26 ISSUES RELATED TO ENERGY CRISIS IN GEOPOLITICS – 1

Peerzada Raouf Ahmad

epgp books

     

 

 

    CONTENT: –

 

–   UNDERSTANDING THE GEOPOLITICS OF ENERGY

 

–   GEOPOLITICS OF OIL AND NATURAL GAS

 

–   GEOPOLITICS OF OIL AND GAS PIPELINES

 

   LEARNING OUTCOME

 

. Understand the concept of ‘oil weapon’

. Understand the politics of gas pipeline in a spatial perspective

. Discuss the major world disputes in energy in a geopolitical perspective

 

 

KEYWORDS

 

Oil weapon, media cacophony, geopolitical strategy

 

 

1. UNDERSTANDING THE GEOPOLITICS OF ENERGY

 

Energy has always had a great importance in the development of civilization and raising the life standard of society. Deficiency of energy delays economic development, while the increased use of energy leads to increase in energy resources exploitation and decrease in non-renewable resources reserves (Tomić 1996). Considering the non-renewability of the fossil energy sources, it is more likely that the spatial distribution of its reserves will become more important, therefore, we will more often have geopolitical tensions and conflicts over the most profitable remaining deposits. The so-called strategic energy ellipsis, from the Arabian Peninsula to west Siberia, is not by chance the hottest geopolitical region in the world. Within, there are about 70% of proved oil and gas reserves in the world. Over the last twenty years the only remaining military super force, the USA, has spent thousands of billions of dollars, enormous amounts of energy and lost thousands of human lives in order to retain control of this area (Armaroli 2011). However, on the global geopolitical scene nowadays, new economic world powers like China, India, Brazil, Turkey and others have engaged themselves in the battle over these energy resources. We are witnessing the end of cheap primary energy resources, which were considered to exist in unlimited amounts until very recently. Over the last 140 years, thousands of billions of barrels of oil have been spent, and the current ‘growing thirst’ for energy is almost 1000bbl/s of oil, 93000m³/s of natural gas and 221t/s of coal.A question is raised: Will future energy production be able to satisfy the demand and what are possible geopolitical consequences of the global deficiency of energy?

 

Energy crisis means restriction in energy resource supply on the world market at a certain period. It is often related to the shortage of only one energy resource, usually the one that has the highest importance in energetics, traffic, industry, etc. Modern world, which has been basing its development on cheap energy resources for a long time, since the ’70s of the 20th century, survived few energy – oil crises which affected global economy as well as the economy of the most countries. The Energy WeaponNation states remain the most important actors in the geopolitics of energy. They retain the power and at home the authority for initiating actions that derive from their self-defined national interests. At the same time, they are enmeshed in a complex energy international system wherein petroleum and gas become increasingly fungible as they move downstream through a number of stages from lifting/extraction to sale of consumable products. The ability of the sate to use energy as a tool is determined by two components tangible and intangible. The tangible includes its economic needs and capacities. The intangibles cover a range of considerations from its tactical calculations through broad national interests to domestic political contingencies. There are internal and external aspects to both.

 

Among the internal elements in the policy mix is the revenue needs of an exporting country.

 

Any significant reduction in earnings decreases the funds available to a government.

 

Saudi leaders’ anxieties as to the last point in the aftermath of the Arab Spring have prompted them to raise public spending for social programs and general stimulus at a time of global economy is sluggish. Iran, by contrast, has depleted its reserves, commerce has been curtailed across the board, and there is a wide gap between living standards and expectations that already has cut tolerance for further stringencies to the bone.

 

The ability of the state use to use oil as a weapon of geopolitics depend on the market influence of the state. The country with the greatest share of export has the greater influence over the supply market. That is what occurred in 1973 when the Arab members of OPEC together cutback on petroleum exports while trying to target specific countries (AlhajjI 2005). The countries role as a protector natural resources have been shifting towards an agent of global power. The resources are no longer just a use value for the countries but after its change in exchange value it has jumped into being a global power value. The capitalizing ability of the big power and their abilities to control the global politics through resource control has turned the resources in a living entity which formulate global power for or against the people. The spatial analysis becomes quite rampant, for its not that all the poor are at the same level some of them in the imperial states rejoices over their countries use of resource weapon against the country which lacks the power. The resource thus also has the power to create and destroy unity of the class.

