G8

What is the G8 doing about the world's energy crisis?

2008-04-06T13:32:00.000-07:00

From December 05, 2005

The G8 in 2005 asked the International Energy Agency (sister of the OECD) to help solve the world's energy crisis. The work will focus on six broad areas:

- Alternative energy scenarios and strategies.
- Energy efficiency in buildings, appliances, transport and industry.
- Cleaner fossil fuels.
- Carbon capture and storage.
- Renewable energy.
- Enhanced international co-operation.

A report is to be delivered in 2008 to Japan when it is scheduled to chair the G8.

Update in 2008: Japan to launch G8 energy-saving talks: official

However Shell is taking the initiative from the G8. The company's scenarios for energy argue that carbon trading, worldwide, is essential to fund renewables. Shell Scenarios

The G8 and the Beijing Consensus

2008-02-13T08:59:00.000-08:00

On the theme of talks with China on global leadership. (See post on 11 February 2008: What does China think?)

China's soft power

[Besides resources] the Chinese also want one other thing which is utterly central to all of their politics and policies: international recognition and corroboration of the one China policy.

China offers its help [to other countries] without conditions. There are no human rights complications, no promises for elections, and no pressure for free press. Countries such as Sudan and Zimbabwe appreciate China's unquestioning support in return for arms, oil, trade or whatever is on offer. These kinds of policies - unsurprisingly - draw considerable international criticism. The Chinese charge d'affairs in South Africa recently defended China's policies of engagement, trade and interactions with Sudan and Zimbabwe by saying that China was "simply protecting its own interests".

Others, notably those from the West, find China's foreign policy of interaction with pariah regimes anything from unfortunate to disgraceful. There is, strictly speaking, no right answer. While it is easy for the West to harangue China for these policies, they are not speaking from an unsullied pulpit either, both historically and presently speaking. Selling billions of dollars of arms to various countries in the Middle East, all of whom rate poorly to atrociously on the Freedom House index, does not lend the West the high ground.

A global energy charter

2008-02-12T09:03:00.000-08:00

The CSIS doubts the ability of the G8 to handle the vital subject of global energy effectively. The report (see November 15, 2007) suggests instead that the next US administration takes the lead:

The next [US] administration should take the initiative on seeking a global consensus on how best to address greater resource competition and the potential perils of climate change in the years ahead. The primary objective could be to create a common charter outlining the principles of sound energy policies and practices. . .

The charter could address issues such as protection of sea lanes and critical infrastructure as well as an investment-friendly regulatory and legal framework that respects the development needs of resource holders.

But there is an Energy Charter Treaty already. Problems with Russia are a regular theme.

Edit

What is distinctive about the Energy Charter Treaty?

1. it is the first multilateral investment protection treaty that contains binding provisions on the protection of investment in relation specifically to the energy sector

2. the ECT integrates WTO rules with respect to energy trade and extends them to non-WTO countries that are members of the ECT

3. With respect to the strategically important issue of transit, the ECT lays down the principle of freedom of energy transit and non-discrimination, on the basis of origin, destination, ownership or pricing of energy materials and products.

Observations by the Secretary-General of the Energy Charter:

I would also like to mention what the ECT does not do – in order to correct some misconceptions that might exist: the ECT does not determine the structure of national energy markets, nor does it dictate national energy policies or oblige member countries to open up their energy sector to foreign investors. Each member state is free to decide how, and to what extent, its national and sovereign energy resources will be developed, and also the extent to which it will open its energy sector to foreign investments. Lastly, it does not impose mandatory third-party access to energy infrastructure.

Archive: see Energy on the G8 agenda, from three years ago.

The G8 and China

2008-02-11T13:01:00.000-08:00

What does China think? charts the development of a new Chinese world view and identifies the following different factions battling for influence:

1. The "New Left" who want a gentler form of capitalism with a social safety net that could reduce inequality and protect the environment;

2. The "New Right" who think that freedom will only come when the public sector is dismantled and sold off, and a new, politically active "propertied class" emerges;

3. The "Neo-Comms", cousins of American neo-cons, want to use military modernisation, cultural diplomacy and international law to assert China's power in the world.

Synopsis of book

An invigorating book about the debates raging within China. We all know about the fast pace of change in this country. This book brings us the ideas being fought over in the country itself -- from democracy to the idea of a 'peaceful rise'. It challenges all of our assumptions about China. We know everything and nothing about China. We know that China is changing so fast that the maps in Shanghai need to be rewritten every two weeks. We know that China has brought 300 million people from agricultural backwardness into modernity in just 30 years (something that took 200 years in Europe). China's voracious appetite for resources is gobbling up 40% of the world's cement., 40% of its coal, 30% of its steel, and 12% of its energy. It has become so integrated into the global economy that its prospects have immediate effects on our everyday lives: simultaneously doubling the cost of the London Olympics while halving the cost of our computers; keeping the US economy afloat but sinking the Italian footwear industry. We have an image of China as a dictatorship; a nationalist empire that threatens its neighbours and global peace.But how many people know about the debates raging within China?

What do we really know about the kind of society China wants to become? What ideas are motivating its citizens? We can name America's Neo-Cons and the religious right, but cannot name Chinese writers, thinkers or journalists -- what is the future they dream of for their country, or the world it is shaping? Because China's rise -- like the fall of Rome or the British Raj -- will echo down generations to come, these are the questions we increasingly need to ask. Mark Leonard asks us to forget everything we thought we knew about China and start again. He introduces us to the thinkers that are shaping China's wide open future and opens up a hidden world of intellectual debate that is driving a new Chinese revolution and changing the face of the world.

Can the G7/8 or the G20 solve the financial turmoil?

2008-02-07T13:14:00.000-08:00

The G7 finance ministers meet on Friday. An editorial in the FT comments:

Dislocations in the financial system and a sharp US slowdown make it important for the G7 to show that, despite the differing interests of its members, it will be able to co-ordinate an international response if the economic need arises.

Two of the three issues likely to dominate the agenda – currencies and the US economy – are unlikely to produce much agreement. That makes some progress on the third – the lessons to be learned on financial regulation and stability – all the more important.

The US will ask its G7 partners to stimulate demand in order to offset its own slowdown. But it will be talking to the wrong people. Germany and Japan both have large current account surpluses, but Germany has barely achieved fiscal balance, while Japan’s government is still deep in the red. Neither will eagerly launch a fiscal stimulus. The elephant absent from the room is China.

China is a member of the G20, but nevertheless needs to be persuaded to take on a global leadership role.

Edit

From the European Council on Foreign Relations: What world order would China introduce?
Soon, the political struggle in the Communist Party will be seen as vital as the battle between the US presidential contenders; and protesters outside the World Bank will complain as much about the "Beijing Consensus" as they do about the "Washington Consensus".

CSIS also favours a G13 (G8+5)

2007-11-15T04:48:00.000-08:00

Recommendations to the US administration from the US Center for Strategic and International Studies: CSIS COMMISSION ON SMART POWER: A smarter, more secure America

Extracts:

Currently the Group of Eight (G-8) Summit brings together the governments of Canada, France, Germany, Italy, Japan, Russia, the United Kingdom, and the United States on a yearly basis to shape a common strategic agenda. Key countries are excluded, however, and to most Americans, the summit appears little more than a talk shop and photo-opportunity.

The G-8 has made efforts since 2005 to reach out to China, Mexico, India, Brazil, and South Africa as "outreach countries" through a set of ministerial meetings on finance and energy termed the "G-8 + 5." This is a positive step, but it does not go far enough to bring together those governments who can contribute substantively to working a whole range of critical challenges.

The next administration should seek to strengthen the G-8 summit process by proposing a set
of high-level meetings on those issues routinely addressed by the G-8 that require sustained
global attention: energy and climate; nonproliferation; global health; education; and the world economy.

France's Sarkozy wants G8 to become G13

2007-08-28T03:41:00.000-07:00

France's Sarkozy wants G8 to become G13

PARIS - French President Nicolas Sarkozy said on Monday that the G8 should eventually become the G13 adding China, India, Mexico, Brazil and South Africa to the existing group of leading industrialised countries.

"The G8 should continue its slow transformation," Sarkozy said in a speech to French ambassadors.

"I want the G8 to become the G13."

Moreover, Sarkozy in drive to give EU global role

France will press for a bolder European Union security strategy when it assumes the rotating presidency next year, aiming to turn the continent into a global power with a decisive role in promoting a more just and effective world order.

In his first major foreign policy speech as France’s president, Nicolas Sarkozy described the EU as a model of effective multilateralism that boasted a full range of instruments to address international crises, including military force, humanitarian assistance and financial aid. "Europe must progressively affirm itself as a first-rank player for peace and security, in co-operation with the United Nations, the Atlantic alliance and the African Union," he said.

Furthermore, from EU Observer

During his speech, president Sarkozy also reached out to new powers in Asia and Latin America, suggesting they should be granted seats at the UN Security Council table.

"France demands new permanent members – Germany, Japan, India, Brazil – and fair representation for Africa".

Replace the G8 with a G4?

2007-06-02T01:29:00.000-07:00

The G8 should be replaced by a G4 - comprising the US, eurozone, Japan and China. Advised the press this week. Letters supported the idea.

In addition to China's elevation in the world's economic hierarchy, the second letter also said the OECD should invite it to become a member.

The Times reported on this possibility a couple of weeks ago. However the OECD have invited Russia to join [missing fromG4], but not China yet.

The Organisation for Economic Cooperation and Development decided to broaden its membership yesterday [May, 2007] by inviting Russia to join and holding out the possibility of future expansion to include emerging powerhouses such as China and India.

The move reflects a realisation that the OECD, which co-ordinates economic policies among industrialised countries, must adapt to a rapidly changing global economy that has reduced its members’ share of overall world trade and output.

The invitation received prompt replies. In Moscow, Andrei Kondakov, the head of economic cooperation at the Ministry of Foreign Affairs, said: "It’s something we’ve been waiting for for 11 years."

When the OECD was founded 46 years ago, its members accounted for 75 per cent of global wealth. Now the figure is just 60 per cent and Angel Gurria, its Secretary-General, has predicted that rapid growth in China, India, Russia and Brazil could reduce it to 50 per cent.

Will the G-8 correct the Bretton Woods Institutions?

2007-02-18T04:17:00.000-08:00

Both the G-8 and G-20 seem very concerned about the ineffectiveness of the Bretton Woods Institutions. Are they serious? In this connection, documents on the site of the Bretton Woods Project make interesting reading.

We learn in one case of the IMF's (key Bretton Woods Institution) attempt in 2001, no doubt because of growing accusations of serious bias in its dealings, to convince the world that it operates impartially. The International Monetary Fund's Executive Board therefore introduced the mechanism of the Independent Evaluation Office - a form of audit. The Office was mandated to operate independently of IMF management and at arm's length from the IMF's Executive Board.

In September 2006, the IEO published a report An Evaluation of the IMF's Multilateral Surveillance. The report emphasised the need for the IMF to persuade effectively and widely, and thought it should distribute not only raw information, but informed analysis.

The IEO also recommended that the IMF would get its message across better by interacting more with intergovernmental groups, particularly the G-7/8 and the G-20. However the IMF disregarded this advice.

The G8 and the UN, including the Bretton Woods institutions, must become more effective - per UK

2007-01-17T10:27:00.000-08:00

Today's Guardian reports on the visit to India by the UK's Chancellor of the Exchequer. Mr Brown's comments bring the agendas of the G8 and the G20 even closer together - do we really need both public organisations?

fast-growing developing countries [are] to be given a far bigger role as he outlined what is likely to be a central theme of his premiership if, as expected, he replaces Tony Blair as prime minister later this year. In his first major foray into foreign policy this year Mr Brown said the world had moved on since the UN, IMF and World Bank were created at the end of the second world war. "The post-1945 system of international institutions, built for a world of sheltered economies and just 50 states, is not yet broken but - for a world of 200 states and an open globalisation - urgently in need of modernisation and reform."

Mr Brown said the G7 - the US, Britain, France, Germany, Italy, Canada and Japan - should be expanded. "Beginning with the UK presidency (in 2005), India has been in attendance at meetings of G7 finance ministers and as part of the G8 plus 5 group has attended the G8. It is time to formally recognise on a more consistent and regular basis the reality of this emerging new world order."

Together and in the same spirit we should focus on modernisation of the United Nations, so that it has the right role for the modern world, not least as an effective peacemaker and peacekeeper." Mr Brown commended India for being the third biggest provider of UN peacekeepers and called on other countries to share the burden.
NB: The first three provide over a third of UN peacekeepers. Pakistan volunteered 9867, Bangladesh 9681 and India 9483 (December 2006). UN Peacekeeping

America has exerted particularly strong influence over the fund and bank, but the chancellor said they could not be effective unless modernised - "the IMF to ensure the stability of the whole world economy, with its primary role no longer to manage balance of payments crises but on crisis prevention through the surveillance of our economies.

And as a bank for development, the World Bank should have a focus for the first time on energy security and environmental care.

Update:

G8 contributions to UN peacekeeping in December were:

Italy volunteered 2,462 (8th biggest contributor); France 1,988 (10); Germany 1,143 (18); United Kingdom 358 (40); United States of America 324 (43); Russia 291 (45); Canada 132 (61); Japan 31 (81)

Growth and responsibility in the global economy

2007-01-08T13:30:00.000-08:00

The official website of the German presidency is here.

The agenda is here, and includes the aim of reducing imbalances in the global economy.

In connection with this aim, the US Council on Foreign Relations has recently published a paper on floating exchange rates, a system that replaced the world's fixed exchange rates in the 1970's and is said to have caused instability in the economy.

Extracts:

Floating exchange rates have proved a source of tremendous periodic instability, yielding repeated currency crises in countries whose currencies are not acceptable for international transactions, but which build up imbalances in their national balance sheets through their imports of dollar capital. The fundamental difference between capital flows under indelibly fixed and flexible exchange rates was well known generations ago, decades before the modern era of globalisation.

