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SPOILS OF WAR
by Lutz Kleveman
New Statesman
October 3, 2005
Spoils of war: Years of work in battle zones have convinced Lutz
Kleveman that the role energy resources play in causing conflicts is
the big story behind the headlines
About three years ago, I visited the American airbase of Bagram in
Afghanistan. A US army public affairs officer gave me a tour of the
sprawling camp, set up after the ouster of the Taliban in December
2001. As we walked past the endless rows of tents and men in desert
camouflage uniforms, I spotted two makeshift wooden street signs.
They read "Exxon Street" and "Petro Boulevard". Slightly embarrassed,
the officer explained: "This is the fuel handlers' workplace. The
signs are a joke, a sort of irony."
As I am sure they were. It just seemed an uncanny sight given that
I was researching potential links between the "war on terror" and
American oil interests in Central Asia. Years of work in war zones
have convinced me that the role energy resources play in causing armed
conflicts is the big story behind the headlines. Dwindling supplies and
the ever-surging global consumption of oil, especially in China and
India, have caused its price to soar to new heights. As doubts grow
about the true size of Saudi reserves, global production is expected
to peak soon, making oil unaffordable to many people and countries,
and raising the prospect of a "last man standing" oil endgame.
The deepening rivalry over fossil reserves, especially between the
US and China, makes energy wars increasingly likely. No Iraqi I know
believes America would send soldiers to the Gulf region if there
were only strawberry fields to protect. My research in places such as
Nigeria, Azerbaijan and Iraq has shown that oil wealth is more of a
curse than a blessing. In all oil-producing countries (except Britain
and Norway), it has led to environmental degradation, economic decline,
corruption, political instability, coup d'etats or even civil wars.
Central Asia offers a perfect case study of what is the trouble
with oil. The warlords, diplomats, politicians, generals and
oil bosses I have interviewed in the region are all players in a
geostrategic struggle that has become increasingly intertwined with
the anti-terrorist campaigns: the "New Great Game". The main spoils
in this rerun of the 19th-century "Great Game" are the Caspian oil
and gas reserves, the world's biggest untapped fossil fuel resources.
While estimates range widely, the US Energy Department believes that
Azerbaijan and Kazakhstan alone could sit on more than 130 billion
barrels of crude. Oil giants such as ExxonMobil, ChevronTexaco and
BP have already invested more than $40bn in new production facilities.
In May 2001 Dick Cheney, the US vice-president and ex-CEO of
Halliburton (a provider of products and services to the oil and
gas industries), recommended in the seminal national energy policy
report that "the president make energy security a priority of our
trade and foreign policy", singling out the Caspian Basin as a
"rapidly growing new area of supply". Since 11 September, the Bush
administration has accordingly used the "war on terror" to further
American energy interests in Central Asia, deploying thousands of
US troops not only in Afghanistan, but also in the newly independent
republics of Uzbekistan, Kyrgyzstan and Georgia.
By 2010, the US will have to import more than two-thirds of its
energy needs, and the Caspian region has become vital to its policy
of "diversifying energy supply", designed to wean America off its
dependence on the volatile Middle East. Yet Central Asia is no less
volatile than the Middle East, and oil politics are making matters
worse. Disputes persist over pipeline routes from the Caspian
region to high-sea ports. While Russia promotes crude transport
across its territory, China wants to build eastbound pipelines from
Kazakhstan, and Iran is offering its pipeline network for exports via
the Persian Gulf. Washington, on the other hand, has championed the
$3.8bn Baku-Ceyhan oil pipeline through the South Caucasus, which was
recently inaugurated amid much pomp. Controversial for environmental
and social reasons, the project has also perpetuated instability in
the South Caucasus.