 

In this scenario it’s no wonder that weapon of mass destructions which has become redundant due to its global availability needs to be replaced by energy weapon for it’s the energy that drives the economy. Therefore, its control becomes a major issue to determine the global; equation of power. The exhaustible energy source in this perspective becomes a major tool determining the power game at global level. Of the exhaustible resource, oil due to its rareness and high power generating capacity has emerged both as a dollar and weapon.

MAP-1(Armaroli 2011)

 

A. ENERGY AS A GEOPOLITICAL STRATEGY: – The readiness of a given state to use energy dealings as a tool to advance a strategic agenda – diplomatic or economic – will be determined by two sets of factors: the tangible and intangible. The tangible includes its economic needs and capacities. The intangible covers the national as well as international interest of the state. In which there are internal as well as external dimensions among the internal is the ability to create revenue. Any significant reduction in earnings decreases the funds available to a government. The factors influencing how salient the impact on policy-making include: its capital reserves, its degree of economic diversification, its standard of living and the populace’s sensitivity to any manifest or latent danger to its lowering. By these criteria, there is a striking contrast between Saudi Arabia and Iran – for examples. The former has enormous reserves. Little diversification, a relatively high standard of living (sustained by government programs) combined with a quiescent population. Saudi leaders’ anxieties as to the last point in the aftermath of the Arab Spring have prompted them to raise public spending for social programs and general stimulus at a time when the global economy is sluggish. Iran, by contrast, has depleted its reserves, commerce has been curtailed across the board, and there is a wide gap between living standards and expectations that already has cut back severely tolerance for further stringencies.

 

B. ENERGY AS WEAPON: – the degree of influence which the country exercise in the world market determines its capacity to use oil as a weapon. Among suppliers, the larger a country’s share of aggregate exports, the greater its potential influence. That can be compounded by acting in concert with other exporters. At the present time, the picture is especially complicated by the turbulence in the Middle East that has unsettled regional politics and domestic politics alike. For Saudi Arabia, a more acute sense of vulnerability on a number of fronts makes the promotion of stability its priority. That pertains certainly to international energy markets. Its stepping forward to raise production as an offset to the loss of boycotted Iranian oil conforms to its thinking about the imperative to ensure market stability. It conforms as well to its political interest in bringing the Iranian leadership to heal. By so using its surge capacity, Saudi Arabia also nurtures its image as an international good citizen devoted to global stability and not only to advancing its national interests.

 

The all major oil producers in the world are in a position to control the economy of other nations. But one cannot undermine the influence of imperial power in framing the political economy of such resource rich nations. This includes Kuwait, other Gulf producers, Iraq, Libya and, beyond the Middle East, energy surplus countries in the Caspian Basin and Central Asia.

 

The same holds true for Nigeria, Indonesia, Mexico and Venezuela where the need to generate national income to meet the needs of a poorer population are even more exigent. The Central Asian leaders, heirs to the centralized power of Soviet era secular regimes, see fundamentalist Islamic forces as the one threat to their rule. Hence, their acute concern about developments elsewhere, e.g. Afghanistan, Iran, Pakistan, Iraq. In those places, they are partisans of stability and opponents of Salafist movements in all forms (Brenner 2017).

 

 

2. GEOPOLITICS OF OIL AND NATURAL GAS

 

Oil is pervasive in our daily lives. It powers most modes of transport; it is in the plastics we use and the composites with which we build even the most modern planes; it connects every country on earth through trade. It is claimed by national governments and multinational corporations as a resource, a traded good, as tax revenue and as profit. The geopolitics of oil is about the control of the reserves, the refining and production chain, pricing, and distribution. Historically, there have been two countervailing forces: the producers – very few oil rich nations which hold the vast majority of known reserves, and consumers – large, developed (or developing) economies. But now there is a third major force transforming the geopolitics of oil. And it’s a force that favors the U.S. – technology.

 

Oil holds nearly twice as much energy by weight as coal and about 50% more than natural gas by volume.

 

    THE GEO AND THE POLITICS OF OIL: – Who holds the oil? Approximately 80% of the world’s proven reserves are in just eight countries, seven of which are described by The U.S. Energy Information Administration as either ‘failed’, ‘high-risk’, or ‘potentially high-risk’ states. Only Canada, at 173 billion barrels or 10% of reserves, is neither a failed nor a high risk (or potentially high risk) state (https://www.pri.org/stories/2011-07-18/who-holds-worlds-oil n.d.).