It was well understood before the Bretton Woods era [pre 1945] that monetary nationalism would fundamentally change the way capital flows naturally operate, making of a benign economic force one that would necessarily wreak havoc with flexible exchange rates. The global monetary order that has emerged since the 1970s is now globalisation’s greatest source of vulnerability.

What is to be done? Realistically, sauve qui peut must be the message for nations whose currencies are not wanted by foreigners. Dollarization—abandonment of parochial currencies in favor of the dollar, euro or other internationally accepted money—is, in a world of fiat currencies, unsupported by gold or silver, the only way to globalize safely.

Of course, the status of internationally accepted money is not heaven-bestowed and there is no way effectively to insure against the unwinding of "global imbalances" should China, with nearly $1,000bn (€755bn) of reserves, and other reserve-rich central banks come to fear the unbearable lightness of their fiat holdings. Digitized commodity money may then be in store for us. . . As radical and implausible as it may sound, digitizing the earth’s 2,500-year experiment with commodity money may ultimately prove far more sustainable than our recent 35-year experiment with monetary sovereignty.

G8 - Africa again

2007-01-05T04:31:00.000-08:00

Should the United Nations be able to employ its own military resources to impose the will of the global community - on Darfur in Africa, for example? Africa is said to be a priority yet again for the G8 - in 2007.

The people of Darfur should be rescued by a UN military force, suggests retired Gulf War commander Colonel Tim Collins on BBC radio today. The UN needs to look at improving its peacekeeping and enforcing its new responsibility to protect

Politics versus business

2007-01-02T03:25:00.000-08:00

The G8 presidency of Russia is now over. Germany is in charge for 2007.

Nevertheless the number one item on the G8 agenda is still energy.

On this subject, the former head of energy giant Yukos - Mikhail Khodorovsky - wrote last month in the Economist. The essay started: "In all likelihood, 2007 will turn out to be a truly watershed year in recent human history - the year in which we will see an acceleration in the formation of a new world order."

Perhaps 2007 will also see a reconciliation of politics and business.

2007 agenda - socialise globalisation?

2006-12-12T14:35:00.000-08:00

The 'developed' world will suffer a decline in wages for about 40 to 50 years.

"Professor Freeman [of Harvard] estimates that the entry of China, India and the former Soviet bloc into the world economy resulted, by 2000, in a doubling of the number of workers to nearly 3bn. . . Eventually the labour surpluses in the emerging countries will be used up and competition for workers will drive wages up. The question that faces the rich countries is "when?". Professor Freeman estimates 40 to 50 years. In between there will be downward pressure on many kinds of wage earner in the west." reported the FT on 20 October, 2006 after seeing the academic paper.

The FT's Samuel Brittan suggested that debates are needed on what lies ahead. For example, governments might be persuaded to favour labour more than capital, and labour standards in the global economy could be raised.

Of course, since October 2006 popular dissatisfaction with the ruling party in the United States has caused much political control to move to the Democrats. Policy changes in the US may be expected.

G8 2007

2006-12-12T10:18:00.000-08:00

Germany is president of the G8 for 2007. The tentative agenda is said to include energy, the freedom of investment, the social dimensions of globalisation and Africa. Source

The proposal by some, including the UK, to extend G8 membership to China, India, Brazil, South Africa and Mexico was rejected. However these countries will all be invited to the summit.

Moreover, from January 2007, Germany will triple share the EU presidency for 1.5 years with Portugal and Slovenia. Source

The Chinese press report some of the stresses in the G8:

"The EU is carefully seeking a balance between its increasing need for Russian energy supplies, and its criticism of Moscow over human rights and other ideological issues. But the divisions among its 25 members, over how to handle Russia, have not made the task any easier." China View

Update

And on energy: "Moscow had no intention of observing guidelines in the EU's energy charter that would allow non-Russian companies access to the country's vast pipeline network. . . Russia's insistence that it will not ratify a set of common rules giving European and other foreign companies access to the pipelines could pose the first challenge for Chancellor Angela Merkel when Germany takes over the EU's rotating presidency on Jan. 1 [let alone presidency of the G8]."

On freedom of investment, Europe complains:
"While Russia stops foreign companies from gaining access to the energy grids, Gazprom is not stopped from distributing its gas in EU countries. . . Where is the reciprocity?"

A response came yesterday from President Vladimir Putin's special envoy to the European Union. He said Russia would never give up control of its pipelines. His statement coincides with increasing pressure from the Kremlin on foreign energy companies to reduce their stakes in Russia's energy sector. IHT

A UN army or regional armies - what does the G8 think?

2006-08-18T05:01:00.000-07:00

A couple of well researched reports have been published recently on peacekeeping operations.

One is Meeting the Challenges of Peace Operations: Cooperation and Coordination. It suggests the G8 thinks it unrealistic to have universal political standards; instead the G8 prefers regional standards, regionally enforced.

Another is A UNITED NATIONS EMERGENCY PEACE SERVICE.
This report recommends a standing UN army. Referring to the difficulty of getting troop contributions from nations, "Kofi Annan once said, the UN is the only fire brigade in the world that has to acquire a fire engine after the fire has started."

The impetus for the report: "Because governments have not created the necessary UN capability, the responsibility for breathing life into the UN Emergency Peace Service
now lies with civil society, working with allies in the UN and interested governments."

Energy Security

2006-08-05T14:03:00.000-07:00

The G8 conclusions on energy security for 2006 are here.

Not a lot of urgent action was agreed, for example: Since 2/3 of world oil is consumed by the transportation sector and its fuel consumption is outpacing general energy consumption we will pay special attention to this sector of energy demand.

And should a nation state, which is lucky enough to have energy, extract it as quickly as possible for the benefit of the global market (not necessarily itself)?

Priorities?

2006-07-22T03:43:00.001-07:00

Third world war - who cares?

The global markets are little fussed by the possible outbreak of another world war. This could explain the hugely different attitudes we are seeing.

As David Hume observed, rather disarmingly: 'Tis not contrary to reason to prefer the destruction of the whole world to the scratching of my finger." . . . What is happening in Lebanon is a human tragedy but it is not an economic one. Lebanon itself is economically insignificant, with an economy three times smaller than that of Manhattan. Its entire gross domestic product is a rounding error in the US growth figures. The reason investors noticed the conflagration at all is that oil prices rose, reflecting a small risk of a severe disruption to supplies. Financial Times

Moreover, the BBC report today on the conflict:

Britain and America are the only countries not calling for a cease fire in the Middle East. The view of the two countries seems to be that an immediate cessation of hostilities would not lead to an endurable peace.

Update

The Times tells us At the G8 meeting the split was six to two for an immediate ceasefire, with the United States and Britain as the two dissidents. The Guardian reported earlier this month The US and Britain insisted on [16 July] at the G8 summit in St Petersburg that criticism of Israel be removed from a joint communique.

Preventing the third world war - a priority for the G8?

2006-07-18T04:44:00.000-07:00

Recent events in the Middle East seem to have taken precedence at this year's G8.

The third world war I believe has already started, Dan Gillerman, Israel’s ambassador to the UN said on CNN, referring to the war on terrorism. What we’re seeing . . . is a chapter of it. Middle East aflame, but who cares?

Should order be restored? Many members of the G8, and the UN Secretary-General, think yes; they want an international peacekeeping force to go into the area, assuming a peace can first be negotiated somehow. A prisoner release may be a pre-requisite.

However the US, another G8 member, seems to want the two sides in the ME to fight to the death. Recommendations to this effect are appearing in the US media.

A major theme of the new campaign is that the more conciliatory "realist" policies toward Syria and Iran pursued by the State Department have actually backfired by making Washington look weak. US Hawks v State Department

G8 Summit outcome in 2006?

2006-06-16T03:48:00.000-07:00

The outcome of next month's G8 summit is guessed today by the Center for Strategic and International Studies in Washington. Moscow Times

Other than stepped-up rhetoric, it is unlikely that Western partners will have much influence over this agenda. . . In the energy sector, Russia retains the upper hand in decisions about how much, to whom and how it is going to deliver its natural resources. The agreement and subsequent start of construction of the North European Gas Pipeline marked the moment when Russia decided to use natural resources for political ends. The North European Gas Pipeline kills two birds with one stone: It makes the European Union even more dependent on Russian energy resources and East European countries less energy secure. It also shows former communist countries such as Poland that their anti-Russian rhetoric has a price.

Russia's right to determine its own market-economy rules, whether regarding energy or other forms of trade, is also likely to be restated. Putin's strong views on economic management from above were reiterated in his state-of-the-nation address in May. He attributed the growth and importance of the energy sector to the state's planning and management, not to market forces. It is unlikely that he will change his position; in fact, this philosophy explains the centralization of economic power witnessed under his leadership.

Energy Charter Treaty

2006-06-13T08:47:00.000-07:00

More details of energy insecurity from the G8 meeting at the week-end. A Russian perspective on a key safeguard, the international Energy Charter Treaty, appears in the Moscow media. The view is the treaty coverage of transit and nuclear energy must be improved before the Duma will sign. But even more fundamentally, it is claimed the existing provisions aren't being enforced - Ukraine's transit default, for example.

Kudrin [Russia's Finance Minister] said the treaty failed to take into account the effect of EU enlargement on energy transit issues, or to address nuclear energy. He then used the treaty to lash out at Ukraine, saying that Ukraine had violated the treaty by siphoning off Russian gas meant for Europe after Gazprom cut supplies to Ukraine in January.

"Ukraine, unlike Russia, has ratified the Energy Charter. However, as a transit country, it allowed the unsanctioned siphoning of gas," thereby violating the Energy Charter, Kudrin said. "I'm amazed that this hasn't been noted in the West," he said.

Update

4 July, 2006

Presidential aide Prikhodko says Energy Charter outdated

Russia has refused to ratify [the ECT] as Europe has demanded access for Central Asian states and other countries to Russian pipelines, which Moscow says will make their natural gas 50% cheaper than Russia's when it arrives in Europe.

St Petersburg - G8 Finance Ministers

2006-06-12T06:27:00.000-07:00

Russia is prepared to sign a revised Energy Charter Treaty. This development was suggested at the weekend's meeting of G8 Finance Ministers. Energy Security

[Russia] agreed, for the first time, to the inclusion in the final communiqué of a reference to the Energy Charter - a development hailed as "major progress" by Thierry Breton, French finance minister. The charter, a legal document signed but not ratified by Russia, requires it to open up access to its pipelines for other countries.

[However Russia] disagreed with the charter's present form. [Russia's Finance Minister] said the document was out of date and needed to be changed to include nuclear energy and redefine rules of transit and investment.

[Moreover, the Minister] reiterated that Russia was a reliable supplier of energy, but turned the tables on consumers of Russian energy, saying they bore as much responsibility for energy security as did the producer. He said energy producers needed "the security of demand" to justify investment in production. "We have quite stable growth of energy supply, but we are encountering a demand shock."

The full Energy Charter Treaty can be read here. The introduction is here.

The Treaty’s provisions focus on five broad areas: the protection and promotion of foreign energy investments, based on the extension of national treatment, or most-favoured nation treatment (whichever is more favourable); free trade in energy materials, products and energy-related equipment, based on WTO rules; freedom of energy transit through pipelines and grids; reducing the negative environmental impact of the energy cycle through improving energy efficiency; and mechanisms for the resolution of State-to-State or Investor-to-State disputes.

UN legitimacy

2006-05-30T08:48:00.000-07:00

In a terse announcement in the Black Sea resort of Sochi, Russia last week signaled that the time had come for it to revisit the doctrine of collective security in the face of growing encirclement by the North Atlantic Treaty Organization (NATO). Asia Times

Russia clearly feels threatened. The article tells of a proposal next month that the 'Collective Security Treaty Organization' (CSTO), at present with a regional security remit, should modestly parallel NATO by acting outwith its area. Members are Russia, Belarus, Armenia, Kazakhstan, Kyrgyzstan and Tajikistan.

What is preventing the United Nations from designating as UN special agencies the proliferating collective security organisations (such as NATO, CSTO, African Union) - if each is willing to operate outwith its locality? This would give the organisations direction and legitimacy.

Update

1. Australia has done well, but Asia needs a posse, not just a lonely sheriff

ANOTHER week, another failing Pacific state: Australia must be wearying of the troubles in its backyard. This time it is Timor-Leste, or East Timor as it was until recently known.

Why should Australia assume all these burdens? The simple answer is that no one else is willing. Whenever things get tough in the South Pacific, the call goes out not to the United Nations in New York but to the prime minister's lodge in Canberra. . .It would be better for all if Asia could draw on something like the sort of institutional arrangements that Europe enjoys in the shape of NATO and the EU. That will not be easy. The two biggest powers of East Asia, Japan and China do not get on, and both are distrusted by smaller countries in the region. Yet a start could be made by the countries of ASEAN. . .

2. Russia to Boost Military Cooperation with West — Official

The G8, NATO, SCO and Iran

2006-04-19T10:19:00.000-07:00

A report on April 18 in the Asia Times Online.

The Shanghai Cooperation Organization (SCO), which maintained it had no plans for expansion, is now changing course. Mongolia, Iran, India and Pakistan, which previously had observer status, will become full members. SCO's decision to welcome Iran into its fold constitutes a political statement. Conceivably, SCO would now proceed to adopt a common position on the Iran nuclear issue at its summit meeting June 15.

The timing of the statement of Iran's full membership of SCO is significant. It comes a couple of weeks before the director general of the International Atomic Energy Agency is due to report to the United Nations Security Council on Iran's compliance with the IAEA resolutions. The SCO is expected to adopt a common "energy strategy", jointly undertaking pipeline projects, oil exploration and related activities.