With thousands of Russian troops still stationed in Georgia and
Armenia, Moscow has for years sought to deter western pipeline
investors by fomenting bloody ethnic conflicts near the pipeline
route, in the Armenian enclave of Nagorno-Karabakh and in the
Georgian breakaway regions of Abkhazia, South Ossetia and Ajaria. In
return, the US has despatched 500 elite troops to Georgia. Moscow
and Beijing resent the growing US influence in their energy-rich
strategic backyard, and have repeatedly demanded that the Americans
pull out. Russia's president, Vladimir Putin, has signed new security
pacts with the Central Asian rulers and, in 2003, personally opened
a new Russian military base in Kyrgyzstan, only 50km away from a US
airbase. China, in turn, has conducted major military exercises with
Central Asian states. In August, China's biggest state-owned oil
company bought a major oil producer in Kazakhstan for $4,2bn. The
purchase fits in with China's efforts to quench its enormous thirst
for oil by intensifying ties to major energy-producing countries and
buying a wide array of foreign petrol assets.
Besides raising the spectre of interstate conflict, energy imperialism
also exacerbates the terrorist problem. Many Muslims hate America
because for decades successive US governments, in a Faustian pact,
were indifferent towards how badly the Middle Eastern regimes treated
their people - as long as they kept the oil flowing. In Central Asia,
the Bush administration repeats the mistakes that gave rise to Bin
Ladenism in the 1980s and 1990s. Oil-motivated American support
for Central Asian autocrats - such as Azerbaijan's Ilham Aliyev,
Kazakhstan's Nursultan Nazarbayev and Uzbekistan's Islam Karimov -
causes more and more of their disgusted subjects to embrace militant
Islam and anti-Americanism. The Caspian region may be the next big
gas station but, as in the Middle East, there are already a lot of
men running around throwing matches.
Ultimately, no matter how many troops are deployed to protect oilfields
and pipelines, the oil infrastructure might prove too vulnerable
to terrorist attacks such as in Iraq to guarantee a stable supply
anyway. In Iraq, chaos and violence have so far prevented any major
oil companies from investing a huge amount in the country's old petrol
industry. Efforts by Halliburton and the US army corps of engineers
to rehabilitate the oilfields near Kirkuk and Basra have been largely
undermined by insurgent attacks on pipelines. To make matters worse,
conflicts have broken out between Iraq's Kurds and Arabs over who
should control the Kirkuk oilfields.
With so much oil-related trouble looming, old-style policies of
yet more fossil fuel production and waste continue in the wrong
direction. The only wise strategy is a sustainable alternative
energy policy that will steer us into the post-oil era. Reducing
our dependence on oil will go a long way towards "defuelling"
terror-breeding regimes and lessening international tension. This
policy will require saving energy through more efficient technologies,
increasing the role of other energy carriers (including gas but not
nuclear power) and introducing next-generation transport fuels on a
huge scale.
A new energy policy is badly needed anyway to slow the greenhouse
effect and global climate change, which might turn out to be the
worst energy-related source of conflict. Hurricane Katrina - with
violence, anarchy and refugees in its wake - gave merely a foretaste
of the suffering that global warming could cause. That was nature,
some say with a shrug, but in fact it was nature on drugs - and we
need a detox soon.
Lutz Kleveman ([email protected]) is the author of The New Great Game:
blood and oil in Central Asia (Atlantic Books, www.newgreatgame.com),
and the host of an authors' conference on climate change. For more
information visit www.ankeloheconversations.com
Natural gas is by some distance the least fascinating of all energy
sources - at least, it is to most British citizens and their media.
In the "debate" on energy and carbon policy, which largely amounts to
special pleading for government funding or regulatory protection for
(in particular) clean coal and nuclear power, there is virtually no
interest in gas. The subject surfaces mainly in the context of claims
made by supporters of other forms of generating capacity that, in 15 to
25 years from now, the power sector will be overwhelmingly dependent
on imported gas from "unstable" countries, and that this will expose
the British public to unacceptable security risks. A BBC2 docudrama -
set in the future - showed Chechen terrorists blowing up a gas pipeline
running from Russia's Baltic coast to Britain, plunging London into
darkness an hour later. The debate that followed was largely about the
future of nuclear power, rather than the unreality of such a scenario.
