid economic change, international tension.

Personally, I am a Europhile and favorable to Turkey's accession into Europe. I think that the economic cost will be easily borne by Europe (the reasonable rule that European transfers should never be above 4% of the receiving country's GDP each year ensures that), and that the accession process will provide an amazing boost to Turkey's economy and to its democracy. Immigration is an overblown fear; in fact the example of Spain and Portugal shows that population actually moves back as the prospects in the home country imporve. The big question is that od the future of European institutions. I am actually confident that Turkey's presence into the "meat grinder" of Brussels' bureaucracy and the inertia of such bureaucracy will ensure Europe's growing assertiveness and presence in more and more areas, including on the diplomatic and military scenes; the risk of political paralysis exists, but it is not enough in my view to balance the positive message - optimistic, peaceful and responsible - sent to the world by welcoming the Turks in.

Back to life

2004-10-23T14:26:00.000+02:00

As I wrote here, my life has been somewhat disrupted in recent weeks... Thanks to all that have sent words of encouragement. I hope to come back to a more normal life and to post again here.

Here's hoping!

Reasonable optimism

2004-10-23T14:23:00.000+02:00

(In reply to RGiap over at MoA)

I think it is misguided to blame all evil in the world on the US or its leaders. I don't deny all the ugly things that have been part of US policy (although I must confess I am really surprised to see Solidarosc - the Polish one - as part of that ugliness), but I cannot let pass the fact that you seem to say that this is the only source of evil/ugliness in our world, because it is clearly not.
I know we are on opposite sides of the fence on this, but I'd still say that the US (and the West in general) is one of the most benign forms of dominant power, and it was in particular more benign than all forms of communism pushed by Russia and China (now maybe you also count this as part of Western domination...). I agree that we should set our standards higher than Stalin or Mao, but your posts are so heated that this basic fact (Stalin was worse) seems forgotten.

The reason I am optimistic these days, and upbeat about the US/the West is that our system does not eliminate the possibility of evil - it makes it easier to fight it if it appears. The most vociferous critics of all the misguided US policies of the past half-century came from within the US itself and they prevailed (and for instance John Kerry was instrumental in that process re the Vietnam war, which is one of the reasons I have a lot of respect for him). The lessons from that pretty recent part, as well as current trends within the US lead me to my upbeat diagnosis that the current cancer in the White House is going to be voted out and thouroughly discredited. This is the force of our systems - not that our mistakes are somehow smaller, but that we correct these mistakes faster and end up being stronger for it. If this does not come to pass on Nov. 2, then I agree, we're fucked, and I will let you rant until you run out of breath...

To comment on the extremism vs moderation / passion vs. reason theme, I must say tht I have sadly come to the unpleasant conclusion that it is the extremists that get results when serious change is needed. They bring the issues on the table and force change on the unwilling status quo. Ask kindly and you will be ignored. Of course, at the end of the process, you need credible moderates to actually get to an agreement with the other side...

@ Jérôme
As always, a well-thought out and incisive contribution.
I guess it's important to set the parameters of "moderation" versus "passion" and the their relative efficacity in producing "serious change".
I think that often the changes induced by "true believers" while superficially revolutionary are, in fact, also heavily freighted with an unconscious continuation of the status quo ante. The French, Russian and Chinese revolutions were nothing if not radical in their attempts to root out ancient injustices and illusions, and for that surely are "globally" positive movements in their initial ideals, but each of them also carried within the seeds of involution and degeneration (as, of course, does any human enterprise). Perhaps France is still split between those who think the Revolution went to far, and those who think it didn't go far enough but at least the dialectic is now pretty tame compared to trundling of nobles off to the guillotine. The kind of revolution that I approve of without reservation (well,almost) are those like what has happened in Italy over the last 60 years, and more generally that which is still in progress in Western Europe with its (far from perfect) project at consensual unification and federalist democracy. These are revolutions from the bottom up, produced by people working daily to create and come to terms with their evolving realities, although the contributions of statesman who knew enough to try to create the favorable "initial conditions" were also indispensable. This is a variation on a theme dear to Max Weber: the constant dialectic between the "charismatic" and the "bureaucratic".

Posted by: Hannah K. O'Luthon | October 23, 2004 04:06 AM

@Hannah

thanks for the response on the passion vs reason theme. In my view, there is this association passion/extremism/power vs the reason/moderation/negotiation; which these days I also associate with USA vs Europe: the army solution vs the Brussels bureaucracy solution.

As I am an ardent Europhile, as you may have read already (not passionate, mind you, just ardent:-), you know on what side I put myself... but the again I am also sensitive to the arguments put forward by Kagan and others, that the peaceful, negotiated situation we have in Europe is only possible because the US still works in the "Old" power-is-all frwmework and protects Europe from what would otherwise be irrelevance, inefficiency, invasion or worse. Although I believe that Europe is showing a better way to manage international relations, I don't have a convincing argument against Kagan's - except to say that the Europeans followed a way which was promoted and encouraged by Americans and that the two continents were working together, slowly, haphazardly, to bring such mechanisms to bear in relations with other countries, by the great mechanims of creating precedents. The current US administration is basically throwing down the drain 50 years of precedent and relative regard for international norms which they had largely contributed to shape. It's just such a waste.

The point I started with, "passion" vs. "reason", is the following: "Passion" is certainly more efficient to get to your political goal, but "reason" is more effective to make it last beyond the effect of your passion. Great rulers are those that built lasting institutions, not those that built great empires. Institutions last because there is minimum level of consent from those that live under them, and this usually requires a minimum of consistency in rules, adaptability to the needs of the population and restraint. (Which is why Napoleon is still well-regarded in France, despite his ruinous military campaigns - he left us a working civil code, and an efficient administrative network of prefects and public engineers)
Power does not tolerate restraint.

The US has no external limitation on its power (not completely true, I know, but it has an overwhelming domination, at least militarlily), but it has a lot of internal limits (you know, check and balances...). Let's see these get to work.

What info do we have on Muslims in France?

2004-08-28T23:21:00.000+02:00

- 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.

A few points on Iran as seen from Russia or China

2004-08-28T11:44:00.000+02:00

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...

Has oil production peaked?

2004-08-25T23:38:00.000+02:00

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.

Some background on Caspian oil

2004-08-19T00:01:00.000+02:00

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...

Control of Oil - II - Security of supply

2004-08-12T23:46:00.000+02:00

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)

Th Oil we Eat

2004-08-10T21:55:00.000+02:00

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? (Part I)

2004-08-10T15:48:00.000+02:00

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…

Tax oil now

2004-08-10T00:05:00.000+02:00

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.

America’s Vichy Left vs. Michael Moore

2004-08-06T00:04:00.000+02:00

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).

Some input on the WoT

2004-08-04T23:23:00.000+02:00

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

High oil prices are good news in the long run

2004-08-04T23:16:00.000+02:00

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.

Yukos

2004-07-03T20:52:00.000+02:00

What's going on with Yukos?

I should know - I worked with Yukos for many years and I even had lunch with Khodorkhovski a few years back; I know a lot a people over there - but I don't. Nobody, it seems, really knows, even those that could or should.

The obvious idea is that Putin, or people close to him, want to capture the wealth associated with the company, directly (change ownership) or indirectly (nationalise). The problem is that Yukos's shareholders are not stupid and they have tied their money very tightly with that of "Western" shareholders and Western banks (I put quote around Western because a lot of the money invested into Russia by foreigners actually belongs, via offshore vehivles, to Russians. The banks are really Western). So, to take moany from them, you also need to take it from Citi, ABN-Amro, etc... which Putin obviously wants to avoid.

The people doing the "takeover" are of course saying " don't worry, we'll pay you back once this is settled, but the Yukos guys are saying to all: "any assets of ours that ends up in your hands - we'll sue you to death in every jurisdiction around the world, especially in the US, with RICO or the Aliens Tort Act". So you have a funny slow motion take over, where the assailers have every lever but have to maintain a fiction of legality, while Yukos basically threatens MAD (we go down, we take the Westerners with us and bring down the country again) and the Westerners try to stay out of the way ("okay, you have 1.5b$ in hostage, maybe you need only 1b$, pay us back a little, and we'll tell the other side to back off a little..." to one side, "we don't really care who owns Yukos, as long as we get repaid, but it must look legal" to the other)

The view from a year ago:
Latynina 23 July 2002
The view from a few days ago:
Latynina 23 June 2004

I especially recommend the second one.

Turkey in Europe

2004-06-29T00:39:00.000+02:00

Bush urges EU membership for Turkey

Do you actually know what it entails?
Will you help, if it's so important to you?

The reason I posted about this was to ask if he (Bush) actually understands what it means to be part of the EU. Bringing Turkey in would be - to simplify only a little bit - the equivalent of bringing Mexico into the USA, giving them a cabinet seat, 10 senators, 40 congressmen, full rights to move, live and work in the US for all Mexican citizens and a few billion dollars a year to help Mexico build new airports, highways, etc... (and subsidise their farmers). Of course, it also means that Mexico has to adopt ALL existing US laws as they are as part of the deal.
That's what's happening in Europe this year with Eastern Europe coming in. They join us at the big table in Brussels (the European Commision - the supranational bureaucracy - and the Council of Ministers - the representatives from each country that have executive power) and in Strasbourg (the European Parliament) where between half and two thirds of all national laws are prepared (as European Directives).

So, to Bush - do not talk about things you do not understand.

As to the internal debate within Europe (or within each country) as to whether Turkey should join, it is indeed lively. I would like to venture that a very simple solution will be found in the coming years: with the UK most likely voting against the European Constitution, the countries that do want a political union (what the European Union has always really been about) will create a new core group, of which the UK, and possibly a few others, will not be. These "outs" will be linked to the core by full free trade and lots of other agreements and they will be joined by Turkey. They will cooperate with the core as they wish on various programs but will not be part of it. This way, Turkey can be part of "Europe" but not (yet?) of the political core.

Siberian oil "war"

2004-06-28T14:27:00.000+02:00

Saw this Washington Post article about Siberian oil and the fight about where the next Russia pipe should go to (Japan or China).

The fact is that this is not exactly an oil conflict, but an oil transportation problem. Infrastructure forces trade patterns: if you have only one pipe to export, you can only sell to the clients at the end of the pipeline. Most oil is exported by sea, and thus the whole world is accessible to cargoes on water. The part of oil which is exported by pipe is very different. The difference between the "Chinese" pipeline and the "Japanese" pipeline is that the Chinese one goes ONLY TO CHINA, whereas the Japanese goes to the Pacific Ocean (and can thus also be used to deliver oil to China).
Transport politics are much more significant than oil politics, because (i) they create real, physical constraints on flow of goods (ii) for a very long time and (iii) it is the part of the industry which requires the largest investments. The natural gas industry is mostly an infrastructure business. Oil is like that for only a few (lanlocked) production zones, like Russia and the Caspian, which is why so much is said about these areas (including a lot of silly stuff).

Euro vs Dollar - some considerations

2004-06-28T14:23:00.000+02:00

I previously gave the example of Sterling based commodities only as an example of the durability of market standards, not as an especially significant one in strategic terms. EVERYBODY must agree on a replacement before switching to another currency; it's just not very easy to do.

I am sceptical of the claims that the US would go to war (in Irak) just to protect the status of the dollar as the hegemonic currency. The main advantage of having the dollar of the main international currency is that you can borrow internationally in your own currency, and thus you do not have to worry (like countries such as Argentina, Russia or, not so long ago, France) about international markets preventing you from running deficits (budgetary and trade) that could otherwise cause a devaluation of their assets. You can borrow more and cheaper, for a long time.
The euro has brought that same advantage to Europe without taking it from the US. It has also reduced the proportion of trade done by each country in a foreign currency, thus rending each individual country much less sensitive to exchange rates overall. This is again a plus for European countries which does not have consequences for the US. It has further created a new bond market in Euro, which as become as deep and sophisticated as the Us one. Europeans can now borrow cheaper and more as well, but again, no impact on the US.

Needing Dollars to buy oil simply means that the US, as the sole supplier, must be willing to provide dollars. They are more than willing, they are desperate to, as they import more than they export, and the dependency is actually a co-dependency. If they refused to provide dollars, now that would instantly force everybody to switch to another currency, as everybody needs to buy oil.
The current problem for the US is not that the Euro is undermining the dollar, it is that they have undermined the dollar for too long by becoming a net debtor to the rest of the world - the first empire to do so. Americans need to consume and consume, and they have been living above their means for a long time, on borrowed money. The past few years have seen an acceleration of these trends, with spending (ans imports) fueled by very low interest rates AND massive government spending. IT CANNOT LAST, and it has very little to do with the euro. The fact that the euro is available will actually help to keep the inevitable crisis a purely American one and not a worlwide one, as there will be a stable replacement currency available for everybody. Current US policies are doing all they can (even if unwittingly) to make the euro a realistic alternative.

So long as the US economy is the largest around and the heart of financial markets are in New York, Chicago and Boston, the markets will still be US-centric and only a massive loss of confidence in the US or in the dollar can change that. Bushco is doing just that (out of sheer incompetence, I am tempted to say), I don't know how you can state that this is a strategy to keep overall control...

Hijacking democracy

2004-06-21T16:58:00.000+02:00

I have seen democracy hijacked in a very small setting: my university class. You had two competing groups (to be elected as class bureau, i.e. class representatives, in charge of some student events and activities and spokesgroup for the class) making a campaign to be elected (by the class).

After a while, one group started saying that they were speaking for the silent majority and that they were really representing the whole class (except for that screaming minority - the other competing group).
The silent majority, being silent, did not deny this.
The other group tried to deny it, but it was called "partisan" and groundless by the other side. If they spoke calmly, they were ignored. If they spoke forcefull or screamed at the injustice, they were branded "extremists" or "isolated" and the domineering group would take advantage of the embarassment of the calmer members of the opposition.

The "majority" group was elected by a landslide, and the other group was thus doomed to isolation, a crazy band of embittered and wacko opponents. Once this was accepted as common wisdom by all, it was extremely hard a perception to destroy. Whatever the "minority" group would say afterwards (even if it made sense) would be seen throught the lenses - the interpretation - accepted by all that they were crazies not representing anyone.

Such behavior - the aggression on one side, the naiveté and then helplessness of the opposition, the passivity of the population (and their incomprehensible support for evil behavior - better understandable as staying in the "norm") are all visible in today's America. And such phenomena, in Billmon's very correct image of the snowball, are very hrad to reverse.

This experience is what makes me not worry too much about Kerry. He MUST NOT ALLOW himslef to get labelled anything noxious because that's deadly. He has managed that so far, which gives me some hope, still.

Total on Peak Oil

2004-06-21T14:48:00.000+02:00

OT but very interesting.
This is an article which was published last week in Le Monde (the link may not last very long as the archives are paying).

I copy it here in full and translate the most interesting bits:

La compagnie française Total estime que le pic (ou maximum) de la production mondiale de pétrole interviendra dans la décennie 2020. Total estimate that Peak Oil will be reached between 2020 and 2030. Cette position est exprimée par Yves-Louis Darricarrère, directeur général de la branche Gaz-Electricité du groupe, dans le "Rapport sociétal et environnemental 2003", que Total vient de publier. "La fourchette oscille entre 2005-2010 pour les plus pessimistes, 2020-2030 pour les plus optimistes, écrit M. Darricarrère. Notre position, dans le groupe, privilégie l'hypothèse d'un pic à l'horizon 2020-2030."
C'est la première fois qu'une grande compagnie pétrolière prend une position aussi nette dans le débat qui agite depuis quelques années les milieux pétroliers sur la finitude des réserves d'or noir. Cette polémique a été relancée par des experts pétroliers indépendants américains et européens. Menés par le professeur Colin Campbell, ceux-ci estiment que le sommet de la production pétrolière mondiale interviendra rapidement, puisqu'on découvre moins de nouvelles réserves de pétrole qu'on en extrait chaque année. This is the first oil company ever to make such an explicit contribution to a debate which has been recently reawakened by European and US experts
"Nous avons le sentiment que le pic de la production pétrolière se rapproche", confirme au Monde M. Darricarrère. Le progrès technique a certes permis d'accroître les réserves pétrolières, d'une part en améliorant le taux de récupération de brut dans les gisements existants, d'autre part en permettant l'exploitation des grands fonds marins (à plus de 1 300 mètres), enfin en rendant rentable l'utilisation de bruts extra-lourds. "Mais il est de plus en plus difficile de renouveler les réserves, dit M. Darricarrère, et on a tendance à juger le pic de la production plus proche qu'on ne le faisait auparavant." Despite technical progress, which allows to get a bigger proportion of oil out of any fied than before, very deep offshore and very heavy crude, "it is becoming harder and harder to renew reserves and we tend, [within Total], to see Peak Oil coming earlier than we used to see it"
Il n'y a cependant pas péril en la demeure, puisqu'on évalue à quarante ans la durée des réserves prouvées par rapport au niveau de production actuel. Il y a une quinzaine d'années, l'estimation n'était que de trente ans de réserves. Total affiche cependant sa volonté de se diversifier dans le gaz et les énergies renouvelables. "Dans la production d'électricité, l'éolien pourrait être compétitif vers 2015, estime M. Darricarrère, ainsi que le solaire dans certaines régions bien ensoleillées." wind power should be fully competitive by 2015

BP REFUSE DE DONNER UNE DATE
La position de Total sur la proximité du pic pétrolier n'est pas ouvertement partagée par les autres grandes compagnies. Chez BP, qui publie vendredi 18 juin sa revue annuelle des statistiques de l'énergie - une référence dans la profession [found here]-, on se refuse à donner une date."Nous ne prévoyons aucun pic imminent de la production, indique Michael Smith, chef de l'unité d'analyse énergétique de BP. Il faut être très prudent dans les prévisions parce qu'on a vraiment une visibilité qu'à cinq ans." BP refuses to provide a date. "We see no peak in oil production in the near future"
M. Smith souligne l'augmentation constante de la production de pétrole ; de surcroît, contrairement aux affirmations des pessimistes,"les quantités de pétrole produites continuent à être remplacées". L'expert de BP note cependant que son rapport "n'a pas révisé physiquement les données nationales de réserves de pétrole et de gaz, et n'a pas essayé de les estimer à la place des pays concernés". Ce point est crucial : une partie du raisonnement des pessimistes repose sur l'argument que les statistiques des réserves sont souvent surévaluées par les Etats pour des raisons politiques.
Le débat ne pèse pas sur la soif mondiale d'or noir. Malgré un prix moyen en 2003 de 29 dollars le baril, le plus élevé depuis 1982, la consommation de pétrole a crû, selon BP, de 2,2 %, tirée par la croissance de la Chine. Mais selon M. Smith, celle-ci devrait se ralentir, ramenant l'augmentation de la consommation de pétrole au rythme d'environ 1,5 % par an.

Hervé Kempf

"Middle East"

2004-06-14T23:46:00.000+02:00

I have little sympathy for the Palestinians and I am still pro-Israeli, even today.