So far NATO has ignored SCO. . . If it recognizes that SCO has a habitation and a name (in Central Asia, South Asia and the Gulf), then, what about NATO's claim as the sole viable global security arbiter in the 21st century? NATO would then be hard-pressed to explain the raison d'etre of its expansion into the territories of the former Soviet Union.

Update on 15 June 2006

1. Russia warns against NATO taking in former Soviet Ukraine and Georgia

2. Communique of 2006 SCO summit
Contrary to the speculation above, no full members were created at the SCO summit. The heads of state also entrusted the Council of National Coordinators to make recommendations on the procedure of SCO membership enlargement. . . The next meeting of the Council of Heads of State will be held in Bishkek in 2007.

Global energy security - a role for the military

2006-04-03T03:59:00.000-07:00

Has NATO a role in energy security?.

An update today:

Nato looks to create a global partnership

Nato is planning to strengthen its strategic and military ties with Australia, New Zealand, Finland and Sweden in a move that could give it a role far outside its traditional geographical influence.

The initiative, led by Washington and supported by Jaap de Hoop Scheffer, Nato secretary-general, would help reinforce the USled alliance’s political and military credentials at a time when these have come under scrutiny. The US would like to see regular Nato "forums" with other countries such as Australia, New Zealand and, later, Japan and South Korea.

The plans are set to be discussed at a Nato foreign ministers’ meeting in Sofia this month and at a summit in Riga in November.

The NATO-Russia Council was established in 2002.

But should the rules for global energy security prevent assets being nationalised? Because more than three-quarters of the world’s oil reserves are already controlled by national oil companies, according to a hearing in the US Senate.

Energy security - in case the G8 fails

2006-04-03T03:13:00.000-07:00

Increasing the security against global energy disruptions involves more countries than the G8. The Institute for International Economics recommend (number 4 below) increasing the membership of the OECD's International Energy Agency. But in case the G8 cannot solve this matter, the United States is exploring setting up an insurance grouping of interested parties:

The "Energy Diplomacy and Security Act" [draft legislation] proposes that the United States, the world's largest oil consumer, forge energy partnerships abroad, notably with China and India, the world's second and fifth largest oil consumers, respectively.

Specifically, the legislation calls for China, India, and the United States to coordinate the release of strategic oil stocks, currently under construction in China and under discussion in India, to manage supply disruptions. Unlike the United States, neither China nor India are members of the International Energy Agency (IEA), the institution established to foster cooperation among the world's major oil consumers. The centerpiece of the IEA is the maintenance of emergency oil stocks and plans for coordinated use. In the near future, China and India are unlikely to join the IEA, which requires membership in the Organization for Economic Cooperation and Development and the maintenance of emergency oil stocks equivalent to at least 90 days of net oil imports. A formal coordination agreement with the United States would reinforce the informal cooperation that already exists between the IEA and China and India. Such an agreement, as outlined in Sen. Lugar's bill, would encourage both countries to contribute to global energy security through participation in international emergency oil stock releases to manage oil supply disruptions and their consequences.

Update - FT on 20 April 2006

The world should get ready for a Nato-style oil alliance

Recommendations for the agenda of the G8

2006-03-28T05:15:00.000-08:00

The Institute for International Economics has some advice for the G-8.

The recommendations include:

1. Rescue the WTO's latest round of trade talks. The round - known as the Doha development round - risks failure. "The G-7 could make an important statement, or even reach an agreement, on the reduction of protectionism in agriculture, which is the key concession the rich countries need to offer the developing world."

2. Agree the Energy Charter Treaty; "In particular, Eurasian energy transportation systems, both pipelines and grids, should be opened to independent producers, foreign trade, and international transit. . . Private investment in the exploration and exploitation of oil and gas need to be stimulated through the reinforcement of investors' property rights and predictable, transparent taxation. Violations of these rules should be subject to binding international arbitration." Moreover, agree on the rational use of energy.

3. Invite China, India, Brazil, and South Africa to join the G8, making it a G12.

4. Increase the membership of the International Energy Agency.
Members of the IEA are expected to share their reserves of energy with one another. Here is an IEA Fact Sheet on IEA Oil Stocks and Emergency Response Potential. The release of oil stocks to the market in September 2005, which followed the devastation of Hurricane Katrina, is detailed here; the contributions are based on members' energy consumption in the past; therefore the biggest releases came from the United States (44 percent), Japan (12 percent) and Germany (6 percent).

Annex

Obstacle in Russia to full agreement of the Energy Charter Treaty:

"the importance of clear-cut rules on international energy flows, and transit flows in particular, to ensure that energy resources can be brought to international markets without interruption."

"I have read the transcript of the 2001 Duma hearings, and while opinion was broadly favourable towards the Treaty, I well understand the concerns that were raised at this time. I feel that a number of these concerns were based on clear misunderstandings of the Treaty. . . However, there were also some substantial issues raised regarding the application of the Treaty’s Article 7 on transit. This was the main reason why – at the end of the debate – the conclusion back in 2001 in relation to ratification was: ‘not now, but later’, and, in particular, once certain issues related to transit have been clarified or studied in more detail."

"That was more than five years ago and – in the meantime – these outstanding questions have been taken up in the Charter process and in the negotiation of a Transit Protocol. That is why I am convinced that the moment defined as ‘later’ in 2001 is now within reach, and why I feel that 2006 is the right moment for a political signal from Russia that ratification is back on the agenda. "

Progress of renewables in providing energy security

2006-03-22T02:52:00.000-08:00

Last month the International Energy Agency gave details of the advances towards renewable energy globally. The progress is disappointing.

"In this leaflet, we define renewables to include combustible renewables and waste (CRW), hydro, geothermal, solar, wind, tide and wave energy." The leaflet tells us that renewable energy was 13% of the total energy supplied in 2003 - the total being split oil 35%, coal 24%, gas 21%, nuclear 7%, renewables 13%.

Although continuing supplies of energy are vital, the political commitment to new forms of energy seems to be missing. The big hopes of geothermal, solar, wind, tide, and wave energy supplied only 4% of the renewable total in 2003 - and 0.5% of the energy total. On the analysis of renewables, "Combustible renewables and waste (97% of which is biomass, both commercial and non-commercial) represented almost 80% of total renewables followed by hydro (16.2%).

Energy politics

2006-03-21T07:04:00.000-08:00

Russian President Vladimir Putin and Chinese President Hu Jintao agreed today (21 March) to deepen energy cooperation. "Putin, who has made energy security the theme of Russia's current presidency of the G8 group of industrialized nations, said in November that diversifying energy export routes was a top priority, with supplies to Asia of paramount importance."

A report says that China plans to build 27 nuclear plants in the next 15 years. Russia intends to tender for them, and build 40 of its own by 2030. Russia also wants to set up in competition to the United States to reprocess the spent nuclear fuel of developing countries.

Meanwhile, the European Union still finds it difficult to agree a common energy policy.

From G8 to G11?

2006-03-02T09:32:00.000-08:00

It is suggested today that the G8 should be increased to a G11. Add India, China and Brazil says former UK Foreign Secretary David (Lord) Owen.

Why? Speed of action: in non-military issues [such as health], an expanded G8 would be beneficial. Yet reform is also needed to facilitate effective military multilateralism. Under UN resolution or with UN Security Council acquiescence, an enlarged G8 could act as the executive arm of a new Nato. The Rwandan genocide and Sudan's Darfur show the shortcomings of the present institutional arrangements.

Who really wants energy security?

2006-02-19T02:09:00.000-08:00

There is little demand for energy security. This is not good for keeping the lights on, let alone keeping transport moving. Former UK energy minister, Brian Wilson, effectively questions today the will of governments to change the national energy policy.

On politics, Mr Wilson says the current policy - based on massive reliance upon imported gas - is a politically unsustainable folly. . . The folly lies in the intention to generate 70% of our electricity from gas by 2020, with 90% of it piped and shipped in from all over the globe - but most of all, within a couple of decades, from Russia.

On economics, Within the past three years, the wholesale price of gas has increased by 200%.. Moreover, The Telegraph reports The £1,000-per-year average energy bill has reached Britain for the first time after British Gas announced a 22 per cent increase in prices.

However, political resistance to reform in the public sector is typically immense. The lack of progress in the Lisbon competitiveness agenda is indicative.

Energy security and democracy

2006-01-31T09:14:00.000-08:00

President Vladimir Putin felt obliged today to defend Russia's right to the chair of the G8 for 2006. There is criticism that Moscow's record on democracy is incompatible with its membership of the club of industrialised democracies.

And Russia is an energy superpower. Mr Putin suggested that state interference in the private sector would be restrained now that it had achieved control of energy giant Gazprom.
Referring to oil firms such as LUKOIL and TNK-BP, the Russian venture of Britain's BP, he said: "Nobody is planning to nationalise them. No one is planning to interfere and they will develop according to market conditions as private firms."

Has NATO a role in energy security?

2006-01-24T04:56:00.000-08:00

Today's press has a report:

The US is setting out an ambitious agenda to bolster transatlantic ties and reform the 26-nation Nato alliance . . . The alliance is seeking to carve out a place for itself in the post-cold war world, but it is going through testing times.

The [US] ambassador. . . argued that Nato should focus on deepening its co-operation with countries such as Australia and Japan and becoming a genuine globally deployable military force in the run-up to the November [Nato transformation summit]. It should also consider setting up training academies in the Middle East and Africa, she said.

She added she hoped Nato would be able to admit new members in 2008, when Nato plans a second summit. "We’ve got to become a 21st-century organisation that the population sees as keeping it safer every day."

But operations in Afghanistan and elsewhere are still hampered by Nato’s lack of funds and resources. [The ambassador argued that] Nato needed to increase its common funding for operations rather than relying on the countries sending soldiers and materiel to pick up the bill.
She said that improved funding and long-distance airlift were also essential for the future of the Nato Response Force, the rapid reaction force, which is supposed to become fully operational this year. At present she acknowledged there were "a lot of issues and problems" with the NRF.

"This is all part of a continuum of moving from a house where basically everyone had to hold their own territory to common collective deployment at strategic distances," she said. "It’s a totally different animal." Source

The way forward?

The NATO-Russia Council was established in 2002, and seems a suitable forum to advance discussion of energy security.

"The NRC will focus on specific, well-defined projects where NATO and Russia share a common goal. NATO and Russia have agreed on an initial, specific workplan, which includes projects in the following areas:
Assessment of the terrorist threat Crisis management Non-proliferation Arms Control and Confidence-Building Measures Theater Missile Defense Search and Rescue at Sea Military-to-Military Cooperation Defense Reform Civil Emergencies New Threats and Challenges (including scientific cooperation and airspace management)

Other projects may be added as the NRC develops."

Resource Wars and the G8

2006-01-22T00:27:00.000-08:00

"Priority issues during Russia’s G8 Presidency will be international energy security. . .", notes the host nation's website. A quote from Russia's President, Vladimir Putin: "We believe that today, we must think very seriously about ways to bridge the gap between energy-sufficient and energy-lacking countries". And at a joint news conference with German Chancellor Angela Merkel a few days ago, Mr Putin said "As to energy security, we certainly discussed it in detail and at length. Many of our European partners, especially ordinary people, were worried, if not frightened, by discussions of Russo-Ukrainian gas problems. I think we made a mistake by failing to explain to them the essence of events clearly and promptly."

Emphatically energy security is the priority for this year's G8 in Russia.

It is therefore surprising to read today that "No outsiders will be invited to this year's G8 Summit that will be held under the chairmanship of Russia." China and India will not be invited? They are rising consumers but not members of the G8 - it might be a mistake to exclude them from energy discussions. The exclusion was hinted at in November.

Global rule-sets and the G8

2006-01-18T06:15:00.000-08:00

There are huge difficulties in trying to enforce rule sets: "The U.S. is overwhelmed in Afghanistan and Iraq, U.S. allies are as skeptical as ever regarding the use of force and even the government is more modest about what it "knows" after the intelligence failures since 9/11", reports the Washington Post.

However TPM Barnett's idea of official global rule-sets is worth exploring. The United States should offer to host a new Bretton Woods conference of key global leaders, recommends Clyde Prestowitz in his book Three Billion New Capitalists: The Great Shift of Wealth and Power to the East. Who will host a multinational conference that aims to prevent resource wars, which some think will be frequent in the 21st century?

Perhaps chairman Russia will put preventing resource wars and financial instability on the G8 agenda for this year.

G8 agenda for 2006

2006-01-12T01:57:00.000-08:00

the G8 summit in St. Petersburg will take up such traditional topics as . . . topical issues of the global economy, finances and trade

The IMF is under pressure from some quarters to address the trade imbalance around the world. A few countries are regularly running huge trade deficits, and many others have big surpluses; should global trade be balanced? If so, what steps have the IMF been taking over the years to even out the imbalances?

Earlier this week the 'Economic Counselor' of the International Monetary Fund gave a speech:

"Let me start with the disclaimer that what follows are my personal views only. I will focus on a familiar issue, the U.S. current account deficit, or more broadly, global current account imbalances, and will describe how financial system reform can play a part in their resolution."

"The United States is running a current account deficit approaching 6 1/4 percent of its GDP this year and over 1.5 percent of world GDP. And to help finance it, the United States pulls in 70 percent of all global capital flows. Clearly, such a large deficit is unsustainable in the long run. . . . demand has to shift from countries running deficits to countries running surpluses".

"Some politicians claim that all it would take for the U.S. current account deficit to disappear is for China to revalue the yuan by a substantial amount. This is nonsense. Without a fundamental change in the factors driving savings and investment, a substantial revaluation could merely alter who the U.S. imports from rather than how much it imports."

The will to tackle the global imbalances is suspect. With the result that the author of 'Three Billion New Capitalists' writes: "several key central bankers are saying. . .that the United States may not be able, or may not intend, to make good on its international financial obligations. . . And since the United States is at present the world's only major net importer, all the exporters that depend on it for their economic stability would suffer severely as well."