This lack of public interest in, or information about, gas is slightly
strange given that it is the country's most important source of energy,
accounting for 41 per cent of primary energy last year (compared
with oil at 34 per cent), and 40 per cent of electricity generation
(compared with 33 per cent from coal and 19 per cent from nuclear
power). This was never intended to happen. But the post-privatisation
"dash for gas" in power generation - partly a dash away from the
problems of the coal and nuclear power industries - was followed by
a realisation that the switch from coal-fired to gas-fired generation
had made a big contribution towards meeting CO2 reduction targets.
In 2000, North Sea gas production peaked and began to decline at
a faster rate than had been anticipated. Over the past few years,
there has been a growing tightness of supply in the winter months,
when gas usage peaks. This has been accompanied by much higher
levels of prices, with substantial volatility and price spikes. These
developments have caused regulatory and parliamentary investigations
into the functioning of gas markets and improper corporate behaviour,
which have failed to substantiate any allegations of wrong-doing. At
the same time, an unprecedented amount of new import infrastructure
is under construction, with two new pipelines, the expansion of an
existing line, and three new liquefied natural gas (LNG) terminals.
This sudden interest in supply, demand and prices is a far cry from
the focus of the past two decades, which has been on developing
competition in utility markets. Since the mid-1980s, politicians,
regulators and consultants have marched around the world lecturing
the less fortunate on the wonders of "British experiment". The answer
to all problems was to "privatise and leave it to the market", which
would produce "the most efficient outcome". This proved to be the
case for much of the 1990s and early 2000s, when British businesses
and citizens enjoyed substantially cheaper gas prices than their
counterparts in Continental Europe, where governments have been
reluctant to liberalise their markets.
Gas production was allowed to proceed at the fastest possible rate -
abandoning the careful "depletion policy" of the nationalised industry
era, which was designed to eke out UK resources with the judicious use
of imports. Government was also responsible for starting the process
that resulted in a pipeline between Britain and Belgium exporting
surplus UK gas, with the aim of accelerating European competition. With
the peaking of domestic production, that pipeline is increasingly being
used to import, and 2004 marked the end of the country's relatively
short-lived spell as a net gas exporter, giving rise to dire warnings
of impending disaster arising from dependence on foreign supplies.
Large-scale imports, when they begin in 2007-08, will initially return
the UK to the position 20 years ago, when more than 20 per cent
of gas demand was imported from Norway. Subsequently, and assuming
higher prices do not stimulate the discovery and production of new
gas, import dependence on piped and liquefied gas will increase
from a variety of sources: Norway, Netherlands, Russia, Algeria,
Egypt, Qatar and others. The diversity of sources and supply routes
provides protection against problems with any individual supplier or
facility. Gas imports, far from being the main problem, are going to
be a large part of the solution to supply problems.
"Unreliable and nasty foreigner" theories of security ignore the
most important current problem - the reliability of ageing North Sea
infrastructure and concern about how these may perform in severe
weather conditions. The impact of severe weather on offshore and
coastal oil and gas infrastructure - as demonstrated by Hurricane
Katrina - is a major potential problem.
Both Transco and Ofgem have given assurances that, even if it is
very cold, there will be sufficient gas and delivery capacity to get
through next winter. But experience of the past year suggests that
any significant supply problem or severe weather causing increases
in demand, even of short duration, will at the very least lead to
short-term price spikes. After this winter, imported supplies start
to flood in and new gas storage (which was not needed when supply
was overwhelmingly from domestic sources) will open up, making the
position much more comfortable. In fact, so much new supply will be
available that, through the early 2010s, exports may continue for a
significant part of the year.
The future of UK energy supplies may be renewables, clean coal, some
form of nuclear power and, more distantly, hydrogen. For the next 20
years, and probably for a great many more, natural gas will dominate
the UK energy balance outside the transport sector. This is a closely
guarded secret revealed only in discussions about supply security.
But there is no specific reason to think that security of gas supplies
will be a major problem - once we get through this winter.