Israel, whatever its faults, is a democracy, and a lively one at that. It is torn (at least some parts of its society) by self-doubt. It has been wracked by the most abominable terrorist attacks on such a regular basis that it is almost not newsworthy anymore outside of the country to mention these crimes. Meanwhile Palestinians have been maintained in abject poverty (in refugee camps for 50 years, for God's sake!) by their hopelessly horrible leadership, with the support of most Arab nations, who are quite happy to keep this nasty sore in Israel's flank with little regard for the Palestinians' plight. They still will not accept Israel's right to existence, thus ensuring that it remains on a perpetual war footing.

Ok, now that I have you all pissed of and angry at me, here's the (ambivalent lawyerly) disclaimer: Sharon's policies make me despair, because they are basically the very policies that these Arab countries (who think that time is on their side) are hoping to see. Bullying, selfish and ultimately self-defeating (and yes, it is that last part that makes me the most depressed). Both sides need to get out of the win/lose mindset and go into a win/win mindset, otherwise, it will be a lose/lose as it is most of the time these days. But do note: if you blame Israel more in this situation, it is pure racism - the white man's syndrome. Israel should (MUST!) stop the colonies and the occupation, but the Palestinians CAN also do something, by abandoning suicide bombings. How can you build any society if your highest values are to kill enemy civilians by annihilating yourselves? BOTH sides are to blame, but if you only ask Israel to change (because they have the big military, and the big tanks, against kids with rocks, and the humiliating checkpoints, etc...), it means implicitly that you think that Palestinians should not be held to the same high standards that we (rightly) hold the Israelis. Think about it before lashing back at me.

and remember - Arafat, like Castro, Kadhafi and Chirac, was already in power in the late 60s.

"moderates" vs "activists"

2004-06-13T13:30:00.000+02:00

In normal times, I would tend to say that "moderates" are more effective than "activists" to shape policy. But these are not normal times.

In normal times, political and policy debates take place in a peaceful context where you can expect the other side to listen to your arguments, either because you control some instruments of power, or simply because they are not unreasonable people. In that case, "moderates", "centrists", i.e. people willing to give up some of their goals in order to achieve others, seen as more important than those given up, can get results with similarly minded people on the other side. (- I want no more than 10. - I want no less than 30. - Okay, let's agree on 20.) Sometimes it's horse trading, some times it's powerplays, and sometimes it's even genuine bipartisanship. In that context, "activists", who focus on purity are not happy, but they can easily be marginalised. And policy, whoever is in power, is mostly centrist and reasonable, while leaning slightly more to the side of those that have the (temporary) upper hand in the power centres.

Now, if one side stops listening, and starts focusing only on its "pure" activists, what do you do? If you continue to negotiate in good faith with them, you are going to be steamrolled (- I want no more than 10. - I want no less than 100. - Okay, no more than 20. - 100. - Well, 30. - 100. - If you really insist, 40. - 100, etc...). If one side hardens like this, you usually hope that they will push things so far that there will be a backlash and things come back to normal as the extremists are voted out. But what if it does not happen? What if you have extraordinary circumstances that make that correcting mechanism ineffective?
You have to get out of the compromise mode and into battle mode. Not give in on anything; push your ideas, your agenda, your language relentlessly, until you get the other side to listen to you again, whether because you outshout them or because you manage to decredibilise them and they have to change their tune. That's the situation we're in today.

Now, I am of course simplifying things grossly. "Moderate" negotiators are never more effective than when they can say "take this deal, that's the best I will be able to get the crazies on my side to swallow; otherwise, they'll kick me out and you will have to deal with them!), so in effect activists help to improve things at all times for their side by influencing the negotiations, even if they are themselves unwilling to negotiate. Recognised activists/hardliners also have more legitimacy to impose compromises, and can thus make effective negotiators, if they accept to enter into such discussions with the other side.

Maybe my point is that there is a time to shape public opinion and common wisdom, and a time to negotiate the most advantageous deal within the framework permitted by such public opinion and perceptions. The right has spent a lot of the past decades to relentlessly shape opinion the way they want it, and thus forced the negotiators on their side to adopt positions close to theirs and compromise very little.
At this point, activists on the left are needed to change public opinion, and mobilise a large enough group (i) to influence and guide the discourse on the left while (ii) attracting enough support from the overall electorate. (i) requires strong activism, but (ii) requires that you do not alienate the constituencies that beieve in the CW. In particular, the most official face of the discourse (i.e. your candidate, Kerry today) must have a profile compatible with current CW, until you have managed to change that CW.
So my suggestion today is that activists act as partisanly as possible to change public opinion while accepting to support the only candidate under whom things have a chance to move in the good direction, evne though his discourse is wishy-washy. If you capture the public mood, the candidate will naturally adopt the corresponding policies, even if he has not said he would. If you don't, he will stay in the middle, which is quite far to the right these days, at least according to CW. Don't undermine him, in any case. (And I would also suggest, do not underestimate him. Kerry is currently doing the right things to not lose the election. Activists will help to shape the policy debates, but only after someone from their side is in place. Today, it means Kerry)

Sold out to BigOil

2004-06-13T01:05:00.000+02:00

I have had 3 articles published in the WSJ - and even worse, in the editorial pages! (3 strikes, you're out?). On the other hand, I'm very proud to be discussed on dKos!!

My 3 articles (just Google my name) were about Russia and the very interesting thing is that Russian "capitalism" is so bizarre that they would not be out of place here either.

Anyway, I have nothing to hide. I do work with BigOil, and I actually have quite a bit of respect for the guys (very few gals) in these companies that do the dirty work in totally fucked countries so that we can drive our cars while only bitching about how supposedly expensive gasoline is...

To people that complain about the importance of oil in politics, I say: please come up with an alternative. Do not just argue against oil, against nuclear, against dams, even against ugly windmills. Argue FOR something else (and "energy savings" is not good enough. How do you encourage them?)

remember:
- "the stone age did not end for lack of stone" (SA Minister for oil)
- "if we do not take steps to massively increase the price of oil (through taxes), nature will do it for us much more brutally, eventually (although probably not during our lifetimes)" (me)

Who has the biggest GDP per capita?

2004-06-11T16:15:00.000+02:00

Some comments on this Swedish study which purports to explain why the USA have a larger GDP per capita than European countries.

GDP comparisons are notoriously unreliable. Heck, you get different numbers from Eurostat, OECD, IMF, i.e. the official international institutions that supposedly use the same data provided by each government... The only thing that you can conclude is that most European countries are close enough that it is impossible to tell effectively any statistical difference. You have a few poorer countries (Greece, Portugal and of course the new members) and a few richer (Luxembourg and Switzerland) ones. The USA are, like these last two, somewhat richer than the average Western Europeans, according to most GDP measures.

- then you have questions of what the GDP measures, and how. Different countries have different methodologies and it is basically impossible to reconcile them. Just to give you an exemple, the US uses "hedonistic" pricing, whereby a computer which is 10 times more powerful than a model from 5-year ago but costs the same in dollars counts more towards GDP than the other model did, because it is more powerful. You do mostly the same stuff with it (and Microsoft Windows and Word are 10 times more heavy, but do the same thing), but it is "worth" more. Software is counted as an "investment" in the US but as an "expense" in most European countries, which impacts GDP differently again. The US uses more energy per capita than in Europe. This is counted as a positive factor (for the USA) towards GDP. Is that good? Services are included at cost, because it is hard to measure them in any other way. Does that undervalue US GDP, where services contribute more? etc...

- then you compare growth rates. How do you choose the dates for comparisons? the same date for all, or a more consistent bottom-or-the-recession to top-of-the-boom? Depending on your choices, you can get very different results. Most comparisons these days use 1990 as a baseline, which was pretty close to the end of the US recession, whereas the European one took place in 1993. So any comparison of the 90s includes no US recession but the European one. If you start doing 1993-2002, it suddenly looks less favorable.

- then you have to decide whether you accept the value of GDP (or the number of cars, washing machines, etc) as an indicator of wealth and quality of life. Should you use instead other indicators, whether economic or social? (Tax rates, rate of overall employment, rate of unemployment - bad for "Old Europe", proportion of poor, illiteracy rates, infant deaths - bad for the US). Do you adjust for immigration-related issues (they're usually poorer, less well educated, but work and will contribute in other ways, including to population growth)? And how do you measure quality in all this??

So the conclusion is - Americans probably work more and have more stuff. Europeans work a bit less and have a bit less. The work done is split differently on the two continents (the young, the old and of course the unemployed work much less in Europe). Is the fact that Europeans work less linked to incentives (higher taxes, less revenue for your work, general bureaucratic obstacles to entrepreneurship,...) or a matter of choice (because they "enjoy life")? It's very hard to tell, but it is easy to find numbers that "prove" either hypothesis.

Personally, I tend to favor higher taxes when you can see the results. I am reasonably happy with the quality of the streets and railways in France, with our health care system and education system. Are things perfect? Of course not. Is it better than what you have in the US? I'd say it's a matter of individual preferences. As a banker, I'd probably do well in the US, get good health coverage, live in a nice neighborood with a good school, etc... and pay less taxes, but wouldn't that be a bit selfish of me to think that way?

"The Duck"

2004-06-10T19:42:00.000+02:00

"la liberté de la presse ne s'use que lorsque l'on ne s'en sert pas"
The freedom of the press is lost only when it is not used
(Motto of the Canard enchaîné, an independent French weekly)

Freedom needs to be protected and fought for. It is an unending fight against violence and the selfish grab for power by others.
Democracy is having institutions - rules - that are accepted by all and allow conflicts and disagreements to be solved in ways less harmeful to all. Normal debate in a democracy is about who is favored in such conflicts. Today, the debate is about the existence of the rules themselves, whether they aply to all or not - in essence, it is about whether the US wants democracy or not.

Many instruments of democracy still function, and as -pea- said, blogs are the newest instrument, but ultimately, the arbiters of the game are to be found within the legislative branch (holding the executive to account) and the judiciary (upholding the rules - and their existence). One early test will be the Supreme Court decision on the Padilla case. A decision favorable to the administration would be ominous, to say the least.

Let's not give up yet.

Job creation under various US presidents

2004-06-09T16:05:00.000+02:00

Nice graph

Why Bush bungled it after 9/11

2004-06-07T22:19:00.000+02:00

Every once in a while, you have a paradigm-changing international crisis, where you decisions are going to influence the behavior and decisions of all others for a long time. This usually comes at the end of a war, when the victors decide how to treat the vainquished. It can also happen following a change of leadership in a country, or a big natural catastrophe. Such a situation creates a void and the opportunity to create really new precedents and models of behavior.

Thus WWI led to the botched attempt to create the League of Nations, the blind egoism of the victors, the reparations wrought from Germany leading to this country's resentment and the eventual rise of Nazism.

In contrast, WWII was followed by the Nuremberg trials, the Bretton Woods institutions, the Marshall Plan. It gave the lasting image of a magnanimous victor, willing to put some limits to its power for the greater good of all (and eventually of itself) through multilateral institutions it did not necessarily control in theory, and to help the losers to rebuild.

The first Gulf war, while clearly motivated by oil, was only waged after the US created a grand coalition to do so and built strong international legitimacy. Thus, absent the Soviet Union, the US, despite its obvious strength, decided to abide by the rules of international agreements to defend its interests in the region, and did not go beyond that mandate (to kick Saddam out of Kuweit).

9/11 was another such event. After that attack, the US basically had an open mandate to change the rules of international behavior. The world was ready to support, or at least tolerate, far reaching changes; money laundering, arms trafficking, a determined fight against WMD proliferation... In a word, many countries would have been forced to accept intrusive rules/inspections, provided that it applied to all. (This may sound optimistic, but for a few weeks in 2001, everybody was terrified of the reaction of the "awakened giant" and would have gone to many lengths to avoid its wrath - and there was plenty of blame to go around.)
Well, what did Bush do? Bomb a country back to the stone age and abandon it there. Attack and bomb another country just because there was unrelated unfinished business with it. Curtail civil rights. Push torture as a quasi official instrument of policy. In short, be petty, vindicative and heavy-handed.

International law has lost whatever little credibility it had, and the message that "might is right" was heard loud and clear by all, especially those that harbor realistic ambitions to be "mighty" in the future, globally or regionally.
The message that "anything goes" was also welcomed by the same, who have always found the West bothersome and intrusive with its "human rights" - now they won't even have to pay lip service to that.
That message was also heard quite loudly domestically by the "patriots", for whom anyone with a different opinion is a "traitor". Torture and stifling of the freedom of expression are natural consequences of this.

Bush has an opportunity to use this dramatic attack to change the rules for the better. Instead, he has brought back the international community 100 years back or more. He has betrayed the values of the USA (and of the West) so thoroughly that we are to pay the consequences for many decades.

Why libertarianism, just like communism, cannot work.

2004-06-05T15:41:00.000+02:00

Humans usually are:

(1) lazy - they won't make an effort unless they feel it's REALLY necessary
(2) selfish - if they can take something instead of making an effort to have it, they will
(3) cowardly - they will blame others for their problems.

That's a recipe for life to be "nasty, brutish and short", as Hobbes put it, and indeed, for the most part of our history, it was.
Luckily, or miraculously, someone lazier, more selfish, more cowardly and also less short-sighted noticed that things could be simpler if people did things in group rather than alone. Easier to hunt the mammouth, easier to sleep and rest if one amongst the "tribe" guards the area, easier to be clothed and fed and housed if the tasks are distributed around. Thus came specialisation and trade, which are a great way for lazy, selfish people to do less and yet live as well or better.
The problem with trade and human relations is that you need TRUST to conduct it. How do you build that when you are also cowardly? Initially, you would trust only the people around you: your family, your tribe, your kinsmen, etc... because simply you can check if trust is warranted through guaranteed repeated interaction. This is still the core source of trust in many civilisations nowadays. The other way to build trust - when it is required between people that may not have interacted before and may not interact later - was to have an entity enforce it: guilds, hierarchies, and finally, a power above everybody else, the State. Initially closer to Hobbes' Leviathan (treating all equally bad, through absolute rule), it started to provide the basic functions (that Pat mentioned above) of a "libertarian" state: police, military, rough justice, some minimal infrastructure building. In modern terms, it's also called feudalism.
Now, feudalism was clearly a progress locally, but it did not prevent wars and mayhem at the above level: fights between feudal lords. Thus started a new process of aggregation, whereby a central entity was created to solve the problem of the lazyness, selfishness and cowardice of the feudal lords. Thus the modern State was created. It is twice removed from direct interaction between people, it thus needs intermediaries, i.e. a bureaucracy, to intervene; and it has a ever growing tendency to meddle in more and more things.

States come in many different forms. Again, the basic question is: what do you TRUST it to do?

1) to protect you from the random aggression of others.

Most states manage that, except quite often when the "others" are wealthy and/or close to the power (see 3 below).

2) to protect you from the aggression of itself (i.e. of its bureaucracy, in any form, including military or police forces, or anyone that has access to them, weather the wealthy, the aristocrats or any other similarly powerful class or group).

Democratic states, but no one else, usually manage that imperfectly.

3) to protect you from interference by others in any productive work you may do.

Not all democratic states do that; some non-democratic may do it somewhat.

2) to protect you from interference by itself (again, its various bureaucracies and the groups/individuals that have access to them) in any productive work you may do;

few do.

(the definition of "interference" is voluntarily kept fuzzy here. The opinions on what is a reasonable level of State intervention (taxes, regulation, etc) can vary significantly...)

Remember in any case that people within the State administrative apparatus ALSO are lazy, selfish and cowardly and they WILL take advantage of the (portion of the) power captured by the State that they wield unless otherwise restrained (i) internally (morality, ethics, cultural or religious rules) or (ii) externally (clear rules of conduct, enforced. You bump quickly into the perennial question "quid custodiet ipsos custodiet" - Who guards the guardians? Who enforces rules on the enforcers?

If people were good, moral, responsible, you would not need to ask this question, and any system of state organisation would work. Communism would be great (each to work in accordance with his/her capacities, each to have in accordance with his/her needs). A benevolent dictator would be fine as well. And pigs would fly.

People are not always these things - in any case, you cannot TRUST them to be so consistently. So how can TRUST be the founding block of civilisation?
The answer is simple: make someone else's laziness, selfishness or cowardice force people to behave - and vice-versa. Thus, division of powers, checks and balances, accountability. Bureaucracies with divergent interests, divergent support groups in the population, different "friends" fighting it out.

It is a miracle that these (institutions whereby bureaucracies are kept in check) ever appeared. When they are in place, they can be self-perpetuating (big test of this underway this year in the US...). If they are not there yet and you have the power to put them in place, it goes against your immediate interests to do so, because precisely it restrains the power you have. So this a tribute to people like the philosophers of the Lumières and the creators of the US Constitution that they were far-sighted enough to see that this would be a good thing for everybody in the long run: everybody's tendency to laziness, selfishness and cowardice is still there, has been fed (we work much less, we have more things than ever, we are safer than ever from most threats (again, speaking in general terms, not specifically about this year...), and we are officially encouraged to blame others, especially politicians for anything that is wrong) but has been put to good use.

TRUST is fed by institutions that do NOT expect people to be trustworthy: institutions that check your promises, punish your breaches, and allow others to do the same and enforce the results. Institutions that help you check other institutions, whereby no institution is without constriant. At the individual level, it is then much easier to trust people when you know that you have recourse if they do not deliver. It is much harder to cheat, lie, abuse, etc.. if you know that someone will catch up with you.

This system is NOT the rule of money, it is the rule of law. The most effective form of capitalism is not a system that loves money, it is a system that loves rules and procedures. If you want fairness and chances for the poor, for the masses, do not look after money, look after rules.

That's what the Democratic party should be: the party of RULES - against the rule of money and the ongoing abuse of money that corrupts existing rules. Focus on procedures: enforcement first , on control/oversight of the enforcement second, and then discuss the actual content of the rules. Well-enforced rules breed morality - which is essentially the internalisation of these rules (plus basic decency). Morality generates trust - trust in the individual enhanced by trust in the institutions. Trust allows individuals to focus on their life and be free and do great things, although they are -still - at heart lazy, selfish and cowardly.

Communism is bureaucratic power unchecked. It grinds the individual. Communists are lazy, selfish and cowardly and get away with it.
Libertarianism is individual power gone unchecked. It grinds the weak. Libertarians are lazy, selfish and cowardly and get away with it.
Democracy is NO power goes unchecked. It should grind anything that grows too powerful. People are still lazy, selfish and cowardly, but they cannot get away with it.

Some facts on natural gas

2004-06-04T22:33:00.000+02:00

Natural gas is essentially a transport business. See here a previous post of mine on the economics of the sector. As such, the markets of North America, Europe and Asia are mostly separate (although LNG is now opening new possibilities for arbitrage).