Russia wants to address topical issues of the global economy? The serious instability in the global economy might therefore be discussed at this year's G8.

Plea for IMF action

"Let me enter a plea for the fund to take a bold initiative in [sorting out trade imbalances]," said Michel Camdessus, a former IMF managing director, in a lecture Sunday attended by many top economic policymakers. Recalling the coordinated agreements during the mid-1980s among the major industrial powers that helped deal with the global economic stresses of that era, Camdessus said: "Now is the time for a similar effort, led this time by the IMF . . . because there is no other -- I insist, no other -- legitimate, global forum to tackle such a systemic problem." Source

Russia's energy security

2006-01-04T03:17:00.000-08:00

Russia plans to supply both East and West with energy. However a discussion today on BBC radio revealed that this will be ephemeral. It was said that Russia has forecast that it will no longer be able to rely on indigenous oil and gas for its own use by 2050 - never mind exports; accordingly it will have to move to nuclear power to meet domestic energy needs.

The interview also considered UK energy needs, observing that 40% of our electricity is provided by gas; and this will be 80% by 2020. The recommendation from one participant was that we need to rebuild our nuclear industry and "a slice of our coal industry"; he favoured an electricity mix of 10% renewable, 30% coal, 30% gas, and 30% nuclear.

NB: The mix in 2004 is reported: 1% hydro, 33% coal, 40% gas, 19% nuclear, 1% oil, 4% 'other' fuels, 2% imports (nuclear from France?) - per DTI.

Russia - Challenge

2006-01-02T03:55:00.000-08:00

The Chairman of the Russian Council on Foreign and Defense Policy questions whether economic globalisation should continue. He gives his recommendations in 'Russia in Global Affairs'. The article is titled 'New Contours of the World Order'.

It is pointed out that the centre of international politics is steadily shifting eastwards; this is natural, because political power follows economic power around the world.

But should the new leader of the G8 promote something as wide as globalisation? The article recommends that Russia should "reorient and diversify energy exports to Asia or the world market as a whole"; the choice of economic patriotism, resisting the world market, led to WW2 last century. Moreover, there is the question of who is prepared to be an importer of last resort in a system that encourages every nation to have a trade surplus. It seems to have been left to Russia to solve horrendous problems in its G8 presidency

Russia is chair of G8 in 2006

2006-01-01T03:19:00.000-08:00

Here is the official website for Russia's chairmanship of the G8 in 2006. The member states account for 49% of global exports, 51% of industrial output, and 49% of assets in the International Monetary Fund.

"A successful first Presidency in the Group of Eight is one of Russia's foreign policy priorities. The work on the contents and organization of the summit is progressing successfully. Priority issues during Russia’s G8 Presidency will be international energy security, fight against contagious diseases and education.

"At the same time, the summit in St. Petersburg will take up such traditional topics as counterterrorism, WMD non-proliferation, fight against organized crime and drug trafficking, environmental and other global problems, topical issues of the global economy, finances and trade, and escalating regional conflicts."

The detailed proposal from President Putin for improving international energy security, and at the same time sustaining economic growth in the world (see below), will be eagerly awaited.

Globalisation

2005-12-31T12:36:00.000-08:00

If globalisation continues as America planned in the 1940's and 1950's, the nation will likely decline in economic wellbeing and political influence internationally. Open trade and cross-border flows of capital mean that the rest of the world will prosper.

"American policy in the 1940's and 1950's was directed expressly at the rehabilitation rather than the punishment of defeated nations, as America led the effort to establish world-wide free trade through [GATT, now WTO], and to protect financial stability, including the IMF and the World Bank. It also initiated its own lending programmes such as the Marshall Plan", wrote Bill Emmott in the book '20:21 Vision'.

Russia plans to lead the world in energy

2005-12-24T01:03:00.000-08:00

Extracts from a report yesterday in India's press:

Energy security would be one of the main issues at the G-8 summit in St Petersburg next summer as Russia is to get the rotating G-8 presidency from Britain on January 1, 2006. US, Canada, France, Germany, Italy and Japan are also members of the elite club of the world’s most-industrialised democracies.

[The President of Russia] said Moscow was willing to open new gas and oil pipelines to reach the Asian markets to create new energy set-up in the world to avoid conflicts among future generations over energy resources. "We must use these positions in the interests of the whole international community, but not to the detriment of our national interests," Putin said in his opening remarks, televised on Thursday night by main Russian TV channels. "This energy set-up should be equally fair for the producers and consumers of energy resources for the sustained economic growth in the world," he underscored.

Perspective

The aim of the Russian presidency of the G8 in 2006 seems to be to sustain economic growth in the world.

In this connection, the Chinese press report statistics from the International Monetary Fund:

1. The world economy will grow by 4.3 percent in 2005;
2. China and India will continue their rapid progress with annual growth of 9.0 and 7.1 percent respectively. The U.S. economy will grow by 3.5 percent, the euro-zone 1.2 percent, Russia 5.5 percent and the Japanese economy will start recovering with a growth of 2 percent;
3. Economic growth in Africa and Latin America will also reach 4.5 and 4.1 percent next year.

"However, threats remain to the world economy, and at the top of all the disturbing factors loom the high oil prices. Other potential threats include a deteriorating current account balance in the United States and consequent dollar fluctuation, an increase in long-term interest rates, falls in property prices, and a major outbreak of bird flu."

Russia to chair G8 in 2006?

2005-12-11T05:08:00.000-08:00

Russia's chairmanship of the G8 in 2006 is under threat from a few senators and congressmen in the United States. These people claim that Russia has an unacceptable culture.

It is worth reflecting though that the countries reckoned to be economic giants in about forty years - the BRICS countries - will also be culturally different. Only one is currently a member of the G8. The BRICS countries are Brazil, Russia, India, China and South Africa - Iran and Venezuela are observers. They are reported to have 75% of the world’s population and 80% of the natural resources.

Moreover, "Washington and London are desperately looking to Putin to deal with pariah states such as Syria and Iran. . . It started after 9/11, when Putin became an important ally in the war on terror by letting the US military operate out of bases in central Asia."

Update

1. Putin Seeks Membership of Asian Business Club: Russia is disillusioned with its role of outsider in European integration and keen to get on board a similar process in Asia. "The process of globalization is beginning to have an Asian look about it," Foreign Minister Sergei Lavrov said in his annual foreign policy review. "This makes the fast-developing Asia-Pacific region a top priority for us." Asian countries are looking to Russia to provide much of the energy for their booming industries.

2. BRIC nations: No one should doubt the economic [and political] resilience of the US and Western Europe, except that it rests on multinational corporations that are moving production, capital and jobs around the world willy-nilly. More capital is sure to bolster the BRIC nations and re-align income and life-standard globally. Growing economic prowess by these new players will lead them to clamor for better recognition in international [political] forums like the United Nations (UN) and World Trade Organization (WTO). In global trade talks exporters from poor countries are now teaming up with India, China and Brazil to argue against agricultural subsidies in European Union and US.

2008?

2005-12-06T04:14:00.000-08:00

The G8 are surely not equipped to deal with the global energy crisis. Moreover they're asking for a report on the situation in 2008.

However there is greater urgency in Asia. Businessweek reports today that two countries not in the G8 - India and China - have plans to act shortly. A pan-Asian oil and gas grid is in the offing.

"Chinese state oil giants have so far had an edge over their Indian counterparts in the search for energy resources because of a head start and deeper pockets. They've beaten Indian rivals in the race for some blocks in Angola, Myanmar, and Indonesia. But the Chinese see the importance of collaboration over confrontation, Aiyar [India's Oil Minister] asserts, citing a string of discussions between his ministry and authorities in Beijing since early 2005."

"The 64-year-old minister, who had built a long career in India's foreign diplomatic corps before joining politics, emerged optimistic from the Nov. 25 roundtable concerning cooperation between North and Central Asian producers and the main regional consumers China, Japan, South Korea, and India. He used the occasion to reiterate his call to former Soviet bloc producers and the vital transit country of Turkey to pay adequate attention to Eastern markets, instead of focusing solely on Europe."

"SECURITY IS KEY. While the message went down well with the producers -- Russia, Kazakhstan, Azerbaijan, Uzbekistan, and Turkmenistan -- Aiyar found an especially strong ally in Turkish counterpart Mehmet Hilmi Guler. "Hilmi Guler belongs to an Islamic conservative party and therefore has some sense of discomfort with a purely Western orientation," Aiyar told reporters in a post-event briefing. "He has become a great advocate," said Aiyar, referring to a "north-south" oil and gas supply relationship he has championed with Turkey in the past few months."

Update

It is reported that Russia wants to prioritise energy when it chairs the G8 in 2006.

Energy - solution by 2008 from IEA?

2005-12-05T14:10:00.000-08:00

The G8 in 2005 asked the International Energy Agency (sister of the OECD) to help solve the world's energy crisis. The work will focus on six broad areas:
- Alternative energy scenarios and strategies.
- Energy efficiency in buildings, appliances, transport and industry.
- Cleaner fossil fuels.
- Carbon capture and storage.
- Renewable energy.
- Enhanced international co-operation.

A report is to be delivered in 2008 to Japan when it is scheduled to chair the G8.

Some of the challenges were reported by 'The International Herald Tribune' in an article A World without easy oil. What now?. The article sets out points arising from a debate they hosted, which included:

"To get the Chinese to the level of per-capita consumption that Taiwan is today. . . is physically impossible."

"I think all four of us are having trouble understanding how the United States will shift its policies. There is the belief that the market will do it. Well, in the '70s the market didn't do it."

"One provocation for rethinking U.S. energy policy will be when Chinese investment in Canadian tar sands and Venezuelan oil development make it increasingly difficult for us to get access to the resources. The problem with the Chinese is that they don't know that the Canadian oil is ours. And neither do the Canadians."

"by our going into Iraq, we displaced a $1 billion investment by the Chinese to develop Iraqi fields. That has motivated the Chinese to do things like buy into the Canadian oil sands and to look into buying Unocal. And it has encouraged them to invest in highly volatile oil provinces that are in opposition to the United States, including the Sudan"

Collective Security - political sensitivities

2005-10-29T10:41:00.000-07:00

If collective security is possible, how should it be funded - the blog asked on 3 and 7 September.

Present funding arrangements have led to the huge variations in military spending by members of NATO and the EU.

The UK navy seems now to envisage a future outwith the collective security of NATO or the EU - hence it intends to rely indefinitely on the largesse of the national taxpayer. The details are here and here in today's Times. Thanks to EU Referendum. No collective security, no chance of central funding.

Update

Signs of more pressure in the UK Government to provide value for money from taxes - a parliamentary requirement for about 20 years. A replacement for Trident, the UK's nuclear deterrent, is in doubt. "The Treasury [sic] has also warned Mr Blair that it is worried about the potential high cost of replacing Trident, and its impact on the public finances". Link

Energy - Political sensitivities

2005-10-29T05:00:00.000-07:00

The United States is blaming the Chinese for the global energy crisis. The Oil Drum has an interesting post and discussion on the matter today.

One contribution to the discussion:

The link to the Chinese press was very helpful. They challenge the accusation that China is destabilising oil markets.

The 'China Daily' says BP's figures show China consumed only 8 per cent of the world total in 2004; however the United States consumed a quarter of the total. Secondly, CD suggests China produced domestically 60% of its consumption; the US produced 40%.

Nevertheless, the competition for the vital and finite reserves is getting intense. Is the World Trade Organisation Ministerial in December the best forum to discuss, officially, this crisis?

Energy - EU, NAFTA and the WTO

2005-10-25T08:11:00.000-07:00

Energy trade is a key activity that is unlikely to receive the priority it deserves at Hong Kong in December (the 6th Ministerial meeting of the World Trade Organisation).

To illustrate the difficulties in store, the Institute for International Economics have this month published a book on the experience with NAFTA - a regional trade agreement. There is an alarming chapter on North America's difficulty in achieving common energy policies. Of the three nations (Canada, Mexico and the US), Canada seems to be the most liberal.

The fractiousness in NAFTA bodes ill for a common energy policy for the European Union's 25 nations.

Update

A summit of European leaders was held 27 October 2005 in London. A broad endorsement was given to the recommendations of the UK presidency, reports the FT.

The recommendations included: "A new European energy strategy, creating an integrated grid, developing a nuclear policy and pooling EU purchasing power". However details are few, although a Newsletter from the EC's 'DG Energy & Transport' will no doubt be issued. Who will meet the costs of the energy security is clearly an important issue - national public sectors, the private sector, or a new financing arrangement.

Energy politics

2005-10-22T14:15:00.000-07:00

In 'Isolationism' below (14 September), it was noted that the UK presidency of the European Union thinks a global solution is needed to satisfy the EU's energy requirements. The 'Update' suggests that this idea is going nowhere. Unless Russia's chairmanship of the G8 in 2006 can help.

Dependence for supplies on the vagaries of national politics seems the way ahead, for now. Earlier this month, the Economist reported on Russia's vast reserves of energy - on which the EU is becoming addicted:

"Last month, Mr Putin and Gerhard Schröder, Germany's chancellor, presided over the launch of Gazprom's latest mega-project: a €4 billion ($5 billion) pipeline that will run under the Baltic Sea to Germany, Gazprom's biggest foreign customer, and thence, eventually, to Britain."

[However supplies of vital energy will be subject to political stability in the exporting and transit countries:] "witness, most famously, the brief interruption in deliveries inflicted on Belarus in February 2004 after Alexander Lukashenka, its tragicomic president, irked Gazprom and Mr Putin once too often. Yuri Yekhanurov, Ukraine's new prime minister, visited Moscow last week, amid talk of an imminent tripling in his country's costs. Both Ukraine and Georgia—another country that is unpopular in the Kremlin, and which lacks Ukraine's transit leverage—are urgently scrambling to find alternative sources of energy."

Reform of G7+1

2005-10-20T13:21:00.000-07:00

Which public organisation should oversee the global economy, regardless of how national finances are independently audited?