Jonathan Stern is director of gas research at the Oxford Institute
for Energy Studies and honorary professor at the Centre for Energy,
Petroleum and Mineral Law and Policy, University of Dundee
by Lutz Kleveman
New Statesman
October 3, 2005
Spoils of war: Years of work in battle zones have convinced Lutz
Kleveman that the role energy resources play in causing conflicts is
the big story behind the headlines
About three years ago, I visited the American airbase of Bagram in
Afghanistan. A US army public affairs officer gave me a tour of the
sprawling camp, set up after the ouster of the Taliban in December
2001. As we walked past the endless rows of tents and men in desert
camouflage uniforms, I spotted two makeshift wooden street signs.
They read "Exxon Street" and "Petro Boulevard". Slightly embarrassed,
the officer explained: "This is the fuel handlers' workplace. The
signs are a joke, a sort of irony."
As I am sure they were. It just seemed an uncanny sight given that
I was researching potential links between the "war on terror" and
American oil interests in Central Asia. Years of work in war zones
have convinced me that the role energy resources play in causing armed
conflicts is the big story behind the headlines. Dwindling supplies and
the ever-surging global consumption of oil, especially in China and
India, have caused its price to soar to new heights. As doubts grow
about the true size of Saudi reserves, global production is expected
to peak soon, making oil unaffordable to many people and countries,
and raising the prospect of a "last man standing" oil endgame.
The deepening rivalry over fossil reserves, especially between the
US and China, makes energy wars increasingly likely. No Iraqi I know
believes America would send soldiers to the Gulf region if there
were only strawberry fields to protect. My research in places such as
Nigeria, Azerbaijan and Iraq has shown that oil wealth is more of a
curse than a blessing. In all oil-producing countries (except Britain
and Norway), it has led to environmental degradation, economic decline,
corruption, political instability, coup d'etats or even civil wars.
Central Asia offers a perfect case study of what is the trouble
with oil. The warlords, diplomats, politicians, generals and
oil bosses I have interviewed in the region are all players in a
geostrategic struggle that has become increasingly intertwined with
the anti-terrorist campaigns: the "New Great Game". The main spoils
in this rerun of the 19th-century "Great Game" are the Caspian oil
and gas reserves, the world's biggest untapped fossil fuel resources.
While estimates range widely, the US Energy Department believes that
Azerbaijan and Kazakhstan alone could sit on more than 130 billion
barrels of crude. Oil giants such as ExxonMobil, ChevronTexaco and
BP have already invested more than $40bn in new production facilities.
In May 2001 Dick Cheney, the US vice-president and ex-CEO of
Halliburton (a provider of products and services to the oil and
gas industries), recommended in the seminal national energy policy
report that "the president make energy security a priority of our
trade and foreign policy", singling out the Caspian Basin as a
"rapidly growing new area of supply". Since 11 September, the Bush
administration has accordingly used the "war on terror" to further
American energy interests in Central Asia, deploying thousands of
US troops not only in Afghanistan, but also in the newly independent
republics of Uzbekistan, Kyrgyzstan and Georgia.
By 2010, the US will have to import more than two-thirds of its
energy needs, and the Caspian region has become vital to its policy
of "diversifying energy supply", designed to wean America off its
dependence on the volatile Middle East. Yet Central Asia is no less
volatile than the Middle East, and oil politics are making matters
worse. Disputes persist over pipeline routes from the Caspian
region to high-sea ports. While Russia promotes crude transport
across its territory, China wants to build eastbound pipelines from
Kazakhstan, and Iran is offering its pipeline network for exports via
the Persian Gulf. Washington, on the other hand, has championed the
$3.8bn Baku-Ceyhan oil pipeline through the South Caucasus, which was
recently inaugurated amid much pomp. Controversial for environmental
and social reasons, the project has also perpetuated instability in
the South Caucasus.