- in the US, natural gas prices are mostly linked to electricity prices as it is used first and foremost for electricity generation. But electricity prices are still in good part determined by the economics of coal plants (50% of capacity in the US). With electricity demand growing, and North American production of NG not keeping up gas prices are indeed growing, but the ways for the markets to balance are many: build plants using coal, or wind (which is becoming really competitive at today's prices), reduced gas consumption by industries that have substitutes for NG, imort morde (hence all the LNG import terminal projects these days). Prices will stay high, but the markets will clear.

- in Europe and Asia, natural gas prices are still mostly indexed to oil prices, so they are pretty high these days, but passed on through to customers. Electricity prices thus follow and are also rising.

World wide, natural gas is a lot more plentiful than oil and will be produced as needed. The politics are different as the main reserves are in Russia (which is the first producer) and Iran (which produces almost nothing), but the main other producers are the US, Canada, Norway, UK, Holland, Indonesia, Algeria, Qatar. It is a VERY capital-intensive industry and fully in control of the Western companies. the locals CANNOT build this industry without Westenr know-how and finance. It is currently quite profitable and a focus of development for all big oil majors.
(And it is also much cleaner as a fuel than coal or petrol)

I need to learn to make my posts shorter, but you may still be interested to learn that the new big thing for the industry is GTL (gas to liquids) which is a process which allows to make high-quality gasoline from natural gas. It used to be seen as too costly (it costs 18-25$/boe (barrel of oil equivalent), which used to be too much for comfort) but the first large scale project has been launched in Qatar recently.

the next sources of oil

2004-06-04T22:29:00.000+02:00

You have many sources of energy that are competitive at higher oil prices:

- GTL (see this post) from 25$/b
- oil sands (Canada, Venezuela) from 30$/b (and it does not matter it it looks impossible to transport as it is: that price above includes the cost of the process to make it into something transportable and/or equivalent to oil AND the self-consumtion of energy to do that.
- stranded fields (fields that are currently too far away from transport routes or existing pipeline networks to be worth investing in at lowish prices)
- additional recovery from existing fields, though reservoir management, horizontal drilling, water injection (it does not matter if you get 90% water out, the 10% oil is still worth something at the right price)
- large scale wind will be competitive on a stand alone basis with 40-50$/b oil
- and then, we always have nuclear; maybe people will care less about waste storage if that's the only way to get cheap electricity.

So, actually, I am not sure that prices will rise high enough to force behavior changes. Remember, with 6$/gallon gasoline, we still drive our cars without any serious limitation in Europe.

May I further add that ALL freeways in France are paying, and cost approx. 8-10c/km, i.e. 15c/mile, i.e. 3$/gallon on top of your gasoline costs (for a 20 MPG car - even more if you have a fuel efficient car!))

GASOLINE IS TOO DAMN CHEAP FOR OUR OWN GOOD.

The only way to change behavior is to increase gas prices.
There are two ways to do that:
- gas taxes
- a nice big oil crisis.

It seems that Bushco, as always, chose the politically convenient route :))

Higher oil prices?

2004-06-03T23:22:00.000+02:00

If prices go up, some uses of oil with be abandoned. Some people may walk, or take a train, because they can and it has become cheaper. Some will go for a more efficient car. some will switch to working from home. Some will start heating their house less. Some industries will switch to coal or natural gas if they can. Etc, etc...

On the supply side, some reservoirs will become economically viable at higher prices; oil sands (a lot of them in Canada) will also become viable although they are less efficient than oil - the higher price will make that low efficiency good enough at that price. Alternative energies, especially wind power, will become fully competitive and will provide additional supply.

Altogether, this means that we should reach a new equilibrium at a higher oil price. The transition could be messy, especially as the fact that spare capacity being low, as Kevin pointed out, means that prices will be much more volatile (jumping to 100$/b or more before coming back to 60, for instance). But people will adapt EASILY to 5 ot even 10$ gas. Such large scale increases took place in the 70s, and were compounded at the same time in Europe by strong tax hikes. Prices levels in Europe were today's equivalent of 15$/gallon in 1980, so 5-6$/gallon feels cheap nowadays (and people have indeed stopped worrying about mileage in Europe in the last 15 years). There was a recession, but nothing civilisation-destroying. So if prices go up people will adapt - AND THERE ARE ENOUGH ALTERNATIVES TO OIL THAT WE WE ALL HAVE THE TIME TO ADAPT to a less oil-intensive world.

I am French and I have to tell you that the market actually works? Including for an eventually finite resource like oil?

Eisenhower speech on D-Day

2004-06-03T15:11:00.000+02:00

Back in 1964, the 20th anniversary of D-Day, Walter Cronkite interviewed President Eisenhower who was previously the Supreme Allied Commander for that operation. And he interviewed him at a cemetery near Omaha Beach. President Eisenhower said, quote, "Mamie and I get our greatest pleasure from our grandchildren. When I look at all these graves, I think of the parents back in the States whose only son is buried here. Because of their sacrifice, they don't have the pleasure of grandchildren.

And because of their sacrifice, my grandchildren are growing up in freedom." Today our servicemen and women, some of whom are the grandchildren of World War II veterans, bravely and selflessly defend that same freedom. They understand very well the importance of that duty, especially at this critical time in our nation's history. I welcome all of you to this hallowed ground today as we remember all those who sacrificed so that our grandchildren grow up in freedom.

“. . . these men came here - British and our allies, and Americans - to storm these beaches for one purpose only, not to gain anything for ourselves, not to fulfill any ambitions that America had for conquest, but just to preserve freedom. . . . Many thousands of men have died for such ideals as these. . . but these young boys. . . were cut off in their prime. . . I devoutly hope that we will never again have to see such scenes as these. I think and hope, and pray, that humanity will have learned. . . we must find some way . . . to gain an eternal peace for this world.”

Comments that follow from "Route 66":

I have a sick feeling in my stomach right now, a feeling that we have lost all that we have stood for, all that we have learned since schoolchildren about the ideals of this country...

A sitting President has an obligation to be a leader, not to consult outside legal consul to help save his imperial ass.

A sitting President has an obligation to the people, not to craven special interests and cronies.

A sitting President has the responsibility to utilize our servicemen and women in defense of ideals and promotion of democracy, not in the promotion of ideas and schemes to enrich private corporations and their major shareholders.

A sitting President of the United States is someone to be respected by the world, not to be a laughing stock and symbol of abuse of power and corruption on high.

Mr. Bush, we want our country back and we are going to take it back from you, and from Mr. Cheney, Ms. Rice, Mr. Rumsfeld, Mr. Powell, Mr. Feith, Mr. Wolfowitz, etc.

More on Iran

2004-06-02T23:05:00.000+02:00

Before we attribute super-human qualities to the Iranian spooks or leadership, I'd like to give a slightly less positive view of that country on two subjects:

- oil & gas industry.
They have competent people in the oil business, but it still looks like they are living off the investments made under the Shah period (with Western involvement) and have trouble developing new stuff on their own. The "Buy-Backs" which I mentioned briefly above are a way for them to get Western companies to do things they cannot, i.e. offshore production or rehabilitation of ageing fields. It's been a slow, painful process, very frustrating for all sides. Banks were pretty much willing to throw money at their projects but they could not make up their minds and nothing happened.
Worse, on the natural gas side, they have TWICE in the past 25 years lost the opportunity to corner the market. They have the second largest reserves after Russia, and they are sitting there untapped because the Iranians could not take the opportunity to take them to the market.
*The first time was in the late 70s/early 80s when Eruope needed a big gas pipe for new supplies. Iran (through Turkey) was the logical source, but it did not happen, the Soviets rushed in and they now have a deathgrip on the European market which will NEVER be lost now.
*The second time is on the LNG front. You may have heard that this is hot stuff now, with the US considering many import terminals in order to buy more of the stuff. Iran would like to do LNG, but they do not have the technology and must rely on foreign partners. They have spent so much time playing Western (European) companies off each other that nothing has happened, no project, nada. At the same time, Qatar, whose gas reserves consist essentially of their part of a super giant field, which is right in the middle of the Persian Gulf and is shared with Iran (which basically means that in the absence of a joint development, whoever pumps the gas first gets it, it's physically a single bubble) is busily attracting Western investmetn to become the largest exporter on LNG in the world and cashing in massively on that.
This is big stuff. Russian pipe exports to Europe account for 25% (and growing) of the market, 10% of Russian GDP, 25% of budget income - and they basically kept the country alive in the 90s. This has real geopolitical significance. Qatar is already getting several billion dollars of income from existing trains ansd billions more currently in new investment. Another self-sustaining "aircraft carrier" in the region...

- general attitude
now I admit this is just a personal impression from a few short visits, but I got the distinct impression that the Iranians feel very superior to us (the West) and this it is only out of luck that we are richer and more influential in the world than they are. Maybe this is a symmetrical blindness on my part, but this is an attitude that I have seen in many other countries with a great past and a fucked up system and economy. They resent our wealth and overreaching presence but will not make the link with our system and values, especially freedom, including for women (Iran is actually one of the best places for women in the region). (and yes, to rememberinggiap, I do think that the West is a MUCH better system that the others, especially all forms of communism or statism, because, however imperfect we are, there are self-correcting mechanisms. We'll see in the very near future if it still works...And please do not start me on all the death of these communists or statist regimes, of which Iran is one).
So let's not idealise Iranian policies in the region. Let's first focus on incompetence in Washington; some opportunism on the part of the other ME powers, as stated in your first post, is very plausible.

Valdron on Middle East power plays

2004-06-02T22:10:00.001+02:00

This very long post is the addition of 4 successive comments posted by Valdron on Billmon's website today. I found them extremely interesting and have shamelessly decided to post them in full. They are further commented and discussed on this thread, where they were initially posted.

Valdron@cncom.net

First, let me offer a few thoughts. All this 'ant-semitism' stuff is really a red herring and we shouldn't pay attention to it. It's merely throwing mud into an issue that is complex enough.

Allow me to offer a hypothesis. There were four significant regional powers in the middle east. The United States was manipulated into a war upon the fourth power, Iraq, by the other three, each of whom had a motive for wanting to see that regime overthrown.
The big surprise that we're seeing with Chalabi is that the third power, the Iranians, may have had leverage to control and manipulate the United States. There is no question that they were strongly motivated to see Saddam gone, given the fact that he'd had a decade long and very nasty war with them. They were also strongly motivated to see Saddam gone by the reasonable prospects of being very influential in any Shiite dominated Iraq.

But there are two other middle eastern powers which were in play.

Israel is one of them. Look, set aside anti-semitism, this is a no brainer. Israel regarded Iraq as a major security threat, no if's and's or but's. The degree of this security threat on an ongoing basis can be seen in Israel's assassination of Iraqi scientists, their raid on Iraqi nuclear facilities, and their ongoing concerns about wmd's. Saddam Hussein was one of the loudest Palestinian advocates in the region, he'd lobbed SCUD's into Israel during the Gulf War. Let's just admit they didn't like him and wanted him gone. Anti-semitism or conspiracy theory simply doesn't enter into it.

Did Israel have levers, directly or indirectly, to manipulate the American government? You bet your sweet patooty they did. There is a huge and very aggressive pro-Israel lobby in the United States. Nothing wrong with that. They're very successful, very good at what they do, and their objective is biasing or aligning American foreign policy to support Israel's interests. There is perhaps a more questionable channel of influence, which is within the Neocon movement themselves, some or many of whom appear to merge Israel and American foreign policy goals, for whatever reason.

Turning to the third leg of the axis, it also seems very clear from Woodward's latest book that the Saudi Arabian government was highly motivated to get rid of Saddam Hussein and was heavily involved in supporting or encouraging the decision. Clearly, according to Woodward, the Saudi's were in it up to the elbows, and exercising their own levers of power.
So what does this amount to? A 'perfect storm' of competing regional powers, three of whom had separate levers of influence with the Americans, three of whom for separate reasons all had coinciding interests in getting rid of the fourth.
The picture that emerges is not of the United States undertaking clear foreign policies, but of a hapless dupe, manipulated and bamboozled into undertaking a reckless and foolish action without any appreciation of the consequences.
And in fact, its pretty clear that there wasn't any credible appreciation of the consequences, or even of what the hell to do with the occupation.

But consequences follow acts like night follows day. If, in whole or in part, the American invasion was really the product of a 'perfect storm' of consensus and influence by the remaining regional powers, then where does that leave the Americans when the perfect storm is over?

And arguably, it may be over. Iran, Saudi Arabia and Israel may each have radically different goals and foreign policy objectives which may or may not mesh.

Israel essentially wants a politically quiescent Iraq, possibly broken up into smaller states or federalized into impotence, which poses no military or security threat, provides diplomatic recognition, supports its Palestinian process, and provides both guaranteed oil and water supplies and a trading relationship as a sort of Israeli economic hinterland society.

Iran essentially wants a Shiite dominated unitary state, hopefully theocratic, in which it is the major influential player. Iran, I suspect, has plans for an Iran/Iraq Axis which would dominate the middle east much like the Franco/German Axis dominates Europe. Iran's plans for Iraq are almost completely incompatible with those of Israel.
Saudi Arabia's plans and objectives are almost completely inscrutable. It appears that their major middle east foreign policy objective is to merely stay two jumps ahead of everyone else. They're likely to oppose Iranian influence or an Iran/Iraq Axis that would leave them as an 'also ran' in the middle east, much like Britain in Europe.
They're also strongly inclined to oppose any kind of Shiite aspirations, including regional autonomy, partition or federalization of Iraq which would foment Shiite unrest within their own borders or in other Persian Gulf states.

So they're probably opposing Israel on that front.
They're also unlikely to wish to acquiesce to Israeli economic domination in Iraq, nor to endorse Israel's security or Palestinian process, since it would ultimately erode their own position.
The best option for them might be an extension of monarchic or feudal rule in a Sunni dominated Iraq. Failing that, another secular police state which is prepared to accept status as a Saudi client or ally.

In short, the goals and objectives of the Israeli's, Saudi's and Iranians in Iraq seem completely incompatible. So where does this put the American occupation?

Between Iraq and a hard place, I think. (sorry, I couldn't resist). It may become increasingly difficult for the United States to sustain an occupation against the opposition of one or more of the regional powers. Simply put, each of the regional powers is more than capable of arming, supplying and providing shelter and support to proxies or natural allies within Iraq. Israel to the Kurds, Iran to the Shiites, Saudi Arabia to the Sunni tribes.

That sets the stage for a continuing and increasing level of violence against the occupation, and against any American proxy that would be very problematic. It may also result in a fairly nasty civil war driven by outside powers.
The natural American response might be to ally with one or two of the regional/internal factions. But that only earns the enmity of the other. It's hard to see a good outcome.

Allying with Israel and the Kurds basically would amount to giving the rest of the country away and setting the ground for a Saudi/Iranian regional alliance that might well be disastrous for American ambitions in the region. Given the geopolitical situation in the region, a Kurdish/American alliance seems likely to produce the fewest dividends and the worst outcomes from a long range point of view.

An American/Iranian alliance seems completely unlikely. It's simply not in the cards.

An alliance with the Saudi's and Sunni's may be viable, but it brings its own problems, and the result would inevitably be the Kurds and Shiites, backed by Iran, against the U.S.
In any case, Saudi goals and American goals may not be compatible.

The best solution for the Americans would be maintaining the support of the Saudi's and Israel, ensuring that the Shia are quiescent and Iran is excluded, and buying off the Sunni and Kurds. So far, with the exception of Israeli support externally, and Kurdish support internally, none of these things seem to be happening.

It's a mess.

Basically, the notion of the United States being manipulated by a 'perfect storm' does a lot to explain America's imperial behaviour over the last couple of years, and also explains the apparent helplessness we've been seeing here now. The Imperial ambitions that lead us into this mess seem increasingly naive and unrealistic.

People, we may have been played.

Posted by: Valdron at June 2, 2004 11:15 AM

According to American officials, the Iranian official in Baghdad, possibly not believing Mr. Chalabi's account, sent a cable to Tehran detailing his conversation with Mr. Chalabi, using the broken code. That encrypted cable, intercepted and read by the United States, tipped off American officials to the fact that Mr. Chalabi had betrayed the code-breaking operation, the American officials said. American officials reported that in the cable to Tehran, the Iranian official recounted how Mr. Chalabi had said that one of "them" — a reference to an American — had revealed the code-breaking operation, the officials said. The Iranian reported that Mr. Chalabi said the American was drunk.

Let me throw something else out here. The Persians seem to have been very good at manipulating American politics.

Back in 1980, they used the hostage crisis to get rid of Jimmy Carter, and they haven't been shy about taking credit for that either.
Then in the 1980's, the used Iran/Contra to essentially discredit and paralyze the American Reagan administration. Make no mistake about it, Casey died, McFarlane tried to kill himself, half of Reagan's foreign policy team was up on charges, and American's influence in Iraq and in the region took a major wedgie.
If we accept that Chalabi was acting as an Iranian double agent, passing information to them, and passing misinformation to further Iranian political goals to us... and this seems very possible...

Then take the next step...

What if the Iranians decided to deliberately burn Chalabi?

To what end, you ask?

Very simple. Destroy Chalabi, and you take out the American's annointed political pawn in Iraq, and you keep your double agent from ever being in a position of power where he could have been independent. The Americans basically have to scramble to try and come up with a new 'heir apparent' if they can manage it. Their occupation plans are thrown into chaos.

But more than that, you set off a political cluster bomb in the United States. Chalabi as a double agent, Iranian spy? The whole invasion was based on a pack of lies? That completely discredits the invasion, which discredits the occupation, which makes the American occupation increasingly politically untenable. Hell, it may well make the occupation impossible and unacceptable to domestic Americans, particularly if there is a body count.

But there's more. It goes quite a ways towards discrediting the political forces that supported the invasion and occupation - the Neocons and the Warhawks of the Bush administration. Suddenly, they're tainted by association with Chalabi, which renders them suspect, credulous, and impotent.
But there's more. The Iranians made an explicit point of saying one of "them" — a reference to an American — had revealed the code-breaking operation, the officials said. The Iranian reported that Mr. Chalabi said the American was drunk.

My my my. Twisting the knife around, are we? Suddenly, it's not just association with Mr. Chalabi's lies that's the problem. Suddenly, it is now part of the record that someone associated with Chalabi was a drunk, an incompetent, and a traitor. Someone high up with access to very confidential material...
In short, it's a political cluster bomb designed to discredit and paralyze the Bush administration, or a large part of it. With any luck, they may figure they'll be able to get rid of Bush the way they destroyed Carter. Even if they don't get that, they've got an almost certain guarantee of kicking off Iran/Contra II.

In short, the Iranians may not have screwed up or made a mistake by sending the cable that blew Chalabi through a channel that they'd been told was compromised.
They may well have done it deliberately, because they were predicting the political fallout and firestorms that would hit the U.S. because of it.
The hell of it is, now that I think of it, that they didn't even actually need Chalabi to do it. He might even be innocent. All they needed was to know their security had been compromised, and after that, all they needed was a plan and a reasonably good story that the Americans would swallow.
Hmmm... Aren't the Persians the oldest empire on Earth? Fought the Greeks, the Romans, the Mongols, the Caliphate, the Ottomans, the British, the Russians and they're still standing. Didn't they invent Chess? Perhaps we are outclassed.