One answer is an improved International Monetary Fund. In this connection, it's worth listing some of the comments and recommendations in a paper last month from the Director of the Institute for International Economics - 'A New Steering Committee for the World Economy?'

Quote

The Fund’s management and staff have courageously publicized the current global imbalances that increasingly threaten both the world trading system (via their impetus to protectionism) and the health of the international economy itself (via a large and perhaps precipitous fall of the dollar). However, the Fund has been impotent in seeking remedial action. . . [although] the Fund’s rules provide ample scope for initiative that have been totally ignored.

IMF policy on major issues has always been directed by an outside group: the G-7 since the late 1980s. . . The fundamental reason for the increasing ineffectiveness of the IMF over the past decade or so has been the ineffectiveness of its steering committee, the G-7. Reforms are needed . . .The G-7 has little credibility in counseling other countries to adopt responsible fiscal and exchange rate policies when it permits huge budget imbalances and massively misaligned currencies to persist in its midst without any serious effort to correct or even address them.

A meeting of high officials and academics that I recently attended to discuss these issues reached the profoundly depressing conclusion that there is virtually universal agreement on the diagnosis of the current problem but virtually no possibility of governmental action until the inevitable crisis hits.

[In detail]
1. the G-7 can hardly expect to forge a coordinated and hence effective response to the global imbalances, even if it wants to, without the participation of China and preferably several other key Asian countries (at least Korea and India) as well.
2. the G-7 is equally ill equipped to deal with the global energy problem. . . the G-7 consists primarily of importing countries and could hardly expect to work out legitimate and hence effective solutions that require cooperation and joint leadership with the major oil exporting countries, presumably via OPEC.
3. the G-7 has failed to produce a "sustainable and comprehensive solution" for the Argentine default, the largest single episode of its type in modern history with potentially huge precedential effects for the management of future debt crises.

[Nevertheless, one option for reform of the G7 is to] build on the existing G-20, which has been meeting at the level of finance ministers and central bank governors (and their deputies) since 1999. This group would add six more countries: Argentina, Australia, Indonesia, Korea, Saudi Arabia and Turkey. The additions would include several oil exporters, including the most important one, and three major Muslim countries. Since the European Union is already counted separately, the group could be slimmed to a G-16 by dropping the four individual Europeans.

One crucial political factor must be addressed before choosing among these options. The G-7 has come to refer to itself in recent years (though not at its outset) as the group of "leading industrial democracies." . . . Much of the resistance to China’s addition to the G-7/8, particularly in the United States, has been based on the continued authoritarian nature of its political system. Similar questions could be raised about Saudi Arabia, which (like China) is nevertheless already a member of the G-20. [But these details may all be irrelevant if the object of the group is to manage effectively the global economy.]

Unquote

Perhaps the UK chair of the G8 for 2005 (and EU president) should hold a summit before the year-end to discuss the proposals for improving the regulation of the global economy.

International protection and economic stability

2005-10-12T08:05:00.000-07:00

Central banks could certainly help to audit the public finances of a nation. However they might need protection from the national politics. But the resulting 'checks and balances' would at least assure the international monetary authority (ECB or IMF?) that the figures are in order.

Another major concern is trading imbalances around the world. Should they be levelled? On a key difficulty, Brad Setser produced helpful paper.

"I have rattled on and on about how China's current account surplus is on track to reach 6, 7 or even 8% of China's GDP. . . But that ain't nothing compared to Saudi Arabia. Its current account surplus is forecast to be close 30% of GDP in 2005 by the IMF (other forecasts put its surplus above 30% of GDP), up from 13% in 2003 (and a deficit in 1998?). The average surplus of a Middle Eastern oil exporter is around 20% of their GDP. . ."

Economic and financial stability

2005-10-12T06:29:00.000-07:00

Do nations still accept that "the world needs a strong and effective IMF as the principal multilateral institution responsible for international economic and financial stability"?

This is question one in last month's paper from the Institute for International Economics, referred to below.

The IIE's question is addressed here. Brad Setser suggests the IMF is impotent at present: "IMF efforts to get China to allow its exchange rate to appreciate significantly would have exactly as much impact over Chinese policy as IMF efforts to get the US to reduce its budget deficit. Zero."

Nevertheless, he thinks the IMF must be more aggressive if it is to have global credibility.

But other events are moving the focus. Today's FT reports that Hungary's "central bank. . . has blown the whistle on its own government's attempt to mask the country's deficit. So Hungary's estimated public deficit for this year has now been revised sharply upwards from 3.6 to 6.1 per cent of gross domestic product."

Protect the independence of central banks? Difficult, but it's a way forward for economic stability in the global economy.

Rewriting the rules of the global economy

2005-10-07T05:14:00.000-07:00

Perhaps the International Monetary Fund is unfairly criticised.

The government of the United States is criticised this week by the private sector for protectionist policies; which are discouraging FDI.

"President George W. Bush should issue a policy statement—just as presidents Carter and Reagan did—to indicate that FDI is welcome. The United States should continue to negotiate and ratify bilateral investment treaties and investment provisions in trade agreements so as to establish ground rules for fair treatment of investment. . . And while the president should fully utilize his authority to block foreign acquisitions that genuinely threaten US national security interests, America should welcome all other FDI with open arms."

Bilateral treaties in a global economy - this surely creates big problems for the IMF. Anyway, it would help in the short-term for the WTO to list the 'national security' exceptions it allows to restrict free trade.

And then, there's the need for independent financial audit.

Washington Consensus - changes?

2005-10-03T13:01:00.000-07:00

The Institute for International Economics arranged a conference in September 2005 to consider how to improve the International Monetary Fund.

As an introduction, the IIE prepared a paper, and the MD of the IMF replied to the issues later.

The IIE suggests that instruments should be devised to increase the IMF’s leverage over the exchange rate policies for all nations, and over the economic policies of major industrial countries. And it was said the preferred IMF steering committee is not the old G-7 but the G-20, slimmed down to include one seat for the European Union.

The MD of the IMF focused on economic growth. Rodrigo de Rato said the world needs to move away from a pattern of growth where investment in most of Asia is too low, and high consumption in the U.S. is financed by rapidly increasing debt, and where growth of domestic demand in Europe and Japan is too weak.

But a key problem is how to persuade powerful nations to accept that the UN's IMF should command their economies, as was effectively agreed 60 years ago when nations signed the UN Charter. Do nations still accept that "the world needs a strong and effective IMF as the principal multilateral institution responsible for international economic and financial stability"?

Update
The US certainly support the IMF, now. Per the FT: Frustrated with the lack of meaningful exchange rate adjustment by China and some other Asian economies, the US Treasury has called on the International Monetary Fund to be more ambitious in its surveillance of exchange rates and warned that the "perception that the IMF is asleep at the wheel on its most fundamental responsibility – exchange rate surveillance – is very unhealthy both for the institution and the international monetary system".

The Washington Consensus

2005-09-16T13:14:00.000-07:00

The rules of the global economy should be rewritten. Fascinating article on the future of the global economy, from a former chief economist of the International Monetary Fund.

He says that many people around the world, including in the rich countries, have "failed to find a viable alternative to the much reviled "Washington Consensus" of economic liberalization." Regardless, there is growing unrest.

A posting below (Who is responsible for the Global Economy?, 26 August) shows that many countries, including the US, have frantically been looking for and finding alternatives. Whether they are viable alternatives is an entirely different matter. Professor Rogoff has his doubts. And the situation is getting worse. The Washington Consensus needs rethinking.

Update
1) This view appears in the Wall Street Journal, in an op-ed highlighted by Thomas Barnett. "Revolutionary China, Complacent America," op-ed by Charlene Barshevsky and Edward Gresser, Wall Street Journal, 15 September 2005. "Biggest point Charlene and her co-author make is that China is generating new rules throughout the global economy. This is my favorite theme of BFA [TB's new book, Blueprint for Action]: the New Core sets the New Rules."

2) A What if? scenario was published recently. The essence is that history is repeating itself in US financial governance : a similar loss of financial control in the 1960's drove the US to a drastic solution in the following decade - which was to scrap the UN (IMF) system of global monetary discipline, and introduce floating exchange rates. There are lessons here for many countries.

Trade, not aid

2005-09-15T09:56:00.000-07:00

The competing economic philosophies of big players the United States and the European Union are coming into focus.

Leaving aside the widely differing levels of commitment to give 0.7% of GNP in development aid, The Australian reports:
"THE US has pledged to tear down all tariff barriers and scrap billions of dollars in subsidies if Europe does the same, in a decisive move that revives hopes of a global trade breakthrough in December."

But why is the US administration refusing to lead the way, and set an example to the rest of the world? Perhaps free trade has had its day - see PINR's Economic Brief: French Protectionism. It'll have to be aid instead.

Isolationism

2005-09-14T01:54:00.000-07:00

On energy, the UK presidency of the European Union thinks a global solution is needed (see update below).
However finding a solution to the growing dissatisfaction with global trade is an even greater priority, the UK's Chancellor suggested to a trade union conference yesterday. He cannot be serious (copyright J McEnroe).

An article in today's Herald sets out the problem:
"The strategy pursued by successive governments for the past 20 years of relying on services for economic growth is over. We've got to start making things again. . . Britain has allowed manufacturing to shrink to less than 17% of GDP. Since [1997], a million jobs have disappeared in manufacturing and British exports have evaporated. We have higher trade deficits than ever – more than £5bn in July. Manufacturing industry has been allowed to wither on the vine as Britain built a false economy based on complacency, services and inflated house prices. Scotland's manufacturing exports have crashed by 27% since 2001 and 100,000 manufacturing jobs have disappeared."

But the UK is very interconnected globally. And, even if it wasn't, there's little political will internationally - at present - to discontinue, or split, the European Union - let alone the global economy.

Disputes over global economics - such as the ongoing Doha Development trade talks, the impartiality of the United Nations - are temporary hitches that are put into perspective by this article.
"Three years ago, President Bush warned the UN that it would become "irrelevant" unless it took action against Iraq. The world body declined to endorse the 2003 invasion, but, far from making it irrelevant, Mr Bush has returned to it time and again to seek diplomatic cover for the subsequent occupation and America's plans for the political transition. Its strength drained by the Iraqi insurgency, the Administration has curbed its unilateralist swagger and discovered some benefits in pursuing a more co-operative foreign policy at the UN."

Update on a global solution to energy:

On energy, the UK presidency of the European Union thinks a global solution is needed. In this connection, the former chief of staff at the US state department commented at the New American Foundation on 19 October 2005. Larry Wilkerson said:

"The other thing that no one ever likes to talk about is SUVs and oil and consumption and, as one little girl said yesterday at the Yoshiyama Awards, do you know that we consume 60 percent of the world’s resources? We do; we consume 60 percent of the world’s resources. Well, we have an economy and we have a society that is built on the consumption of those resources. We better get fast at work changing the foundation – and I don’t see us fast at work on that, by the way, another failure of this administration, in my mind – or we better be ready to take those assets. We had a discussion in policy planning about actually mounting an operation to take the oilfields in the Middle East, internationalize them, put them under some sort of U.N. trusteeship and administer the revenues and the oil accordingly. That’s how serious we thought about it."

Signs of an EU common policy on energy

2005-09-12T14:36:00.000-07:00

It's a start.

"EU finance ministers have suggested that part of the blame for the current oil price crisis lies with the US, saying Americans should do more to save energy."

"UK finance minister Gordon Brown said that "this global problem needs global solutions" adding that oil demand could rise by 50 percent in the next 20 years in the light of emerging markets in Asia." EU to push US for lower energy consumption.

Background
The EU helpfully compiled statistics on world energy use. Page 133 of the pdf shows the figures for 2002.

Solid fuels: China 29.7%; USA 22.6%; EU (15) 9%; India 7.4%; Russia 4.4%; Japan 4.2%; Others 22.7%

Oil: USA 25.2%; EU (15) 16.7%; Japan 7.2%; China 7%; Russia 3.6%; India 3.3%; Others 37%

Gas: USA 24.7%; EU (15) 16.1%; Russia 15%; Japan 3.1%; China 1.6%; India 1%; Others 38.6%

The fate of the United Nations?

2005-09-11T08:39:00.000-07:00

The United Nations system may be seriously damaged this week at the World Summit. And so would the framework for the G8, NATO etc.

The UN World Summit was the subject of the posting on 31 August. But more information about the event came out in the past few days, following the release of a report on Iraq. The opinions in the oil-for-food report will be significant in deciding the continuing existence of the United Nations.

It is mentioned in the article that this report is well timed. However the report is only a provisional one on the Iraq scandal - the final version is expected in October.

How does an economic giant become a political giant?

2005-09-10T12:57:00.000-07:00

The EU might want to take lessons from China. There is good news here for national economies and taxpayers; but bad news for the arms industry and international military alliances, such as NATO.

Extracts from the interview with Singapore's first-ever prime minister, Lee Kuan Yew:

SPIEGEL: The political and economic center of gravity is moving from the West towards the East. Is Asia becoming the dominant political and economic force in this century?

Mr. Lee: I wouldn't say it's the dominant force. What is gradually happening is the restoration of the world balance to what it was in the early 19th century or late 18th century when China and India together were responsible for more than 40 percent of world GDP. With those two countries becoming part of the globalized trading world, they are going to go back to approximately the level of world GDP that they previously occupied. But that doesn't make them the superpowers of the world.

"The Russian mistake was that they put so much into military expenditure and so little into civilian technology. So their economy collapsed. I believe the Chinese leadership have learnt: If you compete with America in armaments, you will lose. You will bankrupt yourself. So, avoid it, keep your head down, and smile, for 40 or 50 years."

How much longer does the EU intend to be a political dwarf?