With thousands of Russian troops still stationed in Georgia and
Armenia, Moscow has for years sought to deter western pipeline
investors by fomenting bloody ethnic conflicts near the pipeline
route, in the Armenian enclave of Nagorno-Karabakh and in the
Georgian breakaway regions of Abkhazia, South Ossetia and Ajaria. In
return, the US has despatched 500 elite troops to Georgia. Moscow
and Beijing resent the growing US influence in their energy-rich
strategic backyard, and have repeatedly demanded that the Americans
pull out. Russia's president, Vladimir Putin, has signed new security
pacts with the Central Asian rulers and, in 2003, personally opened
a new Russian military base in Kyrgyzstan, only 50km away from a US
airbase. China, in turn, has conducted major military exercises with
Central Asian states. In August, China's biggest state-owned oil
company bought a major oil producer in Kazakhstan for $4,2bn. The
purchase fits in with China's efforts to quench its enormous thirst
for oil by intensifying ties to major energy-producing countries and
buying a wide array of foreign petrol assets.
Besides raising the spectre of interstate conflict, energy imperialism
also exacerbates the terrorist problem. Many Muslims hate America
because for decades successive US governments, in a Faustian pact,
were indifferent towards how badly the Middle Eastern regimes treated
their people - as long as they kept the oil flowing. In Central Asia,
the Bush administration repeats the mistakes that gave rise to Bin
Ladenism in the 1980s and 1990s. Oil-motivated American support
for Central Asian autocrats - such as Azerbaijan's Ilham Aliyev,
Kazakhstan's Nursultan Nazarbayev and Uzbekistan's Islam Karimov -
causes more and more of their disgusted subjects to embrace militant
Islam and anti-Americanism. The Caspian region may be the next big
gas station but, as in the Middle East, there are already a lot of
men running around throwing matches.
Ultimately, no matter how many troops are deployed to protect oilfields
and pipelines, the oil infrastructure might prove too vulnerable
to terrorist attacks such as in Iraq to guarantee a stable supply
anyway. In Iraq, chaos and violence have so far prevented any major
oil companies from investing a huge amount in the country's old petrol
industry. Efforts by Halliburton and the US army corps of engineers
to rehabilitate the oilfields near Kirkuk and Basra have been largely
undermined by insurgent attacks on pipelines. To make matters worse,
conflicts have broken out between Iraq's Kurds and Arabs over who
should control the Kirkuk oilfields.
With so much oil-related trouble looming, old-style policies of
yet more fossil fuel production and waste continue in the wrong
direction. The only wise strategy is a sustainable alternative
energy policy that will steer us into the post-oil era. Reducing
our dependence on oil will go a long way towards "defuelling"
terror-breeding regimes and lessening international tension. This
policy will require saving energy through more efficient technologies,
increasing the role of other energy carriers (including gas but not
nuclear power) and introducing next-generation transport fuels on a
huge scale.
A new energy policy is badly needed anyway to slow the greenhouse
effect and global climate change, which might turn out to be the
worst energy-related source of conflict. Hurricane Katrina - with
violence, anarchy and refugees in its wake - gave merely a foretaste
of the suffering that global warming could cause. That was nature,
some say with a shrug, but in fact it was nature on drugs - and we
need a detox soon.
Lutz Kleveman ([email protected]) is the author of The New Great Game:
blood and oil in Central Asia (Atlantic Books, www.newgreatgame.com),
and the host of an authors' conference on climate change. For more
information visit www.ankeloheconversations.com
Natural gas is by some distance the least fascinating of all energy
sources - at least, it is to most British citizens and their media.
In the "debate" on energy and carbon policy, which largely amounts to
special pleading for government funding or regulatory protection for
(in particular) clean coal and nuclear power, there is virtually no
interest in gas. The subject surfaces mainly in the context of claims
made by supporters of other forms of generating capacity that, in 15 to
25 years from now, the power sector will be overwhelmingly dependent
on imported gas from "unstable" countries, and that this will expose
the British public to unacceptable security risks. A BBC2 docudrama -
set in the future - showed Chechen terrorists blowing up a gas pipeline
running from Russia's Baltic coast to Britain, plunging London into
darkness an hour later. The debate that followed was largely about the
future of nuclear power, rather than the unreality of such a scenario.