Posted by: Valdron at June 2, 2004 11:37 AM

Jerome,

Actually, the Americans used the Iranians as a proxy for their interests in the Persian Gulf throughout the 60's and 70's, and in the 80's the Iran/Contra affair was an attempt to see if Iran could be re-enlisted. So it's not out of the question.

An American/Iranian alliance is a possibility, and it would have the advantage of fairly decisively settling the situation in Iraq. Against an American/Iranian/Shiite axis, I don't think that the Saudi's would have any leverage in Iraq, nor would the Kurds or the Sunni's be able to put up much of a fight.

So yes, there may be a short term advantage there for the United States, and there are signs that the Iranians are opening the door for precisely that kind of cooperation... largely because it will allow them the sort of government they would be happy to deal with in Iraq.

On the other hand, American foreign policy for the last 25 years has largely been focused on the containment of the Iranians. So what happens when you let that genie out of the bottle?

An Iranian/Iraqi axis might well be strong enough to push the United States out of the region entirely. Such an Iranian/Iraq axis could easily extend to Syria and Lebanon, completely altering the military and political balances of the region.

There is a substantial Shiite majority in the oil producing regions of Saudi Arabia... that's a cause for concern. At least one of the Persian Gulf states, Quatar or Bahrain, I think, is Shiite dominated. Large Shiite populations are also to be found in Lebanon, other Persian gulf states and possibly the former Soviets. How does that shake out? I'm not sure, but there may be huge scope here for the Iranians to extend their political and military influence.

On the eastern border there would be scope for Iran to build bridges to American ally Pakistan, an Islamic nuclear power. A strong Iranian/Pakistani alliance might well find that the United States is less important.

In short, there's reason to believe that the Iranians could benefit immensely from an alliance of convenience with the United States. Their interests and ambitions could be enhanced at literally every point.

In the long run, however, it strikes me that such an alliance could be potentially disastrous to the American's long term goals and objectives, or to their strategic interests in the region. The risk is to see the formation of a new Persian empire or Federation dominating the middle east, and rubbing up against Russia, Europe and India.

I'm not sure that the United States is truly capable of this level of stupidity and incompetence. The situation would be like that of Napolean III of France, who blundered and bungled his way into the unifications of Germany and Italy, which ended France's role as the continental superpower.

Posted by: Valdron at June 2, 2004 12:02 PM

Actually no, I didn't forget the Turks. I just didn't think anything of them.

The Turks have been pushed out of the middle east since the 1920's, they have no significant credibility or credentials there. They've been out of step with the region politically, religiously and economically.

In Geostrategic terms, the Turks are literally blocked off by Iran and Iraq. They've got no access to the middle east, except through these countries, and each of these countries is a rival power. So this limits their influence and opportunities.

They've got some limited potential for access through Syria as a relatively weak state. But they've never been able to successfully make a move there. Syria has always been tightly embedded in the Arab political framework, and has instead looked everywhere else - to Egypt, Iraq, Iran, the USSR for allies. Syria has also had a longstanding historical grievance with Turkey relating to a post WWI territorial adjustment... France gave away Syrian territory to Turkey, the Syrians have never been happy about it.

That may change, there have been recent diplomatic initiatives between Syria and Turkey which suggest a thaw. But its frankly too early to tell where this will go, or if it will amount to anything. My own thinking is that its one of those 'placeholder' initiatives, it keeps the balls in the air but can be supplanted by other alliances.

Turkey may have opportunities to make inroads into the Muslim Turkish former Soviet states on its northeastern border. For some seventy years, it was stalled out and stymied there, but there's the possibility that things may have opened up. I've no idea if the Turks are pursuing this.

Mainly, however, their foreign policy objectives seem weighted towards and focused upon Europe. That's where they see the money and the power being. Also, to the extent that there is a Turkish diaspora, we're seeing the Turkish populations emerge as significant ethnic communities in Europe, particularly France and Germany. So again, that's where the interest goes.

Turkey does have some form of political alliance with Israel, but I've yet to see anything substantial there. It's simply a by-product of both of them being American client states.

Turkey's major geopolitical interest in this fracas is its own security. About a quarter of their population, and the ass end of their country is Kurdish, and they've just fought a decade long Kurdish insurrection which resulted in 40,000 dead Kurds. They are not at all sympathetic to the idea of an autonomous Kurdish region in Iraq, which they see as fueling Kurdish nationalism. They would be absolutely opposed to a loose Iraqi Federation, or even worse, a Kurdish state... they see this as a recipe for civil war or dismemberment in their own country.

On this issue, their interests are almost diametrically opposed to those of Israel, which wants to see a decentralized or broken up Iraq (which would not pose any security threat).

Their interests are, instead, convergent with Iran and Syria, both of which also have restless Kurdish minorities. If it comes to a real showdown, Turkey will move towards the Iranians, Syrians and Shia, and strongly against the Kurds... and if necessary against Israel and the United States.

But frankly, its not an option that appeals to them. They don't get along with the Syrians or Iranians, they are an American client, they're okay with Israel. So no matter what happens, they would have to cut across the grains no matter which stand they took.

So the Turkish foreign policy here has been to maintain a sort of de facto neutrality, while professing overt loyalty to the U.S. They aren't going to get involved if they can help it, their principal goal is to keep the Kurds down, so they're doing this very careful dance with Washington.

In our terms, this translates into maddening ambivalence. First the Turks are going to help us invade Iraq, second front, rah rah rah. Then it falls through. Then the Turks are going to send 10,000 peacekeeping soldiers to the coalition, rah rah rah. Then it falls through. That's going to keep on happening.

Meanwhile, we're seeing a very quiet series of diplomatic initiatives with Syria, and I suspect, there is a thawing of relations with Iran. Will anything come of this? Unknown. The Turks are just opening up their options, making sure they've got bridges built all over the place, without actually intending to cross any of those bridges.

Finally, for the Turks, the best outcome would be if they could get their hands on the Iraqi northern oil fields. They could really use control of a major oil field to their own advantage. Unfortunately, that kind of aggressive conquest is a no go, it could seriously complicate their European initiative, and the place is full of Kurds so you'd guarantee yet another uprising and nasty low intensity war. So they'll daydream about the Mosul oil fields, but they're not inclined to do anything about it, unless circumstances pitch it straight into their laps.

Posted by: Valdron at June 2, 2004 12:35 PM

Saudi oil revenue cycle

2004-06-02T22:10:00.000+02:00

I think they are suffering an acute form of Dutch disease, and they are just about to get another dose:

- first comes the unexpected (or at least unbudgeted) windfall. You suddenly have A LOT of money to throw around. Flashy consumption, white-elephant prestige projects and more distribution of gifts to the population. People do not need to work, you bring immigrants from Asia to do the menial jobs, everybody's happy.

- it this lasts enough, the distribution of gifts continues and becomes an entitlement. Nobody works, spends like crazy, everydody forgetting how life was before.

- prices bump down. Not to worry, it's temporary, nothing that a little bit of debt won't solve. These nice European bankers, bending over to throw money at us, after all we are rich!

- prices stay down. Ouch! You cannot stop the gift giving, so more debt. Maybe a few white elephants are quietly shelved. A few new fighter planes are delayed.

- prices bump up. Ahhh. Told you it was temporary. Quick, more gifts to stifle any complaints.

- price suddenly go back down (and remember, this is only in relative terms. Prices falling from 50 to 30 in 4 years time does the same); Ouch!!. Debt is becoming unreasonable... let's kick out a few of those wothless foreigners (or pay them less) and maybe cut some of the gifts... More money to anti-riot police might be a good idea, who knows... and let's have the morality police roam the streets to prevent too much conspicuous consumption...

You get the drift. If prices now keep on going up, which is a real possibility today, then that cycle go start once anew. There will be downward bumps, irrespective of the absolute price level. Each price increase tears the traditional values of society and its work ethic; each price decrease creates discontent, social tensions, religious blowback and now terrorism. And as someone pointed out, the throne is almost up for grabs.

The cycle started on 9/11 will end in Riyad, I am convinced of that.

Turkey in Europe

2004-06-02T21:41:00.000+02:00

I won't contest that Turkey will/would be a mouthful for Europe but do consider the following:

- it's 15 years off even in the best case. In the meantime, they - and they alone have to do all the work of adapting to our rule book. we'll help, we'll pay for stuff, but essentially they have to pull themselves by the bootstraps - and that's the nice thing with the EU: it forces/incites you make efforts in the right direction FOR YOURSELF.

- in the meantime, the 10 new countries will have grown beyond recognition, as they have in the past 15 years, and they will be able to contribute to the EU's muscle, as Spain, Ireland and Portugal do now. The effort then to support Turkey would be spread more widely.

- re immigration. Spain and Portugal (and Ireland) showed that people go BACK when their countries are going right. Expect the same with Central Europe in the coming years, and with Turkey when its turn comes. Hell, it's probably better anyway to have legal immigration than to have prostitution rings and other large scale human trafficking (I have calculated recently that approx 10% (yes, ten) of all Ukrainian women in the 20-30 age range have gone into prostituion in Western Europe, if you can imagine that.)

Basically, we help them help themselves. The important thing is the institutions, the rule of lax (with full recourse to Brussels (European Commission), Luxembourg (European Court) and Strasbourg (European Court for Human Rights, of which Turkey is already a party through the Council of Europe, and whose decisions Turkey usually enforces, sort of, already). And these are the themes that will be watched over, the Copenhagen criteria. The economics stuff, in a sense, is not as important. Never forget, the EU is a political project, not an economic union. The economics stuff was used to lure people in but it's never been at the very core of the project. The Brits have been fighting with this notion right form the start, because politically, they are not in. And please discount significantly all articles you may read in the English-speaking press about how France and Germany are hopelessly weak economically, and do not call the shots in Europe anymore, etc... It's in English!!! Chirac is a catastrophe, but he'll be gone eventually. Vi Vill rride to victorry yet...

The next enlargement (that's my French imperialist streak coming out again) will be the Mediterranean bassin. The issues will be the same: can we improve their governance through the lure of prosperity and the soft touch of our perceived weakness (declining, decadent, hopeless military, always bickering internally)? It is the only win-win solution for the region, so there is yet hope. I hope to live to see it, basically...

Viva la muerte?

2004-06-01T21:50:00.000+02:00

In France, we have both May 8 and November 11 as days of rememberance of the two world wars. Both are public holidays. There usually are ceremonies to honor the dead by the unknown soldier's tomb in Paris and by every village's monument aux morts, which usually lists the names of all the village's dead during these wars. Every single village has his, and in some of them, you have the same names over and over again, whole families slaughtered (mostly in La Grande Guerre.)

It's always a very restrained ceremony, with no militarist undertones at all. More and more, the ceremonies involve the presence of Germans or other countries; it's more a reminder of past horror than anything else.

You also have All Saints on November 1, also called day of the dead, where it is traditional to go to the cemetery to remember the lost ones in your family (but not specifically deaths linked to war).
The most militaristic day probably is Bastille Day (14 July) when you traditionnally have a military parade on the Champs-Elysees.

As I wrote in the previous post, the last two wars have actually cured us pretty thoroughly of any desire to fight, at least with Germany or within Europe. With both nations exhausted and destroyed (France's fighting spirit was quite completely destroyed by "victory" in WWI, Germany needing a second dose because they were still angry with that apparent result and later "settlement" of the war), it was maybe easier to try to build peace, the real kind, instead.

Let's hope that it does not come to that (and Churchill's famous words "America eventually does the right thing, after having exhausted the alternatives" are not reassuring...)

As an aside, please note that having whole city blocs evacuated because a bomb (from either war) has been found during construction work or otherwise is still today a very frequent occurence in most of Northern France and a reminder of how it was then.

War or Peace

2004-06-01T15:09:00.000+02:00

I was born in the 70s in Strasbourg, which is in France, but right on the border of Germany. It changed countries five times in the century prior to my birth.

Ever since I've gone to school and learned about WWI and WWII, I could not help marvel at the fact that I could now take my bike and go to the swimming pool in another country, with which we had been at war so many times and so ferociously and I would wonder: will it be my turn, when I am of fighting age? Will I need to go kill my neighbors (or be killed by them)? But it has not happened, and it seems likely that it will not happen in the foreseable future.

So because of that, and because Strasbourg is the home of the European Parliament and of the Council of Europe, I will never, ever cease to be a strong supporter of Europe and its institutions that have mow made peace inconceivable between our countries, and that have made our countries close allies and I would even say close friends.

So I am a proud "Old European" and I do hope that we will be able to extend to the rest of the world our eurocrats and rules and stagnation and PEACE.

I honor the American forces and others that came to liberate us and that did play a big role for many years in protecing us from the Soviet Union and making this peace possible.

I eventually did my military service in 1989-90, I served in a tank unit based in Germany (not so far from my home, and less than 200 km from the Iron Curtain) and forces from many of the great democracies (France, Germany, the US, Cananda, UK) would train together to DEFEND our countries (especially Germany and France) from the (luckily then fading) Soviet threat. It was still terrifying: our training was based on the assumption that we would be outnumbered 7 tanks to 1 by the Soviets ; we had a 7 minute life expectancy on the front lines ; death by burning inside a metal box is not very attractive; but thankfully it never came to pass.

Armies are a necessary evil, they should be seen as insurance: something we pay for to avoid something even worse (being defenseless against an outside attack). It should never go beyond this. It is wasted resource that could go to something more useful otherwise. It is time and energy which will never be given back. There is nothing honourable about them except the fact that a small minority of people, usually in their early adult years, is willing to do, on behalf of their community, a job that needs to be done and that can include killing, maiming, being killed or being maimed.

"A weapon is an instrument to make your opponent change his mind". Ultimately, it all comes back to decisions taken by a few. You must have enough weapons to dissuade the others to do you any harm, but you should not so much that he starts worrying about what you can do to him (and starts to protect himslef in ways that threaten you in turn). Without trust, it's inherently unstable, as the nuclear arms race showed its full absurdity. Trust can only be gained by giving it.

The US has done a pretty good job after WW II, at least in Europe, to build or support institutions that promote trust. For this we cannot not be thankful. But why stop to Europe? The rest of the world deserves the same. It deserves trust, not threats.

In our current situation of assymetric threats, we need to focus again on the goal, which is "changing the mind of the opponent". Invading countries and killing people does not help further that goal.

The USA went to war against Iraq because it could (militarily) and because a good chunk of its population was clamoring for or okay with some kind of vengeance after 9/11.

As you honor those that died in your name, do remember that going to war is always a defeat, it means either that you are an aggressor or that you have not convinced your opponent not to attack you. You cannot help the latter, but you should avoid the former, which is also a crime against your own soldiers.

War is Hell

2004-06-01T14:09:00.000+02:00

A great post and many moving comments at Billmon's.
I'd like to highlight this one (by "Veteran"):

The more inglorious a thing is the more the practitioners of doublespeak try to present it as a glorious thing.

War is decapitated children and maimed men and women and heaps of blackened corpses and ruined homes, villages, towns and cities. War is shouting people straining to kill other people. War is looting, rape, raids and arrests, beatings and torture. War is bodies found on lonely back roads, in fields, in ditches. War is lips sealed for ever, hearts stopped for all time. War is rage, revenge, grief, retaliation, punishment, fury and heartbreak. War is cursing people dealing out death and misery to screaming people. War is the helpless infants whose birth brought such joy turned to killers and tormentors. War is the blackening of human souls, the withering of humanity, the replacing of other living, loving souls with images of some kind of bestial 'other'. War is widows, widowers, orphans and parents weeping. War is the sound of weeping, of bombs, bullets and spades digging into the earth.

War is a handful of people becoming enriched on the deaths of others. War is a series of lies perpetrated to turn the children of nations into killers. War is crippled limbs, minds and spirits. War is the production of traumatized victims and traumatized perpetrators. War is sold as a collective need but endured as an individual's hell. War is a robber of life, of honor, of humanity, of the love that the dead, maimed and brereaved should have been able to give and to receive.

War is only cheered or revered by absolute idiots, often those who have never seen a shattered corpse, a friend turned killer of innocents or the smoking ruins of a home once filled with love and laughter. War is a poison that courses through time and brings more death and misery to and from the broken and humiliated. War makes decent people become warped and compromises any inner decency they have.

I do not think that tributes and flag waving are appropriate 'reward' for those who have fought in wars, have given their lives or are engaged in conflict today.

Because of what war is and because of what it does to the human spirit the most suitable 'reward' that I can think of is that all pray to their God that mercy and healing be granted to the souls and minds of each child turned killer or supporter of killing who has been sacrificed for business and for lies and who has been killed spiritually by ideologies clashing just as casually and brutally as the lives they have been a part of ending.

Letter to Bush from Evangelical leaders

2004-05-31T23:37:00.000+02:00

The following letter to the President was signed by at least 50 prominent evangelical leaders and expresses the point of view of many evangelical churches:

July 2, 2002

President George Bush
The White House
1600 Pennsylvania Avenue N.W.
Washington DC 20500

Dear Mr. President,

We write as American evangelical Christians concerned for the well-being of all the children of Abraham in the Middle East -- Christian, Jewish and Muslim. We urge you to employ an even-handed policy toward Israeli and Palestinian leadership so that this bloody conflict will come to a speedy close and both peoples can live without fear and in a spirit of shalom/salaam.

An even-handed U.S. policy towards Israelis and Palestinians does not give a blank check to either side, nor does it bless violence by either side. An even-handed policy affirms the valid interests of Israelis and Palestinians: both states free, economically viable and secure, with normal relations between Israel and all its Arab neighbors. We commend your stated support for a Palestinian state with 1967 borders, and encourage you to move boldly forward so that the legitimate aspirations of the Palestinian people for their own state may be realized.

We abhor and condemn the suicide bombings of the last 22 months and the failure of the Palestinian Authority in the first year of the intifada to stop the violence against Israeli citizens. We grieve over the loss of life, particularly among children, and the suffering by Israelis and Palestinians. The longer the bloodletting continues, the more difficult it will be for both sides to reconcile with each other.

We urge you to provide the leadership necessary for peacemaking in the Middle East by vigorously opposing injustice, including the continued unlawful and degrading Israeli settlement movement. The theft of Palestinian land and the destruction of Palestinian homes and fields is surely one of the major causes of the strife that has resulted in terrorism and the loss of so many Israeli and Palestinian lives. The continued Israeli military occupation that daily humiliates ordinary Palestinians is also having disastrous effects on the Israeli soul.

Mr. President, the American evangelical community is not a monolithic bloc in full and firm support of present Israeli policy. Significant numbers of American evangelicals reject the way some have distorted biblical passages as their rationale for uncritical support for every policy and action of the Israeli government instead of judging all actions - of both Israelis and Palestinians - on the basis of biblical standards of justice. The great Hebrew prophets, Isaiah and Jeremiah, declared in the Old Testament that God calls all nations and all people to do justice one to another, and to protect the oppressed, the alien, the fatherless and the widow.