2005-09-09T03:37:00.000-07:00

"The idea of Europe, united and working together, is essential for our nations to be strong enough to keep our place in this world." But Mr Blair's trip to China and India this week has exposed the limits of the EU's ability to forge ties with other global actors. . "

"Indeed, José Manuel Barroso, European Commission president, proved unable to answer a question in New Delhi about India's bid for a permanent United Nations Security Council seat because there is no common European position. FT.

The World Summit is fast approaching if the EU wants the semblance of a united front.

Update 2 October, 2005
The press report comments from the former commissioner for EU external affairs: "You hear so much rhetoric about Europe playing a significant role in the world. What the hell signal do we send to the rest of the world if we can't accept Turkish accession to the European Union?"

So many competing political philosophies within the EU

2005-09-08T02:22:00.000-07:00

For example, new member Poland is said to be a prime mover in challenging the EU's Franco-German-Russian axis.

"Poland is actively pursuing its own agenda as a regional power, while functioning as a mainstay for Washington's policies in an enlarged Europe. In this context, Europe's Common Foreign and Security Policy appears once again to be a mere set of institutional instruments and unable to effectively coordinate its member states' policy priorities."

Washington's policies are reported to promote 'economic determinism' in a global economy. Strategist Thomas Barnett blogs today:

To be successful in the global economy, a mature nation should "allow a certain amount of income equality in order to remain competitive and efficient (i.e., you're going to have to let the market move your labor for you). Otherwise, you find yourself funding ghost towns that correspond to no economic logic, making your economy as a whole more uncompetitive."

What should the EU promote? This surely requires urgent debate.

As a start to the debate, the comments here suggest that both Washington and Brussels are looking for protection from the global economy. The comments include "The drive for global free trade, once championed by states with advanced economies, appears to be encountering an obstacle, if not a limit."

A political dwarf

2005-09-07T12:54:00.000-07:00

The European Union is described as an economic giant - but a political dwarf. Why should this be? Half the G8 comes from the EU, ie the UK, Germany, Italy and France. Link.

But each nation still wants to go its own way. As a result, there is little wish to have an EU position at the G8, let alone the International Monetary Fund or the United Nations. Very ineffective!

A coordinated stance at international meetings would give the EU a great deal of political influence in global affairs; perhaps even a chance to lead. Changing sovereign minds is a priority for the presidency; presenting a coherent position at international organisations is surely one of the reasons the EU was formed. Will there be a joint position at the World Summit for UN reform later this month?

Is Collective Security possible?

2005-09-07T07:39:00.000-07:00

What if there is no agreement on security threats?

In its absence, the Institute of International Economics is stepping into the breach. The Director of the IIE has warned that the growing demands for protectionism may result in an economic barrier to globalisation being drawn down the middle of the Pacific. He spoke yesterday at a meeting of the Pacific Economic Cooperation Council (PECC).

The first recommendation was that China should "promptly" take political steps to increase the value of its currency by up to 25%; otherwise the US will be forced to impose high tariffs on Chinese goods. This revisits a defence put forward in June:

>Nobel economics laureate Robert Mundell . . . said Friday there is no reason for China to change its much-criticized currency peg to the US dollar. . . "China has had a dollar anchor for over 10 years, and it's a winning policy."< >He echoed an argument made by a number of other prominent economists, such as US Federal Reserve Chairman Alan Greenspan and fellow Nobel Prize-winner Joseph Stiglitz. They contend that while a revaluation would make Chinese goods more expensive in the US, American consumers would just buy imports from other low-cost countries instead. In that case the US trade deficit with China might fall, but the size of its overall trade deficit would not.<

Emphasising that the US administration was under intense pressure from its electorate to level trade with China, the second recommendation was that China and the US should work towards a single Free Trade Area of the Asia Pacific.

"A number of Leaders including reportedly from Australia, Canada, Chile, New Zealand, Singapore and Taiwan supported the Free Trade Area of the Asia Pacific (FTAAP) idea, but the largest members, including China and the United States, did not and hence no action was taken."

The involvement of the World Trade Organisation, or the European Union (not a 'locomotive' of the world economy), wasn't mentioned.

However the WTO got a mention a couple of weeks ago. The IIE said then that a joint US-China initiative to revive the WTO's Doha round of global trade negotiations is needed: "through offering substantial reductions in their remaining agricultural and other trade distortions." But the large economy of the EU (economic giant, but political dwarf) doesn't seem to qualify it as a player.

How should collective security be funded?

2005-09-03T02:42:00.000-07:00

How should collective security be funded? Assuming that there will eventually be agreement internationally on security threats.

NATO have this dilemmato solve, urgently. The different levels of contributions that member countries make to the Alliance have long caused friction, and this is inhibiting plans for the Alliance's future. See the huge variances in an interactive version of the UK's Hansard.

A leading commander of NATO forces, General James Jones, spoke earlier this year about the problem of funding.

>MUNICH NATO'S top commander says he is seeking a radical overhaul of the alliance's finances as it becomes more involved in peacekeeping missions in distant countries yet continues to use a system introduced during the cold war to pay for them.< >When NATO was established nearly 56 years ago, military operations. . . were financed in two ways. One was through a common fund into which all countries contributed. The other, known as "costs lie where they fall," meant that any country that contributed troops or equipment to a NATO mission was obliged to pick up all the costs. But as NATO moves outside Europe and ventures as far afield as Afghanistan, where it commands an 8,000-member peacekeeping mission, or to Iraq, where it will run a modest training mission, Jones said the new demands facing NATO required financing arrangements that involved more common funding."< >Jones said his big concern was that if the current financing system was retained, it could jeopardize the NATO Reaction Force. It could mean that countries willing to contribute troops to this force might end up being reluctant because they would have to pay on the basis of "costs lie where they fall." . . In practice, this means that countries like Belgium, which agreed in 2003 to the NATO-led Afghanistan mission but then delayed sending aircraft after its Finance Ministry objected to having pay the crew and maintenance charges, often contribute nothing to those missions.<

Update
With a view to discuss future funding, among other matters, NATO met on the 13th and 14th of September 2005. It was pointed out that a poll of the German Marshall Fund has shown there is little public support for increasing defence spending. The S-G said: "And that means that we have, . . . as NATO, to do lots of public diplomacy, to explain why we are in Afghanistan. Why is the German Bundeswehr making such a big contribution in Afghanistan, far away from home, unthinkable ten years ago. Why is that?"
Without public support, defence spending - nationally and internationally -, will surely reduce. This must be a huge worry.

What is preventing consensus between regional alliances, such as NATO, SCO and CSO?

2005-09-02T05:19:00.000-07:00

'Defence' may be key to harmonising international politics, as the French suggest (see 'Common Military Policy' below) . Three principal alliances around the world are NATO, SCO and CSO. Leaving aside the fractious NATO, SCO seems to be more representative of Eurasia than CSO.

What information do we have on SCO? The Journal Of The China-Eurasia Forum has a special feature this summer.

On July 5 2005, representatives from the six members of SCO gathered in Kazakhstan: China, Russia, Kazakhstan, Kyrgyzstan,Tajikistan and Uzbekistan. Also in attendance were observers from India, Iran, Mongolia and Pakistan. Political connectivity is the aim.

"SCO’s new observer status at the UN General Assembly, and the signing of Memoranda of Understanding between the SCO and the CIS and the SCO and ASEAN."

"calls by the SCO for the United States to draw up a timetable for the eventual departure of U.S. forces from Centrals Asian bases as operations in Afghanistan wind down."

" while this statement says little more than what the Pentagon itself has said about when U.S. forces might leave the region (i.e. when they are no longer needed in Afghanistan), the mere fact that it was uttered demonstrates a new calculus that the Central Asian states may feel confident enough with the support of China and Russia to publicly challenge the United States to address their individual needs."

This is getting out of hand. Perhaps a reorganised NATO could unite the military alliances?

2005 World Summit - likely outcome?

2005-08-31T14:09:00.000-07:00

The Economist reports on the US challenge to the United Nations.

"some of [the US amendments to the draft summit text] would change the declaration considerably, particularly regarding development efforts and intervention to stop human-rights catastrophes."

"The proposed American edits to the document remove nearly all references to the MDGs [Millennium Development Goals] . . . America wants to put more emphasis on the "Monterrey Consensus". . . which concluded that developing countries need to take more responsibility for their own growth by fighting corruption, improving their investment climates and making their countries generally more hospitable to economic activity."

"But developing countries, as well as many UN officials and rich-world governments, believe that substantial aid is required too. . . Thus the draft summit document included a call for rich countries to aim to give 0.7% of their GDP in assistance. It is this kind of language that America wants removed."

What are the chances of the US getting approval to its strict 'development' amendments? Most of the members of the UN General Assembly are developing nations - and they might vote instead for easier access to funding from the developed world.

As for military interventions in sovereign nations - this might eventually lead to the creation of a UN army. It could be formed from NATO, the Shanghai Cooperation Organisation, and the Russian led Collective Security Organisation, if they were able to sort out their differences.

NB: The Shanghai Cooperation Organization (SCO) groups China, Russia, Kazakhstan, Kyrgyzstan,Tajikistan and Uzbekistan. The Collective Security Treaty Organization (CSO) comprises Russia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and Armenia.

2005 World Summit

2005-08-27T10:22:00.000-07:00

The meeting next month of the United Nations, 2005 World Summit may not be amicable. Discussions will centre on whether the post WW2 world order should be fundamentally changed, in effect.

Today's FT reports:

"[The US ambassador] sat down yesterday with his UN colleagues to haggle over hundreds of US amendments. They mostly focus on measures and institutions the US has consistently opposed elsewhere, such as the International Criminal Court and the nuclear test ban treaty which the US has either refused or failed to ratify. The US is also opposed to the pledge for rich countries to spend 0.7 per cent of their national wealth on aid; most Americans believe US aid is far higher than this, and the Bush administration does not want to remind them it is actually far lower.

"In the same vein the US apparently wants to delete reference to the UN's Millennium Development Goals set in 2000, when the original aim of next month's summit was to review progress towards them. Astonishingly, given the loud US allegations of recent genocide in Darfur, Washington is fretting at language that would urge permanent Security Council members not to use their vetoes to block action to halt genocide and other war crimes. On this, however, China is as opposed as the US."

Common Military Policy

2005-08-27T09:30:00.000-07:00

The French have suggested that the future of international politics lies in harmonising policies on defence.

Last month, the Chinese media published a table of the top 15 spenders on the military in 2004. The countries are:
1. USA (47% of world total); 2. UK (5%); 3. France (5%); 4. Japan (4%); 5. China (4%); 6. Germany (3%); 7. Italy (3%); 8. Russia (2%); 9. Saudi Arabia (2%); 10. South Korea (2%); 11. India (2%); 12. Israel (1%); 13. Canada (1%); 14. Turkey (1%); Australia (1%).

Next month's meeting at the United Nations will be a good time to discuss global threats and what collective action is necessary.

Who is responsible for the global economy?

2005-08-26T07:39:00.000-07:00

How much longer will we have a global economy? Yesterday's FT contained comments from the Institute for International Economics that globalisation might be saved if the United States and China act together.

But the system is at risk elsewhere, also. For example, we read a report on the possibility of Fortress Russia. And France is moving in the direction of economic patriotism.

The implications are immense. Isn't the G8 responsible for overseeing the global economy?

Unrealistic

2005-08-22T02:50:00.000-07:00

Are the G8 marking time until they're replaced? Per the Gleneagles Plan of Action, "Those of us who have ratified the Kyoto Protocol will work to strengthen and develop the implementation of the [global] market mechanisms. . .".

This is an unrealistic aim, partly because almost 80% of the world's oil reserves are controlled by governments that have little regard for the free market.

"The United Nations seems the only organisation that can negotiate sufficient order - not the G8. But it'll have to be asked first. But do enough nations really want a peaceful settlement of the energy crisis?" - see below, 'No one has asked the UN'.

Energy Security - assistance from Russia

2005-08-17T10:28:00.000-07:00

It is excellent that Russia is focusing on energy security in its presidency of the G8 in 2006 (see below). We need movement on the Energy Charter Treaty.

The Russian Federation is a member of the Energy Charter Conference, but has yet to sign the Treaty. The sticking point is the transit protocol, which aims "to develop a regime of commonly-accepted legal principles covering transit flows of energy resources, both hydrocarbons and electricity, crossing at least two national boundaries, designed to ensure the security and non-interruption of transit."

The hold-up is mentioned in Charter News, which records remarks made by the S-G of the Energy Charter Secretariat at a conference last October:

>Dr Ria Kemper, noted that huge investments are needed in order for Eurasia to meet its projected energy needs, and emphasised that a reliable framework for energy transit is essential if these investments are to be realised. "The aim of the Energy Charter process is to provide a foundation of common rules, facilitating investment in those projects offering the most advantageous combination of high economic efficiency and low environmental impact. A completed Transit Protocol would provide a strong additional impetus to these investments by clarifying – on a multilateral basis – how energy resources can be brought across different national borders and jurisdictions to consumer markets. I strongly hope that the remaining issues in the text of the Protocol – all of which are the subject of continuing consultations between the European Union and
the Russian Federation – can be resolved as soon as possible."<

International energy security

2005-08-17T05:07:00.000-07:00

The end of the G8 summit in 2005 was marked by an official communique.

On energy security, it says:
"12. Following the success of the Energy and Environment Ministerial Roundtable held in London in March, the UK will hold meetings to take the Dialogue forward in the second half of this year, including by identifying specific implementation plans for carrying out each of the commitments under the Plan of Action."
"13. We welcome the Russian decision to focus on energy in its Presidency of the G8 in 2006 and the programme of meetings that Russia plans to hold."

The importance of energy is starting to raise questions whether national security arrangements are sufficient. Is there a role here for NATO?

2005 Summit

2005-08-16T09:26:00.000-07:00

The outcome of the G8 meeting on 6-8 July 2005 is summarised here.

The two main themes of the UK presidency were climate change and Africa.

