MOHSIN ALI: On the Brink
This is excerpted and updated from remarks delivered last week to the Seven Lakes Forum Club.
At the beginning of 2007, the general view of the world energy and natural resources situation looks grave.
We find ourselves on the brink of a global economic and strategic confrontation -- God forbid, even war -- for black gold (oil), uranium for nuclear energy and other world resources.
American carbon dioxide and other greenhouse gas emissions are also helping to raise the terrible specter of global warming, which Britain's chief scientific adviser, Sir David King, has called a bigger threat to the world than terrorism.
President Bush in his State of the Union message to Congress on Tuesday said America's dependence on imported oil leaves us more vulnerable to hostile regimes and to terrorists. He called for a cut in U.S. gasoline use by 20 percent in the next 10 years through better mileage and the increased use of alternative fuels, like ethanol.
Also this month, China outlined a plan to place a cap on its domestic coal production in 2010, encourage construction of newer coal plants and look into nuclear and other energy saving options.
German Chancellor Angela Merkel, speaking at the World Economic Forum in Davos, Switzerland, to government leaders and corporate executives from some 90 countries, called for greater investment in renewable energy sources and steep cuts in her country's greenhouse gas emissions.
But she kept her promise to the Social Democratic Party -- the key coalition partner in her government -- to phase out nuclear power in Germany over the next 14 years. However, Sweden, Finland and France are adding to the number of their own nuclear power facilities.
Let me startle you with these two projections:
1. The U.S. now accounts for 23 percent of the world's energy consumption, with China second at 14 percent. By 2030, U.S. oil consumption is expected to reach 30 million barrels daily, with that of China about 15 million barrels a day. Currently, the whole world consumes some 70 million barrels daily.
2. Published American studies estimate that a nuclear exchange between India and Pakistan would initially kill two million people, cause 100 million casualties and, with radioactive fallout, contaminate South and Central Asia, as well as much of the globe.
Two decades after the Kremlin started beating a retreat from the Soviet empire, a new Russian hegemony, based on gas and oil pipelines rather than tanks, is advancing -- and shows every sign of proving durable.
In Europe, we can expect a new power struggle between an ever-more-assertive Russia and a somewhat feeble West, particularly the European Union. This impending economic and trading conflict will be over energy.
The influential London weekly The Economist reports that Poland and its Baltic allies will build a new nuclear power station in Lithuania and construct a terminal on the Polish Baltic coast for the importation of liquid natural gas. Probably Russia will find this only a small obstacle. Its cash-rich energy firms will step up purchases of downstream firms in Europe. A lot of governments, even from former communist countries, will be seeking special deals with Russia.
Cheap gas will be a useful lubricant, The Economist observed. And Russian companies will continue to gobble up the energy infrastructure in the chaotic Ukraine. Russia's energy strength and cash pile might spell doom to E.U.'s favored projects for pipelines bringing non-Russian gas to Europe.
Nabucco, a trans-Balkan gas pipeline intended to tap Mideast resources for Europe, will be a key factor. The Nabucco pipeline is designed to start in the Caspian region and the Middle East. It will cross Turkey, Bulgaria, Romania, Hungary and Austria, where the gas will be distributed to France, Germany and other E.U. countries via existent pipelines.
The grand project will cost around $6.25 billion, split among the five countries the pipeline passes through. It will have the capacity to transport 25 billion cubic meters of gas a year. The pipeline has important strategic and economic significance as it offers an alternative to gas from Russia.
While Russia flexes its muscles in 2007, the Kremlin probably is still anxious to be seen as a reliable partner, playing by "free market" rules. But some of Europe's alternative oil and gas suppliers may come into Russia's orbit through joint ventures.
All this may mark the re-emergence of Russia as a major economic power. East Europeans may be dismayed, but London financiers and merchant banks can expect juicy profits from all the takeovers and joint ventures in the energy sector.
The Economist recently commented that America would worry more about Europe's energy security in 2007. It noted the U.S. was promoting various pipelines in central Asia, but these would prove "mere pinpricks in Russia's advance..."
Middle Eastern Oil
Now please turn to the oil rich Middle East.
Many millions worldwide think Washington's strategic policy in the broader Middle East and Central Asian regions is aimed at gaining control over more than 60 percent of the world's supplies of oil and natural gas and over oil and gas pipeline routes out of the area.
Muslim countries -- including Saudi Arabia, Iraq, Iran, Kuwait, the United Arab Emirates, Qatar, Yemen, Libya, Nigeria, Algeria, Kazakhstan, Azerbaijan, Malaysia, Indonesia and Brunei -- possess between 66 and 76 percent of total oil reserves. In contrast, the U.S. has barely 2 percent. Western countries, including Canada, the U.S., Norway, the U.K., Denmark and Australia, control approximately 4 percent.