 

 

The major oil producing states, on the other hand, do not represent the same risk profile as the reserve holding states. Russia and Saudi Arabia are virtually tied as the largest producers at about 10 mbd (million barrels per day), representing 25% of world production. The U.S. is also a major producer at 7.5 mbd/9%.

 

If production of oil followed pure economic logic and the largest reserves were preferentially exploited, then production would be centered in the Middle East where breakeven costs are estimated at lower than $10 U.S./barrel. Production did follow this trend from 1955-1975 due to perceived greater regional stability and the introduction of super-tankers to ease transport. However, the pattern changed as large resource-holding states nationalized production during the 1960s and 1970s. Nationalization, along with big price increases driven by OPEC, spurred new field development in the U.K., Norway, Alaska, Nigeria, the Gulf of Mexico, Angola, Russia, and Canada, and geographical diversification of production away from the Middle East. In 2011, the CEO of Saudi Aramco recognized that “the more balancedgeographical distribution of unconventional” was reducing demand for growth in conventional output from the Middle East.

 

Oil seems to defy the law of gravity, flowing from the lesser developed states to some of the most developed

 

 

The politics of oil

 

The politics of oil is the struggle to negotiate who gets how much and how it is used. Since most oil resources are owned by governments, such political negotiations are typically between the host state and a company that wants those resources. There is always mutual dependence: for the holder, the value of the resource depends on its being extracted and sold; for the firms, without (enough of) their own resources like the ‘Supermajor’ international oil companies (IOCs), success depends on securing access to oil supply owned by the state. The object of the politics of oil, therefore, is determining the terms of access and the arrangements for sharing revenues. Currently, transnational state-owned national oil companies (NOCs), such as Petro China and Petro bras, are competing with IOCs that produce much of the world’s oil. However, IOCs control a relatively small proportion of the world’s reserves. For IOCs and some NOCs, access to the sovereign resources of another country is imperative, and both types of companies are relying increasingly heavily on their “home states” for political and diplomatic support in these relationships. Vulnerabilities and opportunities created by the flow of oil, and therefore money, are at the core of international oil geopolitics and heavily influence domestic and foreign policies of both exporting and importing states. Oil “rents” (defined as the difference between the selling price/barrel at world market price and the cost/ barrel of production) are particularly high in the major producing Gulf countries, as well as in failed and high risk states posing threats to global security.

 

2013 OIL RENTS TO GDP

Gulf States % High Risk States %
Saudi Arabia 46 Iran 22
Qatar 51 Iraq 45
Kuwait 54 Libya 52
U.A.E. 22 Russia 14

TABLE-1(http://www.toron-ami.com/wp-content/uploads/2015/08/Geopolitics-of-Oil-Toron-AMI_21.pdf n.d.)

 

For high-risk states especially, oil is the currency of state interests. The range of the government “take” of oil revenue is extremely high: Iran 93-96%, Russia 69-72%, Libya 73-89%, and Iraq 92-95%. While lower oil prices (and in the case of Iran, sanctions) weaken the ability of high-risk and failed states to pose a security threat, they simultaneously weaken the hand of the democratic world’s vital allies in the Gulf.The majority (63%) of the world’s daily oil production is transported by sea to consuming nations and 70% of that must go through four potentially insecure chokepoints: The Straits of Malacca and Bosporus in Asia, and Bab el Mandeb and Hormuz in the Middle East. Securing these routes is a crucial national security priority for the U.S., China and the Gulf States, and requires diplomatic collaboration between consuming and producing nations.

 

To get to China and South Asia by sea, oil must pass through one of the most strategically important and contentious bodies of water in the world: The Strait of Malacca. This strait is a 500-mile-long narrow passage between Malaysia and the Indonesian island of Sumatra, and is also home to many modern pirates. The strait funnels ¼ of the world’s seaborne oil and ⅔ of internationally traded Liquefied Natural Gas (LNG). Geopolitically, this body of water is expected to become ever more contentious as tensions between China and Taiwan rise and China claims more of the South China Sea as its sovereign water. The U.S. will certainly have a role to play here in guaranteeing security for its allies and to protect its interests. Also strategically important is The Strait of Bosporus. Istanbul is considered one of the CIA’s most critical “stations” in part because it is split by the Bosporus – the only way to the Mediterranean and to Western European markets for Russian and Central Asian oil and LNG from the Black Sea and Crimea. Turkey retains the sovereign right to restrict passage through the Bosporus – one reason this is such a vital CIA station. In the Middle East, the Bab el-Mandeb Strait at the bottom of the Red Sea, between politically unstable Yemen and Somalia, provides entrance to the Suez Canal and the Summed pipeline. Each day 3 million barrels of oil and major LNG shipments pass through this strait for transshipment to supply Western Europe.