On climate change, the Gleneagles Plan of Action was agreed.
"23. Those of us who have ratified the Kyoto Protocol will (a) work to strengthen and develop the implementation of the market mechanisms etc,etc"
"33. We look forward to further discussions on how development and energy strategies can be strengthened to build resilience to climate impacts, including at the Millennium Review Summit in September 2005."

However this G8 agreement was overshadowed three weeks later by the Asia-Pacific Energy Initiative.
"The United States has joined five nations in the Asia-Pacific region in an initiative to reduce greenhouse gas emissions and promote the sharing of energy technology. . .This new partnership includes the United States, Australia, China, India, Japan and South Korea. [The US Deputy Secretary of State] said the six countries combined represent more than half of the world's economy, population and energy use, and also produce half of the world's greenhouse gas emissions."

On Africa, Africa: A Historic Opportunity was agreed.
"10 (e) Acting effectively in the UN and in other fora to combat the role played by 'conflict resources' such as oil, diamonds and timber, and other scarce natural resources, in starting and fuelling conflicts."
"21. An ambitious and balanced conclusion to the Doha Round is the best way to make trade work for Africa and increase African countries' integration into the global economy. The Hong Kong Ministerial in December will be a critical step towards a successful outcome of the DDA in 2006."

But Progress on Doha has been disappointing.
"In the key areas of agriculture, developed countries continue to adopt a rather evasive attitude towards eliminating export subsidies and reducing domestic support, while having a very high level of ambition with respect to market access. Keeping in mind the livelihood security of millions of poor farmers and their inability to subsidise these, developing countries would obviously like to move cautiously on the market access agenda in agriculture."

Update on 22 August, 2005
The NYT rails against slow progress in the Doha 'development' trade talks. "But for poor countries, the process of compromise has been a one-way street for more than half a century. It's time for the rich world to start doing a little compromising."

Update on 11 September, 2005
The G20 are also reported to want progress on Doha.

No one has asked the UN

2005-08-15T02:19:00.000-07:00

Obstacles to solving the energy crisis:

a) The US will be reluctant to cut its consumption of fossil fuel - the administration may therefore be prepared to wage wars to maintain its current rate of consumption in the short term. Signs of this belligerence came when the US Congress recently discouraged the Chinese bid for a US oil company.

b) Equally reluctant to restrict their energy purchases will be rising Eastern nations, especially as they're becoming increasingly prosperous. Their sense of fairness will be aggravated by the fact that the US continues to consume 25% of the world's oil production for less than 5% of the population.

c) The FT reports today that the UK government is reviewing what weapon capabilities it needs in the future: "certain capabilities believed to be essential to national security nuclear arms technologies, chemical and biological weapons defences, and counter-terrorist capabilities are almost certain to be among those listed."

The United Nations seems the only organisation that can negotiate sufficient order - not the G8. But it'll have to be asked first. But do enough nations really want a peaceful settlement of the energy crisis?

Why is the UN ignoring energy security?

2005-08-14T14:26:00.000-07:00

Why is the United Nations ignoring energy? One of its responsibilities is to prevent international conflict, including resource wars between nations. In apparent exasperation, the Russians are tabling energy security for discussion at the G8 economic summit in 2006.

Many people are worried. And they are taking matters into their own hands. For example: the Asia-Pacific initiative; big oil companies have taken out advertising space in newspapers to warn of the likely scramble for oil; the US Department of Energy have commissioned a report; and an Oil Depletion Protocol has been published.

"Efforts will be needed to create alternative sources of energy, to reduce demand for oil through heightened energy efficiency, and to redesign entire systems (including cities) to operate with less petroleum. . . The Protocol will require a system for monitoring production, exports, and imports – which cannot be hidden to a large degree in any case. Enforcement will require the establishment of a Secretariat [UN?] for adjudication of disputes and claims, and a system of economic penalties to be negotiated by the agreeing nations."

G8, 2006

2005-08-09T13:54:00.000-07:00

ENERGY SECURITY 'ONE OF THE KEY ISSUES OF OUR TIME': FORMER NATO CHIEF

Former NATO Secretary General Lord Robertson of Port Ellen has underlined the importance of protecting the world's energy supplies. The former British Defence Secretary told 'energy-security.org'."There are few issues as important to people in their daily lives as energy supply. It dominates domestic and business activity like few other factors. That is why energy security - both in supply, assurance and physical terms is one of the key issues of our time. I have no doubt at all that the debate on how best we guarantee energy security will be a dominant one in the next decade and it will be in finding solutions which will largely determine how safe we all will be.

ENERGY SECURITY WILL BE KEY ISSUE AT G8 IN 2006

At this year’s G8 summit in Gleneagles, Scotland, Russian President Vladimir Putin set the agenda for next year’s conference. He stated that moves to stabilise world energy supplies will top the Group of Eight’s agenda at next year’s meeting in Russia. These words were echoed shortly after by Russian Deputy Energy and Industry Minister Ivan Materov when he commented that energy security, including stability of energy supplies will be the key issue at the next G8 summit.With oil prices rocketing to US$ 60 per barrel, the leaders of the other industrialised countries have given their support to Putin. Concerns are growing about rising energy prices, and they wholeheartedly support Mr Putin’s decision to make energy security the priority at next year’s summit. The leaders agreed to address ‘the strategic challenge of transforming our energy systems to create a more secure and sustainable future’Russia will assume the Presidency of the Group of Eight industrialised countries at the start of 2006, and will host the summit in St Petersburg.
http://www.energy-security.org/news.php?PHPSESSID=729c36834df0fd0c94a7b3b7f2235960#12

The global economy and national politics

2005-07-03T02:53:00.000-07:00

There is some agreement in the press that this week's G8 economic summit won't be allowed to tackle serious problems in the global economy.

"It is, however, the global picture that is more worrying even though it is likely to get scant attention in those G8 communiqués. Central banks are increasingly concerned at the worrisome medium-term trends in fiscal policy in the majority of industrial countries." Scotland on Sunday

The worrisome trends include the slowing of the global economy because of continuing increases in the price of oil. National politics might be tempted to print even more money as a result.
But what are the chances of the Bank for International Settlements, that alliance of central banks, being allowed real independence? About the same as financial audit?

Change

2005-07-02T08:24:00.000-07:00

More thoughts in the media on how to address the serious imbalances in the global economy.

The FT's Martin Wolf wrote a piece this week that elicited responses from many websites, including those of Brad De Long and Brad Setser.
http://delong.typepad.com/sdj/2005/07/vain_hopes_for_.html http://www.roubiniglobal.com/setser/archives/2005/06/more_wisdom_fro.html#comments

One way forward, MW thought, was for China to be fully involved in forum discussions. Also "reform of the International Monetary Fund, to make it relevant to today's world, and a radical restructuring of the increasingly absurd Group of Eight. A forum must be found, together with a permanent secretariat, that makes possible serious discussion of how to proceed among the players that matter."

Both Brad's supported the comment, but thought the likelihood of institutional change was low. De Long went further and suggested a more basic problem is the lack of independent financial discipline in the United States. But, at present, people in all 191 nations won't be offered a referendum to remove powers from their sovereign governments.

The conditions for China joining the G8

2005-06-02T03:37:00.000-07:00

"China would be asked to accept the responsibilities that go with full membership of the global monetary system, above all full co-operation in the management of a global system of floating exchange rates." (See May 19, below)

"Research by the UK media into 'Black Wednesday' is providing compelling reasons for rethinking the international financial architecture. Floating or fixed exchange rates? . . But returning to fixed exchange rates means that national governments would have to comply with monetary discipline, if they want to take part in the global economy." (February 10)

China (and others) are unlikely to want a system of floating exchange rates. See elsewhere in the blogosphere. Blog. (China's Dollar Peg, April 18)

"The Chinese have an exceedingly clear recollection of the great Asian financial crisis of 1997 that devastated Thailand and Indonesia among others. China escaped it, because it had not opened its fragile financial markets to fickle, easily-repatriated foreign capital. The lesson learned: if the RMB floats, it will be a managed float, with enough liquidity and transaction restrictions to ensure that the Chinese government will be able to control the rate in times of need."

International foreign policy?

2005-05-25T03:17:00.000-07:00

'The pipeline that will change the world' is the heading of an article in today's 'Independent'.

It tells us that a 1000-mile oil pipeline has been completed that deliberately skirts Russia. The United States taxpayer is underwriting most of the $4bn it costs. Energy security can be a huge expense for national taxpayers - normally paid through military budgets.

"[The project's] architects and investors claimed the pipeline would shore up energy supplies in the US and Europe for 50 years, protecting our gas-guzzling way of life and easing our reliance on the House of Saud." http://news.independent.co.uk/world/asia/story.jsp?story=641172

Whether there could be an international foreign policy was a question here on May 4. However it looks as though this is a non-starter: one G8 country is prepared to spend $4bn to skirt another.

Make the G8 relevant

2005-05-19T03:19:00.000-07:00

Today's 'Times' suggests that a good start would be for the UK to invite China to join the grouping. "China would be asked to accept the responsibilities that go with full membership of the global monetary system, above all full co-operation in the management of a global system of floating exchange rates."

Secondly, the proposed agenda of the G8 economic forum is questioned. The article recommends reasonably that the priorities for the agenda of the G8 economic forum should include matters vital to the working of the global economy:

1. "the threat to jobs in America and Europe posed by Asian competition";
2. "the protectionist backlash that this Asian competition has triggered in the US and Europe";
3. "the link between protectionism and the misalignment of currencies, especially in Asia. . . [In]Tuesday’s US Treasury report on currency management, . . . the Bush Administration effectively presented the Chinese Government with a six-month ultimatum to revalue its exchange rate or face a trade war". http://www.timesonline.co.uk/article/0,,1061-1617886,00.html

Energy worldview - Food

2005-05-18T04:59:00.000-07:00

What happens when we can't get hold of oil?

For a start, our supplies of food will reduce:

"Oil based agriculture is primarily responsible for the world's population exploding from 1 billion at the middle of the 19th century to 6.3 billion at the turn of the 21st."
http://www.countercurrents.org/po-church0700405.htm - Why Our Food Is So Dependent On Oil (Norman Church)

How are priorities for discussion at the G8 chosen?

Replace the G8?

2005-05-14T09:48:00.000-07:00

What powers do the G8 (or Political 8) really enjoy? Very few - the summit is a discussion forum that often issues guidance to the international community on economic priorities.

"The summit members comply modestly with the decisions and consensus generated by and codified at their annual meeting. Compliance is particularly high in regard to agreements on international trade and energy, and on the part of Britain, Canada, and Germany." http://www.g7.utoronto.ca/

Anyway, things have changed since 9/11. Security is much more of a concern. Therefore how should the G8 adjust?

A new book considers the changing political scene, and comes up with three scenarios for the next ten years:
1. Nations become fortresses. They withdraw from global agreements on economics; protect local jobs and introduce barriers to foreign investment. Internationally, they form alliances with like-minded nations; or
2. International business (based on human nature) takes the lead. There is greater division in societies, and large sections of the world are mired in poverty and violence; or
3. The world is ruled by the main political and economic players - the US and China. http://www.theglobalist.com/storyid.aspx?StoryId=4429

These scenarios do not mention the United Nations. There may be little need for the G8 also.

Why no common foreign policy?

2005-05-12T04:11:00.000-07:00

Why is there little sign of a common foreign policy for the European Union? Indeed why haven't other parts of the world even attempted such an ambitious project? The answer seems to be that governments, worldwide, are constitutionally bound to act in their nation's economic interests - accordingly governments are allowed many interpretations of what's best including, for example, fiscal indiscipline and how little assistance to give internationally.

The UN Charter was a bold attempt at a global constitution, to prevent a repeat of the indiscipline that led to WW2 - however the Charter proved unenforceable. As a result key economic actors split from the UN into the G8, thinking they would be better able to address the problems of the global economy. But the G8 is floundering too - it is accused of being insufficiently representative and lacks enforcement powers. The absence of international enforcement is a common theme.

Do member states want the EU model to succeed?

2005-05-11T02:07:00.000-07:00

The EU should surely have a single view on key issues at the G8 Summit.

EU plans for a common foreign policy? Fifteen years ago the EU's Maastricht treaty called for a common foreign and security policy. Now France says a CFSP will probably take one or two generations to agree (see yesterday's blog).

"Member states do not always have clearly defined and shared geopolitical interests. Great Britain, France, Germany, Italy, Spain, Poland, Belgium, and the Netherlands still have their agendas and their relative position to the United States, as the 2003 Iraq intervention undoubtedly displayed." "Great and Medium Powers in the Age of Unipolarity", 11 May 2005
http://www.pinr.com/

EU hopes for a common energy policy? Based on past experience, member states are increasingly going their own way:

"On April 11, . . . Chancellor Gerhard Schroeder and Russian President Vladimir Putin agreed on eight different deals regarding cooperation in nano- and bio-technologies, education, and oil and gas transportation from Russia to Germany (via the planned Baltic pipeline). Russia was already Germany's most important non-E.U. commercial partner, but after these agreements, a new level of cooperation between the two countries is on its way to being accomplished."

A single view from the European Union at the G8 Summit

2005-05-10T13:48:00.000-07:00

The UK will have difficulty representing the EU at the G8 summit. See May 4 blog: A policy merger between countries might not find favour with all the governments in the EU.

Indeed, it looks as though the EU will be divided for many years to come. An interview with the French ambassador to the United States was broadcast on May 6. http://www.chicagopublicradio.org/audio_library/wv_ramay05.asp

Jean-David Levitte told listeners that it would take probably one or two generations before the EU could have a common foreign policy. This is bad news for both the UK and the EU. The new constitution proposes that the EU should have a foreign minister to represent it - perhaps France have other plans?

Stability or laisser-faire?

2005-05-10T05:22:00.000-07:00

Should global capitalism be better directed? The G8 might want to avoid this question.