Finally, Mr. President, be assured of our prayers for you and your cabinet as you lead our nation in this troubled time. May the strength and peace of the Lord be with you.

Sincerely,

Raymond J. Bakke
Executive Director
International Urban Associates
Seattle, WA

Craig Barnes
Senior Pastor
National Presbyterian Church
Washington, DC

(more signatures)

Letter from the mother of a gay son

2004-05-31T14:14:00.000+02:00

Letter to the Editor
by Sharon Underwood, Sunday, April 30, 2000
from the Valley News (White River Junction, VT/Hanover, NH)

As the mother of a gay son, I've seen firsthand how cruel and misguided people can be.

Many letters have been sent to the Valley News concerning the homosexual menace in Vermont. I am the mother of a gay son and I've taken enough from you good people.

I'm tired of your foolish rhetoric about the "homosexual agenda" and your allegations that accepting homosexuality is the same thing as advocating sex with children. You are cruel and ignorant. You have been robbing me of the joys of motherhood ever since my children were tiny.

My firstborn son started suffering at the hands of the moral little thugs from your moral, upright families from the time he was in the first grade. He was physically and verbally abused from first grade straight through high school because he was perceived to be gay.

He never professed to be gay or had any association with anything gay, but he had the misfortune not to walk or have gestures like the other boys. He was called "fag" incessantly, starting when he was 6.

In high school, while your children were doing what kids that age should be doing, mine labored over a suicide note, drafting and redrafting it to be sure his family knew how much he loved them. My sobbing 17-year-old tore the heart out of me as he choked out that he just couldn't bear to continue living any longer, that he didn't want to be gay and that he couldn't face a life without dignity.

You have the audacity to talk about protecting families and children from the homosexual menace, while you yourselves tear apart families and drive children to despair. I don't know why my son is gay, but I do know that God didn't put him, and millions like him, on this Earth to give you someone to abuse. God gave you brains so that you could think, and it's about time you started doing that.

At the core of all your misguided beliefs is the belief that this could never happen to you, that there is some kind of subculture out there that people have chosen to join. The fact is that if it can happen to my family, it can happen to yours, and you won't get to choose. Whether it is genetic or whether something occurs during a critical time of fetal development, I don't know. I can only tell you with an absolute certainty that it is inborn.

If you want to tout your own morality, you'd best come up with something more substantive than your heterosexuality. You did nothing to earn it; it was given to you. If you disagree, I would be interested in hearing your story, because my own heterosexuality was a blessing I received with no effort whatsoever on my part. It is so woven into the very soul of me that nothing could ever change it. For those of you who reduce sexual orientation to a simple choice, a character issue, a bad habit or something that can be changed by a 10-step program, I'm puzzled. Are you saying that your own sexual orientation is nothing more than something you have chosen, that you could change it at will? If that's not the case, then why would you suggest that someone else can?

A popular theme in your letters is that Vermont has been infiltrated by outsiders. Both sides of my family have lived in Vermont for generations. I am heart and soul a Vermonter, so I'll thank you to stop saying that you are speaking for "true Vermonters."

You invoke the memory of the brave people who have fought on the battlefield for this great country, saying that they didn't give their lives so that the "homosexual agenda "could tear down the principles they died defending. My 83-year-old father fought in some of the most horrific battles of World War II, was wounded and awarded the Purple Heart.

He shakes his head in sadness at the life his grandson has had to live. He says he fought alongside homosexuals in those battles, that they did their part and bothered no one. One of his best friends in the service was gay, and he never knew it until the end, and when he did find out, it mattered not at all. That wasn't the measure of the man.

You religious folk just can't bear the thought that as my son emerges from the hell that was his childhood he might like to find a lifelong companion and have a measure of happiness. It offends your sensibilities that he should request the right to visit that companion in the hospital, to make medical decisions for him or to benefit from tax laws governing inheritance.

How dare he? you say. These outrageous requests would threaten the very existence of your family, would undermine the sanctity of marriage.

You use religion to abdicate your responsibility to be thinking human beings. There are vast numbers of religious people who find your attitudes repugnant. God is not for the privileged majority, and God knows my son has committed no sin.

The deep-thinking author of a letter to the April 12 Valley News who lectures about homosexual sin and tells us about "those of us who have been blessed with the benefits of a religious upbringing" asks: "What ever happened to the idea of striving...to be better human beings than we are?"

Indeed, sir, what ever happened to that?

A policy against terrorism

2004-05-30T23:22:00.000+02:00

We really, really need to take a hard look at our energy policies.

Our (again, "we" in here means the West, led by the US) oil policies have been supply-driven: get the oil out of the ground and onto the markets.

Early on, it was easy, the US was the largest producer and the biggest exporter. Then production elsewhere started; BigOil took care of it and kept most of the revenues. Then the producing countries started to ask for a share of the pie, in many cases nationalised their industry, or forced a much more favorable (for them) sharing of the pie. As they exercised a bigger control on the industry locally, it was decided to try to exert influence over these governments in more or less subtle ways.
The result has been pretty pathetic: a series of corrupt, unpopular governments, cut off from their population. They would try to buy off the population in good oil revenue years, but this is addictive; when you are given money, you get used to it and you are unhappy if it stops. If oil prices go down, the economy goes south and the population is pissed. As they have not had to work for a living previously, nothing can replace the missing goodies. In the meantime, the elite is obviously, sometimes obcenely wealthy with money with a distinct US smell...

The population associates corruption with the West and with any economic downturn. The only people providing social services and care are the religious guys; they also provide a visible contrast in morality and ethics, and they are a safe way to be involved in a movement indirectly critical of the corrupt regime.
The Israel-Palestine issue only inflames things further (this with the complicity of the regimes, happy to divert attention from theit own domestic problems and responsibilities)

All these tendencies are starkest in SA and can explain the rise of AQ.

To fight Islamic terrorism, we need to cut off these links.

1) We do not need friendly regimes to get the oil. They need to export it and they WILL sell it at the market price. "Enemy" providers are often the most reliable, see the Soviet Union in the 70s and 80s. They do not have money to do the necessary investments; this can be provided by the West and will allow some participation for our own industries and companies.

2) as a consequence, we do not need to support all these corrupt regimes. All we should care about is stability, where we can actually help (by opening markets, preventing international conflicts, offering help) and who knows what they will get to internally (maybe even democracy?!)

3) the next step is that Islam should stop being the sole political opposition within these countries. With the current situation, this is of course easier said than done. The situation in SA, as discussed in the above posts, show that religion and power are intertwined in ways that are not easy to describe and will not be easy to undo.

4) altogether, we should interfere less. I am not sure that it has been very useful in the end. Some of the biggest suppliers, like Iran and Russia, are quite hostile to outside intervention/investment/involvement in their energy industries, and yet they are amongst the most reliable exporters

5) on the other hand, we should get international cooperation on track, with much more constraining procedures regarding money laundering, weapons proliferation. This sounds unlikely today, but it would work.

5) to get back to our domestic energy policy. We need to find strategic safety in lessening our dependency on oil. It's not wise politically, it's extremely expensive in military terms, and it's not even good ecologically speaking. Let's spend the same amounts of money on clean forms of energy (I'm involved in wind now, so I push that, but everything else should be developed: biofuels, solar, more hydro, etc - and simple energy savings. I'll keep nuclear (which I also favor) for another discussion...)

6) muscular intervention in Israel/Palestine would also be required. Tell Israel that their policies (especially the land grabs and the permanent show and use of force) are not viable; Tell the Palestinians to focus on improving their lifes instead of trying to drag Israel down with them (invest in education, stop considering suicide bombers as heroes - they are not). Tell the Arab countries to get on with the fact that Israel is and will be there. Tell all to focus on the very long term perspective of Euro-Mediterranean Union (America beware, Africa will be ours too, so could South America!)

I think this would actually be a decent policy against terrorism...

It would be a great thing to see Al-Qaeda taking over Saudi Arabia or Pakistan

2004-05-30T11:40:00.000+02:00

May I be a bit provocative?

It would be a great thing to see Al-Qaeda taking over Saudi Arabia or Pakistan.

Why?

- They have to run things, not break them. terrorism does not sound so good anymore.

- They are in control, so they have something to lose. Terrorists, especially the kind willing to get killed, have nothing to lose. If they have something to lose, we have leverage.

- They have to run a whole country. Any kind of ideology makes it hard to do that. Quickly, realists take over. See Iran 198x; see the USA 2004.

- They run a country. We know how to deter countries and their leaders. Invade them and change the leadership. In the past year, that competence of the US army has not been put in doubt...

- They have nuclear bombs. Deterrence works. See above point.

- They own the oil. So what? They need to sell it. Market rules apply. Western companies have NOT been involved in Saudi oil production for a while anyway.

And the huge plus: their population see that religous theocracy is not very good at running a country (the current regimes are NOT selling themselves as Islamists, despite the application of a strong version of Islam). Islamism is finally deconsidered in the eyes of the population. Again, see Iran.

On France

2004-05-29T21:51:00.000+02:00

France is a strange country in that, contrary to the opinion of most (including in France), it is probably a much less statist economy than many others. I'll give you some examples:

- Taxes (actually taxes are quite low, but social security fees are very high) are nominally high, but you have many schemes to avoid them;

- French bosses are the best paid worldwide after the US as a ratio to the average worker;

- Big French companies are amongst the most successful in the world; they are usually amongst the wolrd leaders in most sectors (see Total, L'Oréal, Renault, Carrefour, EADS (of course we claim it as French!), Sanofi-Aventis, Lafarge, Michelin, BNP, etc); they are as nimble as any other. Did you know that during the 90s recession, French companies shed employees at the exact same speed as American companies? (it takes more paperwork, but it can be done)

- French administration can be frustrating at times (oh yes!) but it still works pretty well. The State is not seen with as much suspicion as in the US, which means that it can recruit good people who are not ashamed of working there; it is able to plan long term. For instance, some of the land for recently built freeways in the Paris suburbs was reserved 40 years ago. People in government expected then that they might be needed and preempted the land (same thing for Roissy airport, which is the only airport in Western Europe with all the land for expansion it will ever need, all preempted 35 years ago).

- many of the problems mostly come from a noisy core of over-protected people that have a grip on some much-needed good or service which they leverage to their advantage. The archetype of this is the railways people, whose strikes are highly visible and most of the time very effective, and which have made the French railways, although technically wonderful, a financial basket case. The main groups are well-placed civil servants as well as the older, well-unionised members of large companies. What has then happened is that the flexibility of the economy is borne only by the rest, i.e. the young, the old, women, immigrants and employees of smaller companies, instead of being spread around. (Large companies, as well as public services such as the post office, rarely fire people but do not hire anymore; they take temp workers, subcontract, etc, i.e. things that are easily reversible). This is a vicious circle: the protected group see that their kids have trouble finding jobs and need their help, so they fight even harder for their privileges. And the sad thing is that they are right, because if you lose them, you fall off into the second category without much hope of coming back. French govenrments of the past 30 years have not been good at changing this - or even at explianing it.

- despite all this, France created (proportionally of course) as many jobs as the US in the second half of the 90s. As the only large European country with significant population growth, it needs to create more jobs to keep the unemployment rate stable, and it mostly has;

- "libéral" is a dirty word in France - and of course, it means the exact opposite of what it does in the US (it means something like "libertarian" in the US) and nobody can claim to support it. Leftist opinions ("gauchistes") are extraordinarily strong in France, and you cannot do anything against that common wisdom (that capitalism is bad, etc). So the French administration, has done libéralisme by stealth, without public backing and without the public's knowledge. (A bit like Europe has been built: "we know better", with the twist that, being French, we usually actually do! (I jest, but to be honest with you, a good part of me does believe that)) So our economy looks statist but is not completely so - and it still works...

- And the high taxes that are being paid are put to good use (good roads, cheap energy, reasonably good education and healthcare) - which go a long way to explain the above point (that it still works).

- Plus, anyway, we don't care what you think. We have the only Eiffel Tower, the only Mona Lisa and the best wines around... That's probably what annoys the US the most - we really don't care if they're not happy with us.

Winners and losers of the Iraq war

2004-05-29T13:54:00.000+02:00

I'd like to add one winner to today's mess: Europe, and more precisely Old Europe.

I'll flesh it out later, but the basics are:

- economically. Don't forget the other Bush mess: the US economy is on a totally unsustainable path. The dot-com bubble, instead of bursting, has been replaced by a debt/real estate bubble. This one cannot not burst, because there is nothing to replace it. Interest rates are at the lowest they can go (and will soon go up); private indebtedness is at all time highs (see a previous Billmon post on this, by the way). So you will have a nasty economic crisis in the coming months, a couple of years at most. I see two easy triggers for that: a crash of the dollar or an oil crisis - or both.
Now Europe will obviously suffer if the US goes into a recession, but not so much. Europe's economy is actually quite balanced: its trade is not significantly off balance, its debt position is mostly reasonable and domestic engines (consumption and investment), while not in a great shape, are okay and mostly independent from the US situation. Europe is a lot less dependent on oil than the US, and can rely on some nearby producers (North Africa, Russia) should things turn nasty. (Now that obviously needs to be qualified and/or explained more, but this is not the place for it)

- politically. The Iraq adventure shows (if that was ever needed) that military might does not work against terrorism. We'll have to go back to the wishy-washy, winmpy instruments of international cooperation, diplomacy, bridge building, etc... Europe, especially Old Europe comes out of this crisis with a lot more legitimacy in this respect, which could be put to use. (Now I'm not being naive and saying that France is better than the US in terms of realpolitik and pursuit of its "grandeur", but the point is, France's policy can be improved and channeled by influence from the other Europeans). The world sees the US making war when Europe is bringing into the fold Central European countries (including quite a bit of investment and "nation-building" stuff like the acquis communautaire, is thinking hard about Turkey and is busy building bridges to the Mediterranean countries).
Go back and read Robert Kagan's "Of Power and Paradise". His basic point was that Europe's institutional, peaceful, talkingshop approach to problems, while nice, was hopelessly naive because it worked only as a free-ride on the US military which did all the dirty work of power politics. Well, power politics without the soft power has shown what it can do in all its splendor; maybe the world will be more willing to listen really hard to europe's soft whispers of international rules and economic cooperation.

(Kagan has btw become one of the most vocal critics of Bushco)

So Europe has legitimacy. Can it use it with one voice? If you have followed the debates on the European Constitution, the biggest stumbling blocks until last year where the sharing of power between the "big bigs" (basically Germany and to some extent France) and the "smaller bigs" Poland and Spain). With the change of government in Spain, they are suddenly back in Old Europe, and Poland has not unreasonably decided not to fight this alone. And suddenly the spotlight is on Britain's "red lines", with Blair and Straw, having promised a referendum, suddenly fighting for "national rights" as hard as your average Tory Eurosceptic... We all know where all such fights used to end (with the European train moving forward, the Brits sulking, finally coming around and joining without having influenced how it was actually done). But now, the question "in or out" to the UK (and "in" meaning in the Old Europe version of the EU) is the inevitable outcome of this latest debate.
Either way, Europe will speak in a much louder voice, because it will have a single voice. We all have to hope that the UK voice will be part of the choir, but we'll see.
Russia will NOT be part of the Europe bloc. They do not believe in soft power, and they only have nuisance capacity. Russia does not understand Brussels. Europe-Russia relationships will be mostly limited to the partnership in the natural gas business (where there is strong bilateral co-dependency) and ad hoc discussions on other topics.

- oil stuff. The ironic outcome of the current situation is that BOTH the US and China are shown to be highly vulnerable. The US is in the mess we know, has no available military for a bit of time, but what's left is smack where it worries China most: near the oil fields and on the maritime routes it needs more and more. Yes, China is suddenly discovering - and showing to the whole world - its growing dependency on international trade flows, especially for raw materials and obviously including oil. On top of that, China holds a lot of US debt, which is a double edged sword (the US needs them to keep on holding - and buying - the stuff, but can also devalue the stuff easily). So it's a classic standoff, but neither can do anything crazy or stupid...
Russia and Iran are benefiting from higher prices, but, as always, this is not such a good thing for them in the long run: it allows those in power to avoid needed reforms (why bother when you can buy social peace and prosperity with the oil windfall) and it just postpones problems (until the next price drop, when the population has just gotten used to the new improved standards of consumption and does not want to give them up).
And I am not so sure that having a very, very chaotic neighbor is such a good thing for Iran...

So Europe is no better than it was, it's just that it is not weakened like the others have been. Will it do anything about it? Will ir try to take over from the US. No, of course not. Europe knows that it needs the US. It just wants to be taken seriously and, maybe, maybe, listened to.
War? Been there, done that (quite thoroughly). Colonies? Been there, done that (quite thoroughly as well)... So there is no moral superiority, just the hope that the US can avoid the mistakes that have been done many, many times before.

I think that Europe will bend over backwards to help a new US president who is serious about international law, real cooperation, etc... This will obviously require a strong enough domestic consensus in the US to overcome the hard right's visceral opposition to theses things, which means, once again, that the Democrats must win EVERYTHING (WH, Senate and Congress). Otherwise, there will be no possible agreement, things will muddle along and Europe will just stay on the sidelines until the reality (economic, politic and strategic) washes through in the US.
But being the only stable place in an uncertain world is not such a great thing anyway. Plus, who knows, if AQ are smart enough, they will attack Europe, not the US, before the November election. This would give a boost to Bush while maybe pushing the Europeans to do stupid things of their own...

Iraq Future US Options - some Thoughts

2004-05-26T17:17:00.000+02:00

QUOTE

Posted by Bernhard (mailto:Bernhard.Horstmann@epost.de) May 25, 2004
11:29 AM

Iraq Future US Options - some Thoughts
(why Kerry will not leave Iraq)

There are quite some positives if the US can stay in Iraq:
- Control (directly or indirectly) of a decent chunk of oil - in a
few years enough to control the swing producer of last resort
- Military (projected) control of Saudi Arabia, Iran and Syria
through Air Force stationed in Iraq and some few heavy brigades (even
if these can not actually take land, a renewed Iraqi army under US
control could do)
- Through oil control and power projection on the neighbor countries
comes indirect pressure of all countries that depend on Middle East
oil - the main candidates to be pressured are Japan and China

There is quite a price to pay to stay in Iraq:
- there is no way the US can stay in the cities and in direct control
of the government
- the troops thereby will have to be moved to huge posts in the
desert towards the borders of Syria, Jordan and Saudi Arabia (makes
for very unhappy troops)
- the "lines of communication", i.e. the roads to these posts will be
nasty to maintain. The line through Israel and Jordan opens the US to
Israeli blackmail, the line through the Gulf and Kuweit can be
endangered by any Gulf state through Silkworm rockets
- In money the project will cost more than $50 billion per year

Even though the pricetag is high, the strategic advantage that could
be gained is really great.
The US people (in a majority) do not want to scarifice their
lifestyle for peace of mind. If there is a HMMV needed for ever
Hummer - so it be. Any president to demand this, will not be
reelected.
The mood in the US is not yet one of isolationism and given the
steadily rising dependency of the US on other countries will not rise
until a mayor change in the psycological background takes place.

