Arabic Press - nuclear related 151107

Israel according to Egypt expressed fear of an Egyptian nuclear program, considering that it will be the "scenario of a terrible catastrophe" for Israel. Lierbman from the Foreign Affairs Ministry said that "if Egypt and Saudi Arabia begin a nuclear program that could lead to a terrible disaster scenario for us."

He added that "their intentions must be taken seriously”

Source: Al Shaab

oil related 141107

Iran MPs back Nozari as new oil minister

11/14/2007 01:30 PM

Tehran: Iran's parliament on Wednesday approved Gholamhossein Nozari as oil minister of OPEC's second largest crude producer, a move that had been widely expected.

President Mahmoud Ahmadinejad nominated Nozari, who had been caretaker, after sacking Kazem Vaziri-Hamaneh, a step analysts saw as part a bid by the president to expand control over a ministry that brings in most of Iran's export revenues.

Parliament, which has to approve ministerial appointments, voted to approve Nozari, state radio reported.

Source: Gulf News

nuclear related 141107

The king of the castle

By Zvi Bar'el

Five planeloads of advisors, interpreters, doctors and nurses, young family members and some of King Abdullah's 30 wives landed last month at London's Heathrow Airport. The immediate Saudi royal family was hosted at Buckingham Palace, as is proper. The remaining relatives filled up the luxury hotels of London and the management of Harrods decided to keep the gates of the emporium open beyond the usual closing time. After all, it isn't every day that an entire tribe arrives for the annual shopping spree.

The king is in town and Britain is doing obeisance. Not a single word was said, of course, about the dodgy deal for the sale of fighter planes to Saudi Arabia. Rumor has it that in order to win the contract, about $33 million flowed through back channels into Saudi hands from the planes' manufacturer, BAE Systems. The noise of demonstrations in the streets, protesting the corruption in Saudi Arabia, did not penetrate the walls of the guest palace, nor did the decision by the British court to reconsider the moratorium on the investigations sully the congenial atmosphere of the visit, which culminated as planned in the signing of more contracts for the sale of aircraft to Saudi Arabia. Naturally, it also proved immensely helpful that the Annapolis conference is approaching and Saudi sponsorship is so important that no one wants to annoy the 84-year-old king whose realm just continues getting richer as oil prices soar.

The Arabic press, most of which is controlled by the Saudis, is reporting only on the positive atmosphere and Abdullah's attempts to advance the peace process throughout the Middle East. From Iraq to Lebanon, from the Iranian atom to the Palestinian issue - Saudi Arabia is the main producer of diplomatic initiatives in the region.

This is not just a matter of the first meeting between a Saudi king and a Pope, which took place this month at the Vatican, or of the fact that Saudi Arabia has granted Pope Benedict XVI a kashrut certificate after he stirred up a huge storm in the Islamic countries a year ago when he quoted a hostile description of Islam. Saudi Arabia, for example, is worried about the possibility of Iran acquiring nuclear weapons, just as it was worried in the past, when Iran demonstrated its ballistic capabilities with Shihab 3 missiles. Now King Abdullah has a new initiative aimed at neutralizing the danger of another war close to his palace grounds.

In interviews with the media he has been proposing the following arrangement: An international center for the enrichment of uranium will be established in some neutral country, say Switzerland, and any state in the region that is in need of enriched uranium for peaceful purposes will receive what it wants from this center, which will be supervised by the International Atomic Energy Agency (IAEA). This idea is somewhat similar to a proposal made by Russian President Vladimir Putin to Ali Khamenei, Iran's spiritual leader - but in the Saudi view Russia is not a neutral country. In any case, Iran is not showing any signs that it is prepared to buy either the Russian or the Saudi idea.

One thing is certain: Saudi Arabia will make every effort to prevent a war with Iran. Even if it does not have veto power in the UN Security Council, it does have a sympathetic ear in the corridors of the U.S. administration and in all the other veto-wielding countries. It also has good connections in Iran thanks to the diplomatic activity of Foreign Minister Saud al-Faisal, who has built up friendly relations with the Iranian leadership and has also initiated cooperation agreements between the Sunni kingdom and the Shi'ite state. Iranian President Mahmoud Ahmadinejad's visit to Saudi Arabia this year therefore marked a milestone in the relations between the countries.

Iran and Saudi Arabia have a few more common interests in the region. Just like Washington is brewing a series of sanctions against Iran while at the same time planning the next dialog with it on matters concerning Iraq, Riyadh is fomenting anti-Shi'ite discourse in the country and talking about the Iranian danger, while continuing to maintain trade relations with Iran. The extent of annual trade between the two countries amounts to about $1 billion (not counting oil). And this year their finance ministers met to examine the possibility of further expanding the economic cooperation.