If stability in the nation (or a group of nations) is the overriding priority, to what extent should personal greed be controlled? More importantly, though, can it be controlled - remember the experience of the US with prohibition.

Anyway, the question of disciplining 'capitalism' is provocatively raised by the nobel laureate Gunter Grass and the many other people who are reacting to his views. Grass suggests that stability in Germany (as an example of a developed country) is now being seriously harmed by capitalism; the newspaper article is copied at the start of the first link. Debates are at http://delong.typepad.com/sdj/2005/05/guenter_grass_m.html, and at http://crookedtimber.org/2005/05/09/moral-critiques-of-capitalism/#comments

Unfortunately the responses have been largely pro and con Grass, not about the primacy of stability. But it's a brave start.

Energy worldview - transport

2005-05-09T12:09:00.000-07:00

See blog on April 2, 'What should be the worldview on energy?'

The International Energy Agency are very worried about depleting fuel reserves globally. They are expected to report this month that there is a need for "dramatic measures, such as reducing motorway speed limits by 25 per cent, shortening the working week, imposing driving bans on certain days, providing free public transport and promoting car pooling schemes."

Increasing the supply of nuclear power is one way the United States is planning to cut its imports of energy. However, more nuclear doesn't necessarily mean a lot less oil.

>President Bush has proposed reducing oil imports by increasing the use of nuclear power, which he said in a recent speech was "one of the most promising sources of energy." . . . Oil accounts for 41 percent of energy consumption.<

>There is a problem, though: reactors make electricity, not oil. And oil does not make much electricity.< http://www.nytimes.com/2005/05/09/politics/09energy.html?pagewanted=1

Oil was used to produce less than 3 percent of US electricity in 2004 - most of the remainder was for transport. Therefore, as the IEA suggest, a key problem for the G8 is how to fuel the transport of the future.

International foreign policy?

2005-05-04T01:23:00.000-07:00

Foreign policy is a big issue for all nations, nowadays. Should they continue with national policies or move towards an international policy?

The nations in the European Union are undecided.

A few members are going the international route. The different approaches in the EU were, of course, evident in the recent intervention in Iraq. It was essentially a US initiative; the US administration told Iraq on many occasions that they would unilaterally call off the coalition invasion of Iraq if it disarmed.

But leaving aside the complex case of Iraq, taxpayers could cut their bills substantially if their governments adopted common foreign and defence policies with the aim of effectiveness. The future? Europe clearly believes the international transportation of goods is high risk; and it is therefore investing heavily in navies, especially submarines. Could protection of sea lanes be the basis for a new military alliance between the US and Europe?

A policy merger between countries might not find favour with all the governments in the EU. In July the UK assumes the presidency of the EU and has a duty to represent the EU at the G8 Summit of the same month; perhaps this should be item one on the agenda of the G8.

Energy on the G8 agenda

2005-04-29T08:26:00.000-07:00

The lack of a global framework for the distribution of energy is resulting in growing friction between nations.

Should we rely, instead, on a global free market? Unfortunately, a free market in energy doesn't really exist, because many supplier nations regard oil and gas as strategic assets that must be distributed through nationalised companies. Energy is highly political.

Could a politically free market exist? The signs are that many nations, including the US, would oppose this idea. For example, "Under U.S. law, the first of these aims [a desire to open up Iranian oil and gas fields to exploitation by American firms] can only be achieved after the President lifts EO 12959, and this is not likely to occur as long as Iran is controlled by anti-American mullahs and refuses to abandon its uranium enrichment activities with potential bomb-making applications. Likewise, the ban on U.S. involvement in Iranian energy production and export gives Tehran no choice but to pursue ties with other consuming nations." See: http://www.motherjones.com/news/dailymojo/2005/04/blood_oil_iran.html

Perhaps the G8 could start to sort this out? The Secretary-General of the OECD thinks so; he writes this month on "The Energy Challenge". See:
http://www.oecdobserver.org/news/fullstory.php/aid/1567

National politics v Global economics

2005-04-27T02:49:00.000-07:00

The continuity of energy supply is likely to be big worry at the G8. Popular angst that the lights will go out, never mind prices rise, is putting heavy pressure on governments worldwide to do something.

What action can be taken? The issue might rise to the top of the agenda of the G8, but what then? Diversification of supply to nuclear is one temporary solution gathering support.

Pressure on national politicians can lead them to explore the traditional boundaries of unenforceable international rules. For example, word from Ecuador is that the new president is thinking about his options for winning popularity - one is to withhold the service of foreign debt and use the money instead for social programmes nationally. Such are the national pressures on politicians. http://www.nytimes.com/2005/04/22/international/americas/22ecuador.html?

It is doubtful whether the G8 can solve the conflict of national politics versus global economics.

Geopolitics versus a worldview

2005-04-21T01:04:00.000-07:00

An informative piece in today's press on the geopolitics of energy.

"the Chinese are making deals to secure long-term petroleum supplies from around the globe. In particular, they have their eyes on the world’s largest, politically-safe oil reserves. . . They are just across the US border, in the Canadian province of Alberta. . . the Canadians are sitting on at least the world’s second-biggest reserves, locked in the vast oil sands of Alberta."

"The Chinese . . .want at least two million barrels a day, and the Canadians have already sent a trial shipment of oil. Beijing wants to build a $2.5 billion pipeline from Edmonton to the Canadian west coast to make oil easier to transport. Alberta’s prime minister, Ralph Klein, has been to China to persuade them to invest." http://thescotsman.scotsman.com/opinion.cfm?id=423332005

Energy: security of supply

2005-04-10T10:13:00.000-07:00

A worldview for energy? Should energy be market or non-market?

Global energy is becoming non-market. For example, China is increasingly involved in the energy industries of important suppliers to the United States - Venezuela and Canada. And, for now, China have decided not to acquire a large energy company in the US itself. China takes a non-market view, with its national oil companies.

"CHINESE state oil firm Cnooc's sudden departure from the bidding war over US oil firm Unocal in favour of ChevronTexaco's $18.4bn (£9.8bn, E14.4bn) offer suggests that, however high they raise the stakes, buying a US company is still, sometimes, a step too far."

"The three main Chinese state-owned oil companies, CNPC, Cnooc and Sinopec, have expanded operations from just 20 countries in mid-2003 to around 36 this year, striking deals in the Middle East, Africa, South America, and the Caspian."

"With 75% of global oil resources closed to the oil majors, they fear the Chinese might beat them to access. Sinopec early year last won a key contract to develop gas reserves on the edges of Saudi Arabia's Ghawar field on terms no Western firm would have accepted." http://thebusinessonline.com/33470/State_oil_firm_loses_out_on_US_bid

Therefore, at 75% non-market, oil and gas is highly political. As a consequence, countries that rely on the global market are surely unwise to assume that vital energy imports will be available to anyone who can afford them.

Reconcile EU worldviews for the G8 Summit - a responsibility for Scotland?

2005-04-03T04:35:00.000-07:00

The country holding the presidency of the European Union is expected to represent the worldview of the EU at international gatherings, such as the UK hosted G8 Summit in July (see below). Never mind drum up support for the EU constitution.

Yesterday, the president of the European Commission made an official trip to Glasgow . "[José Manuel Barroso] was of the impression that Scotland was perhaps the most pro-European part of the UK." http://www.sundayherald.com/48862

Reconcile worldviews, and get the EU constitution approved? Perhaps too much is expected from all the Scottish raj. (copyright J Paxman)

What should be the worldview on energy?

2005-04-02T07:01:00.000-08:00

The International Energy Agency are very worried about depleting fuel reserves globally. They are expected to report this month that there is a need for "dramatic measures, such as reducing motorway speed limits by 25 per cent, shortening the working week, imposing driving bans on certain days, providing free public transport and promoting car pooling schemes."

Germany is taking action: The FT reports "Several German cities including Munich, Stuttgart and Düsseldorf are set to introduce restrictions over coming weeks on trucks and diesel-driven cars using local roads. . ." And the Philippines are going further by cutting the working week of public servants from five to four days, on the basis that the government should give a lead.

Other thoughts from Asia on energy policy? See Simon World, a blog that gives an Asian perspective on many matters. (http://simonworld.mu.nu/archives/071927.php, and http://simonworld.mu.nu/archives/073364.php)

Reconciliation of worldviews - whose reponsibility?

2005-04-02T04:02:00.000-08:00

Whose responsibility is it to reconcile worldviews, at least within the EU?

"The European Union now participates at the G8 Summit and is represented by the President of the European Commission and the leader of the country that holds the Presidency of the European Union. When a European member of the G8 hosts the Summit at the same time as holding the EU Presidency, the two roles are combined." http://www.europa.eu.int/comm/external_relations/g7_g8/intro/index.htm

The presidency is therefore expected to reconcile the worldviews of EU countries. Luxembourg has the presidency of the EU for the first half of 2005. The UK for the second half, when it will represent the EU at the G8 Summit in July 2005. At the Summit, the UK will be expected to promote the worldview of the EU.

There is much reconciliation to be done before July. The worldview coming from the French government, for example, is that global capitalism should be opposed. This departure from the norm not only questions whether the EU endorses the global economic system; but also questions the EU constitution.

"In the corridors, Mr Chirac was also heard to say that "ultra-liberalism is the new communism", a dig at Mr Barroso's [EC president] free-market instincts. . . Then in a brutal aside, [Mr Barroso] tried to make sense of Europe's baffling political alignments, where centre-left leaders such as Tony Blair of Britain or Marek Belka of Poland supported liberal reforms, while centre-right politicians such as Mr Chirac opposed them. . . This high-profile feud could have serious consequences. The Chirac-Barroso battles seem unlikely to bolster the Yes campaign in the referendum." http://news.ft.com/cms/s/e752945c-9fb9-11d9-b355-00000e2511c8.html

Is collective security a worldview?

2005-03-28T06:54:00.000-08:00

Is the UN Charter's worldview of collective security still realistic? In this connection, an article today explores the changes necessary to the UN Security Council if there is to be protection globally. http://www.timesonline.co.uk/article/0,,1072-1544308,00.html

Key arguments are:

The UN should have the power to enforce international law (essentially the UN Charter). The original basis of the UNSC was a permanent military alliance of the then great powers to keep the peace. But such is evolution. . . one possibility now is to go back to basics and activate Article 44 of the charter, which calls on members to "hold immediately available national . . . contingents for combined international enforcement action". NATO is an example of an international grouping already put together, albeit unconnected to the UN.

Next, update international law. The doctrine of national sovereignty should be qualified by a "behaviour test", assessed by the UN. In December the high-level panel on the future of the UN endorsed the principle of an international obligation to protect the innocent; this allows intervention.

Worldviews?

2005-03-26T14:09:00.000-08:00

The worldviews of the G8 nations are vital, but they are still unknown.

In his 1994 book 'Diplomacy', Henry Kissinger wrote that at least three types of states are entitled to call themselves 'nations'. Firstly "the ethnic splinters from disintegrating empires. . . The goal of international order is beyond their fields of interest and frequently beyond their imaginations. . . they seek to preserve their independence and to increase their power without regard for the more cosmopolitan considerations of an international political order"; secondly "postcolonial nations . . .For many of them, the current borders represent the administrative convenience of the imperial powers . . . the state too often came to mean the army"; finally "the continental-type states - which will probably represent the basic units of the new world order."

Interestingly the former US secretary of state commented on the weakness of a previous attempt at a world order: "The failure to give the League of Nations a military enforcement mechanism underlined the problems inherent in [US President Wilson's] notion of collective security. . . As Hitler was to demonstrate, in the world of diplomacy, a loaded gun is often more potent than a legal brief."

Some see a UN army as essential. Meanwhile, there is a case for using an enforcement capacity written into in the Charter of the United Nations 60 years ago (ECOSOC); the failure to use this facility seems a key matter for debate.

Privatisation or nationalisation?

2005-02-11T08:13:00.000-08:00

This year's G8 will be momentous. The global economy is suffering mounting stress. Apart from governments interfering in exchange rates, some are prepared to reverse the global trend of privatisation. A recent example is reported - 'Russia bars foreign-owned firms from key assets':

The Ministry for Natural Resources said companies would have to be at least 51 per cent Russian-owned to take part in this year's tenders for strategic oil and metals deposits. The rule may prevent oil companies such as ExxonMobil and ChevronTexaco from developing new Russian oil reserves, and also stymie TNK-BP, a pioneering 50-50 owned Anglo-Russian oil company.

The ban is part of an increasingly clear trend by the Russian government to reassert control over strategic areas of the country's economy and keep foreigners out of the most lucrative assets. It comes days after Russian officials suggested that Siemens should not be allowed to buy Russia's engineering company Power Machines, which is also considered a strategic asset. http://news.ft.com/cms/s/f4805682-7b97-11d9-9af4-00000e2511c8.html

G8 agenda - the international financial architecture

2005-02-10T04:47:00.000-08:00

Research by the UK media into 'Black Wednesday' is providing compelling reasons for rethinking the international financial architecture. Floating or fixed exchange rates?

But returning to fixed exchange rates means that national governments would have to comply with monetary discipline, if they want to take part in the global economy. In the early 1970's, it was agreed that the global system of fixed rates (currencies linked to gold) should scrapped. Thereafter, floating currencies became the practice. However, since then, the European Union have tried to reinstate some control, by introducing broad guidelines for the public finances of their member states (Stability and Growth Pact). Moreover, certain countries are pegging to the dollar. Fixed rates are on the way back - unofficially in some cases.

The banking industry isn't too keen on fixed exchange rates. They mauled the UK taxpayer in 1992. The events surrounding 'Black Wednesday', when the UK Treasury used up $40bn in reserves in the failed attempt to prop up the pound, hobbled progress in moving to the protection for taxpayers of fixed rates. http://www.hm-treasury.gov.uk/media/F70/0E/Cost_Black_Weds_reconsidered.pdf

Floating or fixed?