In the alternative estimate of The Oil and Gas Journal, which includes Canada's oil sands, this percentage would be on the order of 16.5 percent.
The largest share of the world's oil reserves lies in a region extending north from the tip of Yemen to the Caspian sea basin and east from the eastern Mediterranean coastline to the Persian Gulf. This broader Middle East-Central Asian region, which is the theater of the U.S.-led "war on terrorism," encompasses more than 60 percent of the world's oil reserves.
Iraq has five times more oil than the United States. Muslim nations possess at least 16 times more than the Western countries. The major non-Muslim oil reserve countries are Venezuela, Russia, Mexico, China and Brazil.
The Middle East-Central Asian region is heavily militarized. The oil fields are encircled by U.S. warships. This control also extends to strategic oil and gas pipeline corridors (as in Afghanistan).
Now please let me put forward to you objectively these crucial, hard facts:
Today the big powers and huge corporations are anxiously competing for industrial energy and agricultural and other raw material resources.
The world's need to develop alternative nuclear and other energy sources will continue to grow as the demand for oil becomes greater.
Chemical, biological, radiological or nuclear weapons are becoming easier to acquire, build, hide and transport. Weapons of mass destruction -- atomic, biological, chemical -- along with global terrorism, are big dangers in this new century.
Meanwhile, the brutal sectarian killings in Iraq become more horrific, and the endless Israeli-Palestinian conflict remains explosive.
While American blood and treasure are being spent in Iraq, an unprecedented societal revolution is seeing the rise of China as a big economic and military power.
The U.S. trade gap with this Asian giant in 2005 hit about $265 billion, or about 34 percent of the total deficit. China's holdings of U.S. Treasury bills last year were over $300 billion. Foreign investment in China in 2005 was $53 billion, while investment by China overseas was $7 billion.
Raw materials prices will remain high as China and other fast growers like India gobble up oil, steel, coal, copper, bauxite, cement, precious metals and scrap paper. Annual economic growth in China will settle around 7 percent, still leaving its economy on course to overtake U.S. GDP by 2020. Meanwhile, China's economy expanded by 10.7 percent in 2006, marking the fastest growth since 1995, the National Bureau of Statistics has said.
American experts forecast that over the next 25 years, nearly $10 trillion -- more than 60 percent of all the money invested in the future of energy -- will pour into the electricity sector. China has just completed the main construction of its famous Three Gorges hydroelectric dam, the largest ever built in the world.
The United States has yet to understand pragmatically the true impact of becoming the only superpower. Its military might is overwhelming, and it spends more on defense than the rest of the world put together.
Yet this great edifice is shown by various terrorist actions of re-cent years to have weak foundations. It does not actually provide security at home or abroad for Americans, except in case of conventional military attack, where it would prove invulnerable.
Thus, resort to international diplomacy is essential for the defense of America and its allies against asymmetric, unconventional and nuclear threats. President Bush thanked China for getting North Korea to return last year to the six-nation talks on its nuclear disarmament.
Therefore, the best answer to the problems with oil-rich countries like Iran and Venezuela and the Stalinist-type dictatorship of North Korea is diplomacy.
Every effort should be made to avoid direct pressures. And wherever possible, proxies should be used to stop Iran from making nuclear weapons and North Korea from adding to its small nuclear arsenal.
Even the use of "soft power" should be discreet and as invisible as possible. Language used by U.S. leaders should be non-threatening. No foreign leader is unaware for one second that Washington could, if it wished, bomb them back to the Stone Age, and, therefore, to remind them this is counterproductive.
Solve Our Own Problems
Here is what our new bipartisan (Republican and Democrat) strategy should be:
n Stop trying to micromanage the world. We do not have the capability to do it anyway.
n Remember that charity begins at home. First solve the important issues in our own country, which today has the frightening national debt of $8.5 trillion.
n Our urgent problems are massive budget and international trade deficits; dependence on imported fossil fuels; environmental degradation; shortcomings in education; a threatened breakdown of our health and Social Security services; and massive illegal immigration, particularly from Mexico.
n Make sure our economy continues to grow, because it is still the motor of world prosperity.
Yes, we must keep up our defense superiority, but we should try to achieve conciliation with the world as well, heeding John Donne's words that "No man is an island, entire of itself."
Mohsin Ali, who lives in Pinehurst, is a retired diplomatic editor of Reuters News Agency and a recipient of the Order of the Brit-ish Empire. Steve Bouser, editor of The Pilot, helped in the preparation of this commentary.
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