So Kerry will look at the strategic advantage he will neglect the
cost (they are longterm), he will look at the chances to be reelected
and if nothing extrodinary shocking and mood changing happens, he
will try to find a "compromise" with the Iraqis and keep a division
in the desert without realy caring what happens to the Iraqi people.

Sad story - but the neocons did win this one

UNQUOTE

I found this an interesting post, because it shows how terribly pessimistic we have all become, and how our expectations have been lowered, following almost three years of impending doom.

Bernhard's points are valid, but they describe a situation of de facto preparation for World War III. As I wrote in previous posts on Billmon (which can be found here), physical control of the oil matters only in a situation of war, when the usual rules of commerce do not apply.

The strange thing is that this scenario is "positive" in the sense that the correct strategic long term threat to the US is correctly identified: China. Iraq has nothing to do with Islamic terrorism in that scenario, it's all about oil and a future confrontation with energy-hungry China. 9/11 is just a convenient excuse. But while the enemy is correctly identified, the tools to "fight" it are typical of the neo-cons and their zero-sum games: prepare for military confrontation. In that context, democracy, soft power, international law are just nuisances or worse, signs of "weakness".

If Kerry comes out of the zero-sum game mindset, things can and will improve. The problem, to the annoyance of many of you, is that he CANNOT make that case publicly, because he would be accused of "weakness", lack of resolve, etc... So at this point we do not know if he intends to come out of that scenario or not. But we have to hope he will (change the mindset). As has been written before, I think the Europeans really will make extra big efforts to help Kerry succeed. We all know that Iraq is a disaster for everybody, which now (that it has been created) needs to be addressed. It just does not seem possible to do anything with Bush and his crew around.

Why do people dislike America?

2004-05-26T17:15:00.000+02:00

Why do people dislike America?

This is a text written by Matthew Maly, an Ukrainian-american who has extremely interesting views on Russia, the US and the institutions and culture of both. I highly recommend his site.

Johnson's Russia List #6593, 9 December 2002

From an article that appeared in the JRL a few days ago, we learned that according to the survey of 44 countries done by the Pew Global Attitudes Project, "the United States is falling out of favor in 19 of 27 countries where a trend could be identified". As could be expected, this trend reflects anxiety over a possible war with Iraq and the resulting animosity of the Muslim countries. Yet, while the survey indeed found that the dislike of America was greatest in the Muslim countries (from 59 to 75%), citizens of Canada, France Britain, and Germany were also not all that keen on the US. What could be the reasons for that? Why did 67 percent of Germans and 71 percent of the French say that to spread American ideas and customs would be "bad"?

America has pioneered a new social technology: it increasingly advocates win/win as the best possible mode of human interaction. Other countries are still firmly based on a win/lose or even on a lose/lose. Win/lose is best if you are a winner, because a win is not as sweet if there is no loser. In England and France, where the notion of class is still very strong, the upper classes correctly think that in a win/win society they would find it much harder to maintain control and would lose their privileges. On the other hand, many in England and France proudly identify themselves with lower classes, workers, peasants, or shopkeepers, and keep to their stature in life. By contrast, in America a farmer's child would think nothing of applying, and being accepted, to Harvard.

Thus, when America proclaims a win/win foreign policy, it is being misunderstood in Europe as Europe is not yet a win/win continent. Europeans try to build a society that is stable and mutually considerate, but not by any means equal. A Norwegian King is known to ride a bus with simple workers, but it does not mean that the King pretends to be a worker, or that the workers are under any illusion that they are equal to the King. On the contrary, the difference in status is so obvious that there is no longer a need for a crown or a gilded carriage, as everyone understands their respective position. Doormen are treated without overt disrespect, but are not invited to the table. Thus, Europeans tend to suspect that America, the world's only superpower, is indicating, with varying degrees of politeness, to service personnel where their work stations would be, in the America's palace, using NATO as sort of a trade union of Palace Attendants and Guards. On that score, Europeans are almost certainly mistaken: there indeed is a catch, and a very cruel one, but it lies elsewhere.

Other countries, such as Russia, continue to be based on a lose/lose mode of social interaction. The benefits of lose/lose are even greater than that of win/lose as lose/lose takes away from all the parties to the interaction all responsibility of developing themselves. If there is no way to win, everyone can declare himself a winner. I am a former Soviet citizen, and when my sister was born, my father found (and long did he search!), bought, and boiled a chicken. Now, that was THE meal of my life; and yes, I have since been to Four Seasons. The Pew survey pointedly stated that "when it comes to conditions at home, Uzbeks and the Vietnamese were the happiest of all", with 69% of respondents pronouncing themselves satisfied. Well, this is so because these particular respondents are alive, and they are well aware that they could have been dead or could still die if their admiration for the regime is not seen as adequate. It is a shame that Iraq was not included in the survey, as 107% of Iraqi citizens will publicly state that everything in their country is magnificent, though some of them would be torn between, "magnificent" and "exceptionally magnificent".

Since you probably found the previous sentence funny, let me quote you another survey: 80% of Russians approve of Putin and 30% of Russians cannot afford basic food. Do these figures clash? No, they don't: they point to satisfaction-in-failure that is a major benefit of a lose/lose interaction. When you are out of work you find satisfaction in not having to shave every day. Now we know why Harvard freshmen are no less anxious and depressed than Calcutta beggars.

Win/win does have its benefits, but we must keep in mind that it is a personally taxing form of interaction: you must be ready for the rapid pace of development and growth because if you are not a winner you do not really belong. In an American mall you usually see a lot of prosperous people, but you also see a few people who wear sweat clothes, talk to themselves, and clearly are out of their element. To such people, living in a win/win society turned out to be a curse: in Russia, they would have belonged as here being a dropout is sort of being middle class while not drinking vodka at lunch is seen as an aberration.

The social technology of win/win is vulnerable to being misunderstood and misinterpreted because it is much too sophisticated for most people and because, being a mode of interaction of winners, it creates millions of those who are not invited to interact, millions of hopeless losers who seemingly do not exist and do not seem to matter. America's version of win/win increasingly divides the world on the manipulators and the manipulated, and the manipulators are few. Michael Jackson sings "I'm Bad" and pretends to be a member of a gang or urban thugs. But he is not "bad": all that is happening is that his company has just sold you a twenty dollar CD, a lifestyle of hopelessly confused and easily controllable jailhouse material, and made you spend hours shaking to the tune of atrocious "music" that takes away your ability to perceive and contemplate reality, that is, if you had any.

America's lifestyle is fine, provided you have a profession and do not get hooked on drugs, soap operas, food, or the New York Times. If you can earn an honest living AND avoid becoming addicted to many disguised versions of McDonald's that seek to shape you into a controllable and predictable vegetable, America is indeed the best place on earth. For a few million people living there, America has worked very well, indeed, but those are very strong and very purposeful people, probably educated more by their grandmothers than by American TV.

Since America is run by winners, while millions of America's losers are nothing but stupefied cartoon characters just waiting for their favorite TV show to start, American elite appears to have made a fateful mistake of assuming that win/win could be a lifestyle of choice for every country. This mistake was made easier by America's genuinely welcoming attitude towards winners and manipulators from other nations. If an Afghan Foreign Minister tells Americans that he will be able to build a genuine democracy in Afghanistan (for a few billions of dollars, that is), Americans are all too happy to believe him and fail to notice that the Minister speaks fluent English, which is a rarity among the Afghan herdsmen.

Democracy is not "bad" in any way, but it does require maturity and skill. Cars are not "bad" either, but maturity of an adult and a skill of a license holder are required to drive one. In America, we do not sell beer to anyone younger than 21, but we expect Afghanistan to instantaneously build a democratic state. Americans may well be naive enough to believe that this is possible, but the world is not so naive. Ordinary Afghans know that even though a kitchen is warmer and brighter than a chicken coop, a chicken appears in the kitchen only as an ingredient for a soup.

America is seen as championing the following horrifying notion: "Every person must appear (appear - note that well - as it is not necessary to actually be, and this is how the Manipulators rule the world), to be trustworthy, honest, successful, politically correct, presentable, democratically-minded, and naturally pro-American. Now, whom to appoint as honest is for Dan Rather's handlers to decide. Bin Laden also once was an Unsung Hero of Afghan Resistance.

America aggressively demands that people who could only be killers and thieves simply because they happen to occupy a particular seat of power in their, not a win/win oriented, country, appear if not honest and respectable, then at least "nice enough" for a TV picture. Average citizens of the countries in question correctly perceive this demand as disregarding their current situation, tradition, and history and see America's posture as disingenuous and threatening.

Take the raging "Who is Chubais?" debate. First, it is being said, in all seriousness, that Chubais actually may have been a crook. But who did you want him to be, considering the position he was occupying, in a country he was occupying it in? Why does a quest for a beautiful dreamy virgin with whom to hold hands while reciting romantic poetry guide so many men as they visit a bordello? And then it works the other way around: OK, here is a beautiful romantic virgin who has been working in this whorehouse for the last five years, but why would she want to hold hands with you, you stinking ugly goat? And indeed, when Russia was paying 150% per month on its GKOs, Chubais was a hero, but when it all came tumbling down we discovered that Chubais failed to tell the world's leading economists that this orgy was unsustainable. They did not know, you see, being so naive and trusting. Those who claim that Chubais was "bad" must make sure that their work is not being used to claim that the Harvard Institute for International Development was not all that bad, just a bit too nice and hopeful to subject things to doubt. I repeat, people feel that this is disingenuous and think that America has grown much too slick for so powerful a country.

Regardless of the conclusions of the UN inspectors, America will soon declare war on Iraq. American government is virtual, powerful, fast, and absolutely uncontrolled. This government will be through vaporizing a few hundred thousand shish kebob sellers and olive growers by the time the citizens that are supposed to be controlling it reach the third track of their Britney Spears record. Thousands of Iraqi peasants will be no more while Juicy Fruit chewing gum is still sweet in American mouth. What for?

President Bush's stated (I insist on this important word) objective of removing Saddam and his henchmen is an honorable one. I agree that tortures and killings of innocent people are an intolerable affront to the entire human race. Moreover, I think that it is a great advance, a revolution, to insist that all people have a right to live free from horrors of a dictatorship. This stance shows that the concept of non-interference into internal affairs of other states, whatever they may be, is outdated and is a product of a win/lose mentality that assumes that a state would only interfere to subjugate and plunder.

If America champions justice and good government, and not just because gory murders happened to clash with a plastic, Barbie Doll notion of "nice", it is all to the better. But Desert Storm stopped short of removing Saddam from power, and I felt horribly betrayed. I felt that Americans killed thousands of Iraqis for a reason that was not good enough; quite possibly, killed more Iraqis than were ever killed by Saddam. I noted that President Bush did not apologize for ten additional years of Saddam that his father could and should have saved Iraqis from. Bush said that America is a friend of Iraqi people, but the leaflets we drop on Iraqi frontline troops, i.e. on people who are not good enough to be protected by Saddam, are threatening and insulting. Ordinary Iraqis now have reasons to suspect that America's declared friendship is not genuine, and that they may yet again be caught in the middle.

But why would Canadians, of all people, be suspect of America's motives and why did wealthy, English-speaking Saudis play such a prominent role in the September 11 terrorist attack? Win/win is the way, but America's prevailing version of it is not. The world wisely does not accept the American definition of "winning": it does not want to see Rocky-76 or attend the "One trillion Big Macs sold" celebration.

American artists are increasingly unwilling to open their hearts to the world: there is no Mona Lisa smile in a Jackson Pollock painting and a blood-soaked heart that beats in Rocky5 is violent and kitschy. Hollywood is not making Tarkovsky or Ryazanov movies, and when America does make a film about real people, such as American Beauty, it usually shows America as phony and threatening, a place where real people can't live. Just compare the Russian and the American version of Winnie the Pooh: Russian Winnie is kind and wise, while the American one is a crook dead set on getting the honey. Why is it that real America is so much kinder and wiser than the pop culture that it tries to impose on the world?

America may be fine as long as it gets to handpick its enemies and as long as it picks someone as vile as Saddam. But the real enemy of America is not Saddam: it is the world that is alarmed that America may use force to impose the fake and violent vision of human existence, the vision that hides and misrepresents the true face of America.

Let us define aggression as deliberate policy that causes grave damage to another country. The case has been made that environmental policy of certain countries, including America, amounts to aggression. And how would we define an imposition on another country of a political system that causes grave damage to it? Certainly, that would be an aggression. Unfortunately, imposition of democracy on an authoritarian and/or underdeveloped country may well qualify as aggression. Russian experience since 1991 can only be described as a catastrophe, and playing "democracy" with gullible and confused population had much to do with it.

Another type of aggression is exemplified by the worldwide expansion of MTV. America is sophisticated enough, rich enough, or absent-minded enough to accept MTV as part of its culture and disregard the losses that are caused by it. But please allow other countries to be of the opinion that fourteen year olds were not born to shake and should not be imitating the cultural depth and the irreverence of the ghetto culture. I mean it, motherfucka!

The more sophisticated America becomes in its presentation the emptier it appears, and this is horrifying. Seen from the inside, America is fundamentally healthy and fair, and its tremendous creative potential is a proof of that. Thanks to the people whose creative energies America did everything to liberate and protect, America is very strong militarily and economically, but since the outside world sees America as frightfully empty, this strength comes off as very threatening. People of the world are thinking that America tries to force them to listen exclusively to Britney Spears, to take their language and thinking away, and, boy, this is, like, sick or something.

Now the source of the world's distrust of America becomes clear: there are two wars going on simultaneously, with one war disguising and masking the other. One is the war of lose/lose with win/win, the so-called war on terrorism, or the coming attempt to remove Saddam from power. The other war is America being seen as imposing its plastic version of win/win on the world that, even though it may not be ready for the genuine win/win, senses that the American version of win/win would mean the end of human civilization. America should not be seen as fighting the world's culture, traditions, and the objective realities that exist in various human societies. America must present to the world a considerably more genuine and realistic version of win/win, lest it be seen as worshipping a wrong Madonna and fighting on her side against the world.

Like no other country, America for most of its history has tried to have Truth and Justice on its side, not just strength. Why is it that in a recent Russian movie Brat-2 a Russian says to American, "Ne v sile bog, a v pravde" (God is in Truth not in Violence)? Why is America now seen as imposing on the world artificial emotions, retouched images, and engineered sounds?

National Security Advisor Rice has stated that America is a "special country", and she is absolutely right. America gives opportunities to all and effectively defends the rights of its citizens; in a final analysis, it is the citizens' fault that so many of them self-destruct and submit to brainwashing. Americans can be as successful, as secure, as honest, as caring, as magnanimous as they wish - there is no impediment and no fear, no coercion or shame. And that makes America special. America stands for win/win, and that is why America is an object of hatred of the lose/lose crowd.

But being a citizen of a special country can mean only one thing: all of us must now be as good as we can be because we have already been credited as being "special". Ms. Rice should have known that in the 20th century several countries declared themselves as "special": Communist Russia, Nazi Germany, and Imperial Japan. If being a citizen of a "special country" means that individually Americans no longer need to be moral, that they can trample other countries underfoot and wreck havoc, if we can now line our own pockets while ostensibly being on a mission of assistance - then I would term Ms. Rice's assertion as extremely dangerous. It is too convenient to assume that an Arabic-speaking bearded guy in a turban is THE enemy. For Americans, it is sometimes better to remember the expression, "We have met the enemy, and it is us."

1,001 uses for Bush

2004-05-26T16:36:00.000+02:00

1,001 uses for Bush
By Arnaldo Jabor

There's a good side to Bush: he has 1,001 uses. Bush is good because he shows us the hypocrisy that was hiding under the "democratic globalization" marketing.
Bush teaches us that political systems are slower than changes in social and economic life. Bush shows us the need to reform civil society; it has become clear that democracy is abstract in the face of the invincible brutality of things. Bush reminds us things have desires of their own. Bombs want to go off, cannons yearn to fire. A 500bil budget craves being used.

Bush, by means of so many mistakes and authoritarianism, may reawaken the hunger for democracy in America. Bush reminds us that the Right is very alive and that multilateralism only existed for America while she needed Europe, during the Cold War. With the end of bipolarity, the USSR finished, they stood absolute, arrogant, and unilateral.
Bush reminds us stupidity is way stronger than reason.
Bush shows us the hole is deeper.

With Bush we are realizing it is the Iraqis dying, and the crazy soldiers performing pornographic torture, who are defending the return of an international democratic multilateralism.

Bush teaches us the Truth of America, with no veils — teaches that democracy has to react inside there, because half the population wants hamburger, root beer and authoritarian war.

Bush makes us hate the Republicans' stupidity. Bush has taught us the West is much more fragile than we thought. Bush learned everything with Osama, his Lord and Master, whom he obeys blindly. By the way, Osama would vote for Bush, who just profits him with his (Bush's) mistakes. Bush shows us the lunatic fringe of America may become the majority. Bush wants it. Bush teaches that the politics of reason no longer moves the wheel of society. Through him, we learn that Fascism is stupidity in power.

With Bush we understand that, before ideologies, there is the mental disease that begets them. Be it the Communist omnipotence of "paradise", be it the neoliberal idiocy of "end of History", be it the Fascist lust for death to ravage cultural and political differences.

Bush teaches us there will never be a harmonic, Platonic world — something Machiavelli had already foreseen — and our dreams of eternal peace are unachievable. Bush wants to convince us that Kant was a dumbass. That Hobbes is the one who had the feel of things. Kant was quite naive in his dreams of universal government, and Hobbes was certainly closer to today's world.

Bush shows us the Iraq War is just the reflex of a broader war against the West, waged by him and his cohorts.

Bush shows us that Americans envy Europe and believe their conciliatory, political maturity to be a flaw of weak people, with no will to fight. He tells us Europe wants to tame the "Leviathan" with words and ideas.
But, on the other hand, Bush is living proof of the impossibility to impose democracy and freedom through the force of arms. You can't win the hearts and minds of a country with explosions and gunfire.

Bush showed that sexual issues are stronger than war in America. That neurosis and religious repression are stronger than the Enlightenment. Nobody thinks of impeaching him, he who is destroying his country's prestige and threatening the West, not to speak of creating millions of man-bombs. On the flip side, Clinton happened to bang the girl and almost got kicked out.

Bush showed that politics today is ruled by the financial bourgeois. No trace of the former "greatness" of liberal ideology.

Bush is not a person. He's an end product. Centuries of Puritanism, and years of the neocon gang, made him their speaker. Bush is a businessman. No, wait: he's a middleman for the oil industry.
Bush wants to create a new "American way of life" — the wrong way. He wants to revert everything that was won in the 60s and 70s, civil rights, liberties for minorities.