Washington is gritting its teeth but has so far refrained from scolding. When trade with Saudi Arabia amounts to more than $41 billion, there's no spoiling the relations. But it is not just economic relations that connect Saudi Arabia, Iran and the United States. All three are opposed to the breakup of Iraq into autonomous federal provinces - Riyadh in order to maintain the status of Iraq's Sunnis; Tehran in order to be able to influence all of Iraq by means of a Shi'ite government. As for Washington, it will certainly not be able to depict a crumbled Iraq as a diplomatic achievement.

The good relations that have been forged between Saudi Arabia and Iran are now also being enlisted to end the political crisis in Lebanon. Iran supports Hezbollah's position demanding the establishment of a national unity government in which the opposition will have the right to veto important government decisions, whereas Saudi Arabia supports the position of the majority led by Saad Hariri, the son of Rafik Hariri, who held Saudi citizenship and was considered a darling of the kingdom where he attained his tremendous wealth. But Saudi Arabia and Iran, and not Egypt or the Arab League, are suggesting the compromises, and it is they who will have to nod when the crucial moment comes.

Abdullah, who also holds the positions of prime minister, commander of the Royal Guard, head of the National Economic Council, president of the national Council on Petroleum and Minerals and head of the Center for National Dialogue, is not a healthy man. He inherited his formal position from his brother King Fahd in 2005, but by this point he had already run the kingdom in his brother's stead for many years, after Fahd suffered a stroke and was not even able to run a single working meeting.

It was Abdullah, as crown prince, and not King Fahd, who articulated the idea of "the Saudi initiative" that became "the Arab initiative" - an initiative that promises peace and normalization with the entire Arab world if in return Israel withdraws to the 1967 armistice lines. Since the initiative was first proposed, at the Arab League conference in 2002, it has become a formative document that not only has canceled the old perceptions of non-recognition of and non-negotiation with Israel, but has also transmuted non-recognition of Israel from a rigid ideological stance into a matter subject to change with the help of a diplomatic formula.

This is the position that has transformed Saudi Arabia from a "country that joins" initiatives by others into a country that initiates. In fact it has been establishing its position as the Arab world's hegemon over the diplomatic discourse in the Middle East. Though Abdullah's failed attempt to mediate between Fatah and Hamas at the Mecca conference in February of this year showed the kingdom's limitations, its support for the Annapolis conference - although it is not yet clear whether it will send a senior representative - and the financial backing it is providing and will continue to provide to the Palestinian Authority are turning Saudi Arabia into President George W. Bush's most reliable ally when it comes to managing the Israeli-Palestinian conflict and his Middle East policy as a whole.

And because of this special status, Bush could only bite his lip when Abdullah informed him at the last minute that he would not show up for a special dinner the president had organized for him last April. Bush does not host many state dinners - he enjoys this "about as much as having a root canal," according to commentator Jim Hoagland in The Washington Post - thus the great importance he attributed to the dinner with Abdullah is clear. A short time later the king made it clear why he had slapped the royal family's friend in the face: "The United States is an illegal occupying force in Iraq," the Saudi king declared and in so doing showed Bush that there are Arab red lines to White House policy. The pomp of his latest visit to Europe has made it clear to Washington once again that the friend from Riyadh does not see the U.S. as his only ally.

The upshot of this is that when it comes to Saudi Arabia, Washington tends to close its eyes. Secretary of State Condoleezza Rice, for example, has no problem publicly chastising Egypt for human rights violations. Bush has unhesitatingly called for the release of the leader of the opposition Al Raad party, Ayman Nour, from Egyptian prison. Yet apart from the periodic State Department reports on the human rights situation in Saudi Arabia, no presidential or other governmental statement has been heard from Washington concerning the state of human rights in the kingdom.

Today, too, despite Abdullah's promises to revise the curriculum, one can still read in Saudi textbooks about the need to hate Jews and Christians, about the Jews' evil plans and about how some Jews - true, not all of them - are devil-worshippers. But what is all this compared to a handshake between a senior Saudi representative and an Israeli prime minister?

Source: Haaretz

Those Nuclear Flashpoints Are Made in Pakistan

By Douglas Frantz and Catherine Collins

George W. Bush is hardly the first U.S. president to forgive sins against democracy by a Pakistani leader. Like his predecessors from Jimmy Carter onward, Bush has tolerated bad behavior in hopes that Pakistan might do Washington's bidding on some urgent U.S. priority -- in this case, a crackdown on al-Qaida. But the scariest legacy of Bush's failed bargain with Gen. Pervez Musharraf isn't the rise of another U.S.-backed dictatorship in a strategic Muslim nation, or even the establishment of a new al-Qaida haven along Pakistan's