3. GEOPOLITICS OF OIL AND GAS PIPELINES

 

The control over the gas line and its transportation is the major discourse in geopolitical power assertion. The method of distributing the resource surplus is a method to control the wealth pot. The inauguration of the Dauletabad-Sarakhs-Khangiran pipeline in early January of 2013 connecting Iran’s northern Caspian region with Turkmenistan’s vast gas field may go unnoticed amid the Western media cacophony that it is “apocalypse now” for the Islamic regime in Tehran. The event sends strong messages for regional security. Within the space of three weeks, Turkmenistan has committed its entire gas exports to China, Russia and Iran. It has no urgent need of the pipelines that the United States and the European Union have been advancing. Are we hearing the faint notes of a Russia-China-Iran symphony?

 

The 182-kilometer Turkmen-Iranian pipeline starts modestly with the pumping of 8 billion cubic meters (bcm) of Turkmen gas. But its annual capacity is 20bcm, and that would meet the energy requirements of Iran’s Caspian region and enable Tehran to free its own gas production in the southern fields for export. The mutual interest is perfect: Ashgabat gets an assured market next door; northern Iran can consume without fear of winter shortages; Tehran can generate more surplus for exports; Turkmenistan can seek transportation routes to the world market via Iran; and Iran can aspire to take advantage of its excellent geographical location as a hub for the Turkmen exports.

 

MAP-2 (http://www.globalresearch.ca/pipeline-geopolitics-major-turnaround-russia-china-iran-redraw-energy-map/16932 n.d.)

We are witnessing a new pattern of energy cooperation at the regional level that dispenses with Big Oil. Russia traditionally takes the lead. China and Iran follow the example. Russia, Iran and Turkmenistan hold respectively the world’s largest, second-largest and fourth-largest gas reserves. And China will be consumer par excellence in this century. The matter is of profound consequence to the US global strategy.

 

What matters most to Russia is that its dominant role as Europe’s No 1 energy provider is not eroded. So long as the Central Asian countries have no pressing need for new US-backed trans-Caspian pipelines, Russia is satisfied.

 

The power game between the world imperial regimes have diverted the issue of resource distribution to that of exercising geopolitical influence by shifting the perspective to resource hegemony.

 

 

SUMMARY

 

  • –Deficiency of energy delays economic development, while the increased use of energy leads to increase in energy resources exploitation and decrease in non-renewable resources reserves.
  • – Oil seems to defy the law of gravity, flowing from the lesser developed states to some of the most developed ones.
  • – The control over the gas line and its transportation is the major discourse in geopolitical power assertion. The method of distributing the resource surplus is a method to control the wealth pot.

 

 

you can view video on ISSUES RELATED TO ENERGY CRISIS IN GEOPOLITICS – 1

References

  • AlhajjI, A.F. 2005. “The oil weapon: past, present, and future.” OIL AND GAS JOURNAL.
  • Armaroli, N., Balzani, V. 2011. Energy for a Sustainable World – From the Oil Age to a Sun Powered.
  • Brenner, Michael. 2017. http://energy.utexas.edu/the-geo-politics-of-energy/#1.
  • http://www.globalresearch.ca/pipeline-geopolitics-major-turnaround-russia-china-iran-redraw-energy-map/16932.
  • http://www.globalresearch.ca/pipeline-geopolitics-major-turnaround-russia-china-iran-redraw-energy-map/16932.
  • http://www.toron-ami.com/wp-content/uploads/2015/08/Geopolitics-of-Oil-Toron-AMI_21.pdf.
  • https://upload.wikimedia.org/wikipedia/commons/f/f0/Oil_Reserves_Updated.png.
  • https://www.pri.org/stories/2011-07-18/who-holds-worlds-oil.
  • Tomić, P., Romelić, J., Lazić, L. 1996. Ekonomska geografija sveta, Univerzitet u Novom Sadu,.