Bush teaches us the main enemy is no longer the old cigar smoking "bourgeois"; the enemy today is a business method, it's the capitalism of speculation and financial flows.
Bush teaches the new Lefts that they have to change their goals and methods. Before, the Left thought of unity. Today, it's the fundamentalist Right and turbo-capitalism who want "unity", dreaming of a world ruled by one single megabusiness, World Inc. Before, the Left searched for the "absolute"; today, they wish for the relative. Bush teaches us we can no longer fight with just the weapons of the old nation-state.

Bush is helping to awaken civil society from its dream of dependence; it has to organize more and more to jump-start the jammed machine of States and governments. However, the terrible evidence of Bush's errors may make the West better.

Bush, along with Osama, teaches that religion is not the opium of the people — it's the bomb of the people. Bush is the red alert that says: if America becomes populist and authoritarian, adopting the "politics of fear", anything may happen. Including the end of the world.

(this is a translation from someone at Democratic Underground in their Editorials thread.)

Some info about me

2004-05-26T16:06:00.000+02:00

As you may have realised, I'm French - and worse, a Parisian (who think of the "provinciaux" what the French think of the rest of the world...).

I am not anti-American, although this is (sadly) a real trait of many French, explained in my view by jealousy, i.e. the US is playing in the world the role that really belongs to the French. Both our countries have been built on similar idealistic and messianic values, a sense of mission to "civilise" the world, and a strong tradition of immigration - but the US is now much bigger and consequently wields a much larger influence on world affairs.

I am definitely anti- the current administration, which I think is making a mistake of historic proportions by giving up on the values of the Western world by endorsing torture, despising the UN, ignoring the existing (still insufficient, but growing) body of international law and spurning allies.
The US had the extraordinary opportunity to lead by example following 9/11, by showing that, even in the face of terrible adversity, they would react by sticking to their values (which are also Europe's values), show restraint, and ultimately prevail in an uncontestable way - by pushing for and enforcing international rules applies to all, including the US. Instead, we had "might is right", we have spite and arrogance, we have Abu Ghraib, and we have a worrying "Likudisation" of the country. Nothing new in the history of mankind - but that's precisely my point: this was an opportunity to change the world for the better. Europe would have gone along gladly, Russia, China and most of the rest of the world would have stayed out of the way. Now, we have China noting, with glee I am sure, the precedent set by this administration's behavior.

Anyway, back to me. Married, 3 young kids (my contribution to solving the looming pensions crisis!), a banker working in the energy sector (oil & renewables, an interesting combination - I'll try to post more about both if anybody is interested --- shameless attempt to be encouraged on ---). Very pro-European (I was born in Strasbourg, on the German border, home of the Europen Parliament, the Council of Europe and the European court of Human Rights). Anti-religion as an institution. Avid science fiction reader (I heartily recommend Lois MacMaster Bujold). Very aware (probably from all these trips to the Soviet Union and Russia) of the thin line between liberal and autocratic worlds and the ease with which the dark side of human nature can come to the fore ("the price of liberty is eternal vigilance"). And generally a contrarian.

Definitely not a frog or snail eater, and a fan of new world (especially Australia and California) red wines, as well as, with the right friends, a good bottle of very cold vodka.

Memos Reveal War Crimes Warnings

2004-05-19T17:55:00.000+02:00

By Michael Isikoff
Investigative Correspondent
Newsweek

Updated: 9:14 a.m. ET May 19, 2004May 17 - The White House's top lawyer warned more than two years ago that U.S. officials could be prosecuted for "war crimes" as a result of new and unorthodox measures used by the Bush administration

The concern about possible future prosecution for war crimes—and that it might even apply to Bush adminstration officials themselves— is contained in a crucial portion of an internal January 25, 2002, memo by White House counsel Alberto Gonzales obtained by NEWSWEEK. It urges President George Bush declare the war in Afghanistan, including the detention of Taliban and Al Qaeda fighters, exempt from the provisions of the Geneva Convention.

Army General Says U.S. Has 75 Prison Abuse Cases

2004-05-19T17:35:00.000+02:00

Army Gen. John Abizaid, who is responsible for military operations in Iraq and Afghanistan, told the Senate Armed Services Committee there were systemic problems at the Abu Ghraib prison near Baghdad, where U.S. personnel took photographs of detainees being abused and sexually humiliated that have shocked and angered Americans and fueled anti-American anger overseas.

"The total number of detainee abuse cases that have been investigated since I believe the beginning of the conflict in Afghanistan is around 75," Abizaid told the committee.

He said the army was still investigating several homicides in Afghanistan that went as far back as December 2002 and which needed to be resolved quickly.

"Abuse has happened in Afghanistan, it's happened in Iraq, it's happened at various places. I think the question before us: is there a systemic abuse problem with regard to interrogation that exists in the Central Command area of operations," Abizaid said.

The French experience with terrorism

2004-05-17T21:16:00.000+02:00

Maybe something can be learnt from the French experience with Islamic terrorism. As you may remember, there were two big waves of bombings, in 1986 and 1995. In each case, you had bombs in metros, restaurants, large stores, with each time a few people killed and several dozen injured, about once or twice a week for two or three months, most of it in Paris.

The first time, the interior minister famously claimed that "we would terrorize the terrorists" (that was after bombing n°2 of 10 or so). This did not work...
What did work was painstaking police work, understanding the network, infliltrating them, doing quiet diplomacy to kill off support from other countries. In both cases, ALL the terrorists were arrested. In the second case, it was significantly faster and one of the terrorists was killed before he could do a new bombing. (Ironically, the only terrorist not in jail in France today is the financier of the network, held in the UK because UK courts judged that his rights would not be protected by the savage French... 9/11 was not sufficient to change that).

The lesson, in any case, is that police work DOES work (and remember, back then, international cooperation was even worse than now). no need to invade Algeria, to bomb Lybia or whatever else could have been "desirable".
And everybody knows it even today. All the bomb plots that have been foiled in the past two years were so because of good ol'fashioned police work, not thanks to military action (I'll caveat with the possible value of military intelligence in that context...) - and note that the European govenrments have fully cooperated with the US on the law enforcement side, even at the worst times of the Iraq spat... Some people have kept their eyes on the ball, even in the US.

The point is that with police work, we are within the usual norms of a democratic society and we do not need to compromise our values. We fight back and do not give up our soul to do so.

Hot showers

2004-05-16T23:13:00.000+02:00

I've been visiting the Soviet Union and Russia since 1987, i.e. when it was still the "Evil Empire". and that name was actually very exact. The people were incredibly friendly and nice in private, but the system was really nasty. Back then, and even now, I felt a distinct relief when my plane would take off from Moscow to take me back home, because I was away from the clutches of the local authorities, the potentiality of arbitrariness had disappeared. This may sound paranoid, but it was true. Most of the time, nothing ever happened to you, but it could, people knew it, and acted accordingly. Fear, permanent bureaucratic CYA-ism and lack of trust were prevalent. One major consequence was that people lived in the present, because there could very well be no future the next day. They would concentrate on enjoying the moment and spending time much more intensely with their friends and close relatives. For human relations, it was great, but for the economy it was not so good ( "you pretend to pay us and we pretend to work" was a pretty accurate summary) and after the breakdown of the system it was a catastrophe - no investment, no trust in institutions, and a field day for predators of all kinds.

I was quite young on that first trip (still a teenager), and I've never forgotten the vivid impressions from then. Civilisation is but a giant illusion: basically, it exists because all of us pretend that it does, and act accordingly. Other systems are similarly based on the illusion of their omnipotence and irrepleceability (sp?). As soon as facts do not coincide with that illusion, everybody switches back very quickly to survival mode (in Hobbes' Leviathan style) and things get nasty very quickly - you live day-to-day, looting is prevalent, people take security in their own hands very quickly, you trust no one.
The Soviet Union was the Leviathan - a nasty tyrant, with the monopoly of violence, propped up by everybody against their individual will. Russia was then for a few years man without the Leviathan, and it was terryfing: no tyrant, but no other way to organise relations and to channel violence. People retreated to the most basic principles and were totally vulnerable to violence from any source, which duly appeared, in the form of extorsionists, bureaucrats-turned-racketeers and so forth. Now these "mafias" and other organised violent groups have coalesced and structured again and Putin has pretty much recaptured the monopoly of violence for the State - and while it looks bad from the West's point of view, it is a real progress for ordinary Russians, which is why he is so popular. Security is the first liberty. (This lesson is fully applicable to Iraq today).

I often think about these past 15 years in Russia whenever I take a hot shower. Hot water, for some reason, is the embodiment of civilisation in my mind, and I enjoy this luxury every single day, thinking that any tear in the fabric of our Western world could bring this down and tragically make hot water disappear from normal daily life. (Of course, the paradox is that hot water is one of the few things that were never put in jeopardy in Russia's recent history!)

For further thoughts on this, I can recommend two great French science-fiction books dealing with that them:
René Barjavel "Ravage" (Can't find a translation in English)
Robert Merle "Malevil" (same title, trans. by D. Coltman in English)

My point is not to depress you all, but to remind you of the luck we have in living in the Western world, with its openness, its (relative) freedom and its (imperfect) ability to contain evil within man and improve itself.

If you look at all the big ideologies like communism, anarchy, etc... they basically are utopian and are premised on an ideal version of man. If man was good, fair, etc..., communism would indeed be easy to get to work - and would indeed be better for mankind, taking into account the public interest. The problem is that any system would work if man was perfect - capitalism, aristocracy, enlightened dictature, etc... but man IS NOT perfect.
Man is complex, with a real capacity for evil, and a basic tendency to be lazy and selfish - and these are good survival traits!
Democracy - checks and balances - and capitalism - based on the rule of law, with a strong State to enforce them fairly - work because they are built on realistic assumtions about man, not on an idealised vision, and structure their institutions accordingly - the main goal being to not allow impunity (see a previous post above in this respect) and to protect each and all form the nastiest instincts of the others.
Of course, it's never perfect, and people still do bad stuff and worse, still get away with stuff, but it is meant to be a self correcting system, and, for the most part, it does work. However, it works only if most people do believe that it works, trust their institutions and trigger them when necessary to correct any deviation or excess.
Religion usually starts from a similar premise (man is imperfect) and provides rules and institutions that can work. However, the injection of absolutes into politics makes it a sometimes very blunt - and easily corrupted - instrument to channel human behaviour.

Anyway, I don't even remember my initial point - is it "enjoy your showers"? In a sense, yes: do enjoy life every day, and remember that we live in a system which we all contribute to create and should defend.

Impunity is always the biggest danger.

2004-05-16T16:46:00.000+02:00

If people in power get the impression that they can get away with whatever crime or misdemeanor they're doing, they will do the crime/misdemeanor again and again.
The "getting away" will include (1) framing the debate beforehand, (2) using every tool/pressure to prevent the story from coming out, and (3) every legal procedure to avoid any formal culpability if it gets to the judicial system.

In the US, 9/11 was seen as an amazing opportunity to push very far and very hard a very nasty political agenda (step 1):
(i) push the "might is right" logic at a time when the population felt justifiably "wronged" by the attack
(ii) get rid of many "troublesome" checks and balances of the system under the pretext of the WoT, with a shaken US public not willing to question their leadership in a perceived time of national crisis
(iii) include in the WoT many neocon goals that have only a tangential link to it (they involve Arabs of some kind)
(iv) paint any critics as objective supporters of terrorists, appeasers and so forth.

Bad stuff, especially so much of it, especially when it affects many countries around the world in matters of life and death, usually comes out eventually, and it duly did here. (coming out means not the actual facts, which have been known long to those who care, but a format impossible to ignore by Joe Public - this time it was particularly spectacular).

We now are in phase 2 of the getting away with it - preventing the full story to come out; Thankfully, American democracy still works and the focus of the media is on real stuff, and we'll hopefully get to phase 3.

Phase 3 is the hardest part, because these guys will fight back and can afford the best and nastiest lawyers, if it gets to that. We'll see. But apart form legal punishment, there is a political price which can be imposed on them.

As someone mentioned earlier, the Bush administration only understands force. If they are not thoroughly destroyed (i.e. both discredited and sent away), they will keep on polluting the political landscape. This means that they must lose ALL the elections in November, not just the WH. Nothing short of a major political swing will be sufficient. If they can also be brought to justice, so much the better, but the political defeat is the first step.

A Kerry win will give the positive signal that (enough) Americans do not condone what has happened, but only a victory in Congress will give him the actual means to really do something about the current mess, and to really discredit the bush/neocon version of the Republicans.

mass transit in cities

2004-05-15T20:36:00.000+02:00

Regarding public transport, please go see this very enlightening post from Kevin Drum about the book Edge City, by Joel Garreau.

A few extracts:

And finally, a series of laws that helps explain the lack of mass transit in edge cities and why this will never change. Note that "FAR" stands for "Floor-to-Area Ratio," the ratio of the total floorspace of a building to the area of the land the building is on. It's basically a measure of population density.
- The level of density at which automobile congestion starts becoming noticeable in edge city: 0.25 FAR.
- The level of density at which it is necessary to construct parking garages instead of parking lots because you have run out of land: 0.4 FAR.
- The level of density at which traffic jams become a major political issue in edge city: 1.0 FAR.
- The level of density beyond which few edge cities ever get: 1.5 FAR.
- The level of density at which light rail transit starts making economic sense: 2.0 FAR.
- The level of density of a typical old downtown: 5.0 FAR.
The density-gap corollary to the laws of density: Edge cities always develop to the point where they become dense enough to make people crazy with the traffic, but rarely, if ever, do they get dense enough to support the rail alternative to automobile traffic.

energy economics

2004-05-15T16:09:00.000+02:00

There is a fundamental shift in the economics of oil (and gas): the expensive part is not the actual production, it's the transportation of the energy.

For oil to get to your car form the field, it goes on pipelines (that's where the transportation cost lies), on a tanker, again in a pipe to the refinery, then by pipe or rail to be distributed.
gas goes from the field to power plants, big industrial users or retail distribution networks through the pipe network or via the LNG chain: pipe, liquefaction, LNG tanker, regasification (transportation cost includes all these), pipe.

The first stage of transport has interesting political and strategic dynamics, in many ways different from production.

(i) without transportation, there is no production, so anybody with real control over anything in the production-and-transportation chain effectively has veto rights on the production.

(ii) the correlate of this is that you have to spend all the money upfront to build the whole production-and-transportation chain before you get one cent in income. This means that being able to finance all of it is vital. The bankers (that's me) (or the oil companies which have spare cash, damn them) effectively also have veto rights. That means that the Western corporate world controls access, except for countries or companies that are strong enough or smart enough to pay for their own investments.

(iii) with easily accessible resources declining, you have to go for the less accessible potential production areas - and you have to bring the oil or gas back through more and more exotic situations:
(a) more difficult terrain;
(b) more difficult countries (poor, inexperienced, corrupt,...)
(c) ecologically sensitive zones, with vigilant NGOs
(d) borders, with third party countries involvement (including countries which do not have reserves but see the potential to earn cash).

Anybody with physical, legal or other control of any of these, or who can make bad publicity about it, needs to be engaged, brought on board and satisfied.

Building a pipeline or a LNG plant has therefore become a hugely complex endeavor where you have to accomodate the (often contradictory) wishes of many different parties - and you have to make sure that everybody will be happy for A LONG TIME, because you investment will typically require 10 years to pay off. It's a mixture of industrial issues, project economics, domestic politics and international diplomacy. It's not easy, and in practice, only the big oil majors can do it (ExxonMobil, BP, Shell, Total, ChevronTexaco and a couple others), and most of the time they create consortia to be stronger.

To summarise: transportation is becoming the most important part of the business, it requires a lot of upfront money, and it requires that you piss nobody significant off. Only the West can do it, which opens interesting co-dependency issues...

Energy is not a black-and white, "you're with us or against us business". We're all in it together (and that "we" includes most of the planet). It would actually be quite ironic to see this quintessentially oil-buddies-administration be brought back to reality by the real world constraints of the international business.

2$/gallon?

2004-05-15T15:11:00.000+02:00

We've been living in Europe with prices above 1EUR/litre (4$/gallon) for close to 20 years (with some ups and downs, but not that much).

- the thing is that when taxes are 80% of the price of gas, the changes in the price of oil have a much more subdued impact

- a middle sized country like France has more tax income than Saudi Arabia from oil (strange but true)

- the worst is that, even at these prices, and even with heavily subsidised and efficient (from the consumer's point of view, I mean: fast, frequant and comfortable, not efficiently-run!) railways, it it STILL CHEAPER to travel by car in many cases. (the fuel bill per kilometer is pretty much the same in the US and Europe because the cars here are smaller and more fuel-efficient, even though we drive faster).

We WILL adapt easily to higher oil prices. We'll grumble but go on. Some politicians may be kicked out, but not to much effect. We'll worry more about MPG, energy savings, etc... but get on with our lifes. The car industry will make further steps towards lesser oil-dependence, such as the hybrid engines and eventually fuel cells, which will move the problem to electricity production, where it is easier to diversify sources.

On the international stage, higher oil prices are useful because they bring into play non-Persian oil and energy sources:

(i) energy savings,

(ii) deep offshore (North Sea, Gulf of Mexico, Brazil, Africa) ,

(iii) Canadian oil sands

(iv) switch to electricity from gas, coal, nuclear, wind.

All of these (except for natural gas) are produced domestically, from reliable sources (Canada, Australia or diverse Third World countries) or require high technology and lots of investments, things that we fully control.

BTW do not dismiss wind out of hand; I work in that sector (more precisely, I finance this sector, in a real private-owned investment bank) and it WILL be the big energy story of the next 10 years. It's no longer an industry for hippies or other dreamers. It's a 10b$ high-tech industry (it's aerospace - blades, mechanical/electric gear - gearboxes, generators and construciton - lot's of good jobs, all at home). I'll write more on the subject later.

China will actually have a hell of a lot more trouble adapting their industry-driven economic model to much higher oil prices; Look for trouble there first form the oil crisis...

... and remember the famous quote from an earlier Saudi minister of oil: "the stone age did not end for lack of stone"

Another view on Sadr (from Tacitus)

2004-05-14T16:38:00.000+02:00

Amy Ridenour received an illuminating e-mail from Army Spc. Joe Roche, who is on the front lines in the fight against Sadr and his mafia. Starting in April 2003, the U.S. began strategizing on how to deal with Sadr, and they set four primary goals, excerpted below:

Goal one: His so-called Mahdi Army militia is fighting alone. We are out defeating them day and night, and all the time we find them exposed and vulnerable. The people of Baghdad, Karbala and Najaf are not supporting him. His forces are isolated.

Goal two: His one-time powerbase, Sadr City in Baghdad, has been lost. Sadr has been exiled from there, and we have him on the run. He is trying to cloak his presence and activities in Najaf and Kut as planned, but that is damage control on his part. Yes we confront pockets of his followers. Just a couple days ago, I had to maneuver around such a crowd of 300 in Sadr City. The point is, though, we operate in Sadr City, and his followers are merely trying to raise the lost cause of his. It is perhaps better to understand why he is able to mobilize groups like this by seeing him as a mafia leader who is just sacrificing his own people in a mad last plunge to grab onto power. He is no different from any other thug in the world who manipulates and betrays his followers for his own lost cause. The critical thing to see, however, is that in Baghdad, Sadr is gone. He has been effectively exiled and we are destroying his one-time properties of power and abuse there.