This lack of public interest in, or information about, gas is slightly
strange given that it is the country's most important source of energy,
accounting for 41 per cent of primary energy last year (compared
with oil at 34 per cent), and 40 per cent of electricity generation
(compared with 33 per cent from coal and 19 per cent from nuclear
power). This was never intended to happen. But the post-privatisation
"dash for gas" in power generation - partly a dash away from the
problems of the coal and nuclear power industries - was followed by
a realisation that the switch from coal-fired to gas-fired generation
had made a big contribution towards meeting CO2 reduction targets.
In 2000, North Sea gas production peaked and began to decline at
a faster rate than had been anticipated. Over the past few years,
there has been a growing tightness of supply in the winter months,
when gas usage peaks. This has been accompanied by much higher
levels of prices, with substantial volatility and price spikes. These
developments have caused regulatory and parliamentary investigations
into the functioning of gas markets and improper corporate behaviour,
which have failed to substantiate any allegations of wrong-doing. At
the same time, an unprecedented amount of new import infrastructure
is under construction, with two new pipelines, the expansion of an
existing line, and three new liquefied natural gas (LNG) terminals.
This sudden interest in supply, demand and prices is a far cry from
the focus of the past two decades, which has been on developing
competition in utility markets. Since the mid-1980s, politicians,
regulators and consultants have marched around the world lecturing
the less fortunate on the wonders of "British experiment". The answer
to all problems was to "privatise and leave it to the market", which
would produce "the most efficient outcome". This proved to be the
case for much of the 1990s and early 2000s, when British businesses
and citizens enjoyed substantially cheaper gas prices than their
counterparts in Continental Europe, where governments have been
reluctant to liberalise their markets.
Gas production was allowed to proceed at the fastest possible rate -
abandoning the careful "depletion policy" of the nationalised industry
era, which was designed to eke out UK resources with the judicious use
of imports. Government was also responsible for starting the process
that resulted in a pipeline between Britain and Belgium exporting
surplus UK gas, with the aim of accelerating European competition. With
the peaking of domestic production, that pipeline is increasingly being
used to import, and 2004 marked the end of the country's relatively
short-lived spell as a net gas exporter, giving rise to dire warnings
of impending disaster arising from dependence on foreign supplies.
Large-scale imports, when they begin in 2007-08, will initially return
the UK to the position 20 years ago, when more than 20 per cent
of gas demand was imported from Norway. Subsequently, and assuming
higher prices do not stimulate the discovery and production of new
gas, import dependence on piped and liquefied gas will increase
from a variety of sources: Norway, Netherlands, Russia, Algeria,
Egypt, Qatar and others. The diversity of sources and supply routes
provides protection against problems with any individual supplier or
facility. Gas imports, far from being the main problem, are going to
be a large part of the solution to supply problems.
"Unreliable and nasty foreigner" theories of security ignore the
most important current problem - the reliability of ageing North Sea
infrastructure and concern about how these may perform in severe
weather conditions. The impact of severe weather on offshore and
coastal oil and gas infrastructure - as demonstrated by Hurricane
Katrina - is a major potential problem.
Both Transco and Ofgem have given assurances that, even if it is
very cold, there will be sufficient gas and delivery capacity to get
through next winter. But experience of the past year suggests that
any significant supply problem or severe weather causing increases
in demand, even of short duration, will at the very least lead to
short-term price spikes. After this winter, imported supplies start
to flood in and new gas storage (which was not needed when supply
was overwhelmingly from domestic sources) will open up, making the
position much more comfortable. In fact, so much new supply will be
available that, through the early 2010s, exports may continue for a
significant part of the year.
The future of UK energy supplies may be renewables, clean coal, some
form of nuclear power and, more distantly, hydrogen. For the next 20
years, and probably for a great many more, natural gas will dominate
the UK energy balance outside the transport sector. This is a closely
guarded secret revealed only in discussions about supply security.
But there is no specific reason to think that security of gas supplies
will be a major problem - once we get through this winter.
Jonathan Stern is director of gas research at the Oxford Institute
for Energy Studies and honorary professor at the Centre for Energy,
Petroleum and Mineral Law and Policy, University of Dundee