Goal three: Other Shia leaders are breaking from him now in large numbers. The overall Shia leader of Iraq, Grand Ayatollah Ali Sistani, has left Sadr's call for jihad and uprising to flounder on deaf ears. Bremmer and Gen. Abizaid stunned the overall Shia community by negotiating a calm in Fallujah. That has tail-spinned Sadr and his efforts to intimidate Iraq's Shia leaders. They see the US hand is strong, and that therefore they are making a mistake in kowtowing to Sadr's terror and violence.
Sadr is now running scared in Najaf. This is great. The Iraqi people of Najaf are offended by this Baghdad thug coming to their city and trying to hijack them into conflict with us. His militias have moved into Karbala too, and the same sentiment is being expressed by the people there. Sadr and his Mahdi Army militia are occupiers of those cities, and are insulting the most sacred sites of Shia Islam daily in their actions. Sadr's forces have stockpiled weapons in mosques and schools, and he continuously is going into the Imam Ali Mosque to call for jihad against us. This is offending Iraq's Shia leaders very much, and the Shia people are not following.

Our units, in fact, are operating w/in 500 meters of the most sacred Shia religious sites in these cities, and you should notice that the local people are not resisting. This is what the pessimists amongst you are preventing you from understanding. Something like this would have been impossible before Sadr and his militia thugs went into there to hijack Iraqi Shia Islam. The people of Najaf and Karbala know we are not there to conquer and occupying the religious sites; we are there to liberate them from this would-be tyrant who is trying to hijack them. His uprising has been contained, despite Sadr's desperate efforts to expand.

Goal four: Now Sadr's patrons and mentor in Iran are breaking from him. Grand Ayatollah Hossain Kazzam Haeri in Qom, Iran, is no longer backing him and has instead made it clear that Sadr's uprising is not sanctioned. Haeri is his mentor, and was a close intimate to Sadr's respectable father. The Teheran Times has run stories that are largely exaggerated, but still are making clear that Sadr's uprising is counter to Iranian interests and does not have the support of even one of Iran's grand statesman, Hashemi Rafsanjani.

In lieu of this, Sadr has exploded increasingly desperate and offensive. On Friday, he offended perhaps the whole Muslim world when he issued a fatwa (a religious edict) that if his forces in Basra capture a female British soldier, they can keep her as a slave. And as I pointed out already, his militia thugs in Najaf and Karbala are keeping weapons in mosques and schools.

In this, quite frankly, Sadr has done it to himself. He has compelled his would-be supporters amongst Iran's hard-liners to break from him and to put distance between Iran's interests and Sadr's uprising. Along with this, Shiites all over Iraq are breaking from Sadr and ignoring his frantic calls for jihad and slave-taking. Sadr has been abandoned.

Miscellanous Oil & Iraq issues

2004-05-14T15:52:00.000+02:00

Comments posted on Billmon's blog

- the Afghan pipe. First of all, it would be a natural gas pipe, not an oil pipe, so it's a totally different market. Trust me, this pipe will NEVER be built, for the simple reason that it is not financeable:

(i) there is no creditworthy market on the other side - and it is the buyers of the commodity that ultimately pay for the pipe investment. India or Pakistan are not good risks.

(ii) the gas would come from existing Centrla Asian fields already in production - and already linked to markets via the fromer Soviet pipes. The fact that Russia does not give them good terms on the pipes they control does not mean that they could not, which means that the new pipe would not be competitive (you cannot compete with an already built and paid for infrastructure unless there is demande for more capacity, which there is NOT in that region).

- Caspian oil and the Georigan pipe. Just a quibble: the pipe (called BTC - Baku-Tbilisi-Ceyhan) is currently under construction and will come onstream early next year. Its financing was put in place early this year, with World Bank, EBRD, several Export Credit Agencies and 15 international banks.
The view of journalists and pundits on Caspian reserves has varied much more than the actual reserve estimates... It's one of the major "oil provinces" around the world which are both outside the Persian Gulf, accessible to Western oil majors (along with the Gulf of Guinea offshore Western Africa) and with significant reserves (at least for 20-30 years), so it will be developped and yes, it is important strategically.

- Peak Oil. It's real, but I'm inclined to think that we'll manage to keep on pushing it further away again and again. Better technology, better use of existing fields (for instance, 50% of the "new" reserves of the big oil majors in recent years actually comes from reassessments of existing fields), a few more discoveries in underexplored regions (the whole Former Soviet Union, for one). Plus, the inevitable (in my eyes) increase in oil prices will make more fields viable and new technologies (oil sands, GTL) economic at such new prices, thus pushing further away the decline.
Of course, in the very long term, this is not viable, but this does give us a few more decades to develop renewable energy, fusion or other yet-unknown technologies.

- Natural gas. IS NOT DEAD. We have a lot more of it than we have oil. (When I say we, I mean Russia and Iran, actually, which jointly have 70%).
The problem of oil, as opposed to other energy sources, is that it is needed for transport and petrochemicals. If we manage to switch to fuel-cells or electric cars, then the problem of transportation becomes one of electricity generation, where many different sources can be used (gas, coal, nuclear, renewables), where the West is much less dependent on the Middle East overall.

- an obvious point (at the risk of starting a "SUV thread": our biggest reserves are in energy savings. The US needs to tax oil as it is taxed in Europe. As a kid in the 70s, I remember hearing that there would be riots when gas prices would reach 25c/gallon (they were at 10c or so then). Prices in Europe are at approx. 5$/gallon and there have been no riots...

Oil in Iraq

2004-05-14T00:16:00.000+02:00

The thing to remember about oil is that what's important is not usually (the exception is during times of warfare, when ships are actually sunk or so forth) the control of oil but the control of the oil rent, i.e. the difference between the low production cost and the high(er) market price.

Let me explain: oil will be sold, at the market price. This is true for Iraq, Iran, Russia, etc... They NEED to sell the oil. Where the oil goes physically is unimportant because the market is worldwide - it really is one of the most liquid markets you can find.
The only conflict is on the rent. Since the 50s, with the nationalisation of many countries' production capacity and/or the negotiation of PSAs (production sharing agreements), most of that rent goes to the producing country. The big oil companies (whether US, European, or otherwise) get a share of the production ("cost oil") to cover their investments plus a decent return (usually in the 15-20% range) at "normal" oil prices (i.e. 20$/barrel). The excess ("profit oil"), after paying off investments and/or if prices are higher, is shared, with most of it going to the country (usually close to 90% at the marginal rate).
So, either you take the rent, by selling iraqi oil to US interests (which amounts today to stealing Iraq's assets) or you are not in a very different situation from before. As far as I know, the rent is currently controlled by the IGC / CPA but meant to be used inside Iraq. I do not know how much is allocated to Halliburton & co, but this is a question about sovereignty (who controls the budget) and not really about oil (although of course the existence of oil makes the amount at stake bigger).
You will notice that you never hear about Exxon or other BigOil in Iraq. They're NOT there. They make 20-30 year investments, and the only way to make a return is over the long term, which means to have legal contracts with a legitimate contracting authority, which does not exist in Iraq today. (This will actually be a good test of Iraq's actual sovereignty - when big contracts are signed with an international oil company).

Oil prices are going up today because nobody anticipated Chinese demand, plus a risk premium for possible bombings on oil installations in Saudi Arabia or similar.

Bush 2004 Campaign Pledges To Restore Honor And Dignity To White House

2004-05-13T22:54:00.000+02:00

BOSTON - Addressing guests at a $2,000-a-plate fundraiser, George W. Bush pledged Monday that, if re-elected in November, he and running mate Dick Cheney will "restore honor and dignity to the White House."
"After years of false statements and empty promises, it's time for big changes in Washington," Bush said. "We need a president who will finally stand up and fight against the lies and corruption. It's time to renew the faith the people once had in the White House. If elected, I pledge to usher in a new era of integrity inside the Oval Office."
Bush told the crowd that, if given the opportunity, he would work to reestablish the goodwill of the American people "from the very first hour of the very first day" of his second term.
"The people have spoken," Bush said. "They said they want change. They said it's time to clean up Washington. They're tired of politics as usual. They're tired of the pursuit of self-interest that has gripped Washington. They want to see an end to partisan bickering and closed-door decision-making. If I'm elected, I'll make sure that the American people can once again place their trust in the White House."
Bush said the soaring national debt and the lengthy war in Iraq have shaken Americans' faith in the highest levels of government.
"A credibility gap has opened between the Oval Office and America," Bush said. "The public hears talk, but they don't see any result. But if you choose me as your next president, the promises I make in my inaugural address will actually mean something. The president of this country will be held accountable for his promises, starting Jan. 20 of next year."

Study Says Bush used 27 different rationales for war in Iraq

2004-05-13T22:48:00.000+02:00

"If it seems that there have been quite a few rationales for going to war in Iraq, that�s because there have been quite a few � 27, in fact, all floated between Sept. 12, 2001, and Oct. 11, 2002, according to a new study from the University of Illinois at Urbana-Champaign. All but four of the rationales originated with the administration of President George W. Bush.
The study also finds that the Bush administration switched its focus from Osama bin Laden to Saddam Hussein early on � only five months after the Sept. 11 terrorist attacks in the United States."

There is a link to the actual study in the link.

Oil and China

2004-05-07T18:18:00.000+02:00

Initially (and rightly in my view) seen as the main strategic threat of the USA by the Bush administration, China has been overshadowed since 9/11 by the priority given to the War on Terror (and China has been extra careful to remain discreet on the international scene during this period). This cannot last.

The strong growth of the Chinese economy under the rigid control of the Communist Party apparatus and a fixed currency peg is showing strains on many fronts, most notably the inflation, which threaten to spill into the world economy. The even stronger growth of Chinese imports of commodities and raw materials is having a devastating impact on the world prices of these goods and rapidly having a strategic impact for developped economies. In particular, the significance of the fact that China has overtaken Japan as the second largest importer of crude oil cannot be overstated.

China now worries about the Middle East, about shipping lanes, about oil reserves and is headed towards a direct clash with the US on all these subjects. Is this the best time for the US to be militarily overstretched? Is it the best time to be losing the good will of the entire planet?

The frustration of the Chinese following the little-known Kashagan episode is not publicized but is quite real. The Chinese tried to purchase a stake in that oil field in the Kazakhstan part of the Caspian Sea, the largest discovered in the last 30 years, but were prevented from doing so by the existing – Western – shareholders which all exercised their preemption rights to do so despite intense Chinese pressure (especially on Shell, which has a significant presence in China). Kashagan is the largest undeveloped oil field outside of the Persian Gulf area and a pipeline to China would have been a viable option. This oil (between 1 and 2 mb/d, or 20 to 40% of China's current imports) will now go West in a few years' time.

For the time being, China has a real incentive to cooperate with the US but it is not clear how long this will last and when the hard economic realities of international trade will cut through the fog of "War on terror". But what better time to push your interests than when your adversary has other worries, especially self-inflicted ones for which you cannot be blamed?

Quand assistera t-on vraiment à l’extinction des dinosaures?

2004-05-07T18:10:00.000+02:00

La France possède le triste privilège d’être l’un des derniers pays au monde à être dirigé par un « dinosaure », à savoir un homme politique arrivé au pouvoir au cours de la deuxième moitié du Xxe siècle et qui ne l’a plus quitté depuis. Parmi les tristes spécimens que l’on peut identifier, notons Fidel Castro, Muhammar Khadafi ou Yasser Arafat. Jacques Chirac, qui fut ministre pour la première fois en 1967, est un membre d’honneur de cette confrérie de dirigeants dont conquérir et conserver le pouvoir est à peu près la seule compétence, aux dépens évidemment de leurs concitoyens.
Circonstance atténuante pour Jacques Chirac : il a été régulièrement élu et réélu et ses concitoyens portent une lourde part de responsabilité pour sa présence continue au pouvoir. Rendons lui donc cette qualité : il sait mener des campagnes électorales adaptées à son époque (libéral en 1986, social-populiste en 1995, sécuritaire en 2002, pour ne parler que des principales), et capables de faire oublier aux Français qu’il a été totalement incapable de gérer le pouvoir chaque fois qu’il l’ a eu, et qu’il a à chaque fois désavoué deux ans plus tard (1976-78, 1986-88, 1995-97, 2002-04).

Qu’est ce qui explique cet attachement irrationnel des Français pour un homme aussi manifestement incapable à assumer le pouvoir – et dont une bonne majorité s’accorde à dire qu’il devrait être en prison ? La médiocrité générale des alternatives ? La nostalgie du passé ? La pitié ou la lassitude envers un homme dont on sentait bien qu’il ne renoncerait pas tant qu’il n’aurait pas obtenu les postes suprêmes ? Le sentiment que cela n’a de toute façon pas d’importance ? Ou le plaisir particulièrement français de faire chier le monde ?

Prenons garde tout de même à ne pas être le dernier pays dirigé par un dinosaure !

When will dinosaurs really be extinct ?

2004-05-07T18:05:00.000+02:00

France has the sad privilege to be one of the last countries in the world to be ruled by a “dinosaur”, i.e. a political leader which rose to power in the early part of the second half of last century and has not left that place since. Amongst the sad specimens of that race, one can include Fidel Castro, Muhammar Khadafi or Yassir Arafat. Jacques Chirac, who was a Cabinet member for the first time in 1967 under de Gaulle, can rightfully claim to be a full member of that select club whose main (and only) competence is to grab power and keep it, on the back of the general populace.

To be fair to Chirac, he has been consistently – and mostly fairly - elected and reelected in his various posts, and the French thus bear a heavy responsibility for his continued presence in power. The man is clearly a gifted campaigner, able to run campaigns well suited to the mood of the day (as a Thatcherite in 1986, as a social populist in 1995, on a law and order platform in 2002) and able to make the French people forget that he has been utterly ineffective each time he has actually been in power – and that he has each time been voted out two years later (1976-78, 1986-88, 1995-97, 2002-04*).

How to explain this apparently irrational love of the French for such a manifestly incompetent politician – whom a majority agree should be in jail (this will be the subject of another post)? The mediocrity of the alternatives? Nostalgia for a long-lost (and presumably glorious) past? Pity for a man who made it clear that he would not give up until he reached the supreme job? The feeling that it is not so important? Or the peculiarly French trait to stick it up to others (including other Frenchmen)?

Maybe we should at least care to make sure that we are not the last country with a dinosaur…

* in March 2004, the right was routed in local elections; this reflected the population's annoyance with Chirac and his government, led by Raffarin. As the right still controls the majority in Parliament (in principle until 2007), he stays in power, but his legitimacy has been severely weakened.

La théorie du vaccin

2004-05-07T18:04:00.000+02:00

Pourquoi les islamistes ont ils le vent en poupe depuis une vingtaine d’années ? Ma théorie est que la pratique de la religion et des discours religieux a constitué la seule forme de liberté et d’expression tolérée par les régimes autocratiques du Moyen-Orient. Les islamistes en sont venus à constituer la seule opposition à ces régimes totalement déconsidérés (et avec raison) auprès de la population, ce qui leur a donné une forte légitimité politique (outre leur pouvoir spirituel). Cela a été de plus renforcé par le travail social sur le terrain, auprès d’une population frappée par misère et chômage grandissants.

Le seul moyen de déconsidérer les islamistes auprès de la population arabe est de montrer qu’ils seraient encore plus inaptes que les dirigeants en place. Cela ne peut malheureusement être fait qu’en les laissant exercer le pouvoir. L’exemple iranien est frappant : la théocratie en place est totalement décrédibilisée, perçue comme une dictature oppressante et la majorité de la population souhaite s’en débarrasser. L’idée de confier le pouvoir aux autorités religieuses n’est pas une proposition gagnante dans ce pays, et ne le sera pas pour longtemps.

Le risque de cette « solution » est que le remède soit pire que le mal, c’est-à-dire que le régime islamique en place soit dangereux, tant pour sa population que pour l’Occident (par exemple en soutenant les terroristes). En ce qui concerne la population, c’est un argument légitime (doit on les condamner à 25 années ou plus de misère pour les « guérir » ?), quoi que les exemples parallèles de l’Algérie (ou le coup d’Etat des militaires contre les islamistes légitimement élus en 1991 a été suivi d’une guerre civile qui a fait des dizaines de milliers de morts, sans aucune perspective nouvelle aujourd’hui) et de l’Iran (qui n’a pas vraiment fait pire que ses voisins) incitent à penser qu’il doit être fortement atténué.
Vis-à-vis de l’Ouest, il faut noter qu’un Etat, même islamiste, est un acteur international avec un minimum de rationalité (à commencer par le désir de survivre) peut être contenu et/ou dissuadé par les méthodes classiques de la diplomatie. L’argument qu’il faut empêcher les principaux pays producteurs de pétrole d’être soumis à des pouvoirs hostiles peut à mon avis également être contré : ces pays ont autant, si ce n’est plus, besoin d’exporter leur pétrole que nous de l’importer et les relations commerciales s’établiront en conséquence. L’Iran (comme à son époque l’Union Soviétique) a été un fournisseur fiable de pétrole pendant ces 25 dernières années.
En ce qui concerne le soutien au terrorisme, on peut également noter que l’Iran a pour l’essentiel soutenu les terroristes anti-israéliens. Sans excuser d’aucune sorte ce soutien, il faut bien noter que le pays a pris soin de ne pas provoquer directement les Etats-Unis sur ce sujet, preuve que la dissuasion marchait (dans un contexte pré 9/11), et force est de constater que l’absence de solution politique au conflit israélo-palestinien (incluant l’ensemble des pays arabes et impliquant naturellement leur reconnaissance d’Israël) explique (encore une fois, pour être clair, sans les justifier) le soutien aux crimes des terroristes palestiniens.

Donc, laissons ces pays passer par une phase de théocratie islamiste, ils en guériront on peut l’espérer assez vite et seront alors beaucoup plus ouverts envers l’Occident.

Parfois en anglais - Sometimes in French

2004-05-03T22:09:00.000+02:00

Ce site sera alternativement en anglais et en français. L'objectif de long terme - on verra si c'est réaliste - est:

(i) d'offrir une source d'information en anglais sur la France qui soit moins négative que Merde in France (cela ne devrait pas être trop dur);

(ii) proposer des commentaires (essentiellement en français) sur la politique intérieure et extérieure de la France, en imitant Kevin Drum. Il y a un créneau à prendre...

This blog will be both in English and in French. The intent - we'll see if it is realistic - is:

(i) to provide, in English, a less negative coverage of France, French policies and politics than Merde in France (this should not be too hard);

(ii) to comment (mostly in French) on domestic French issues, French international policy and any other subject of interest, à la Kevin Drum. There still is prime real estate to be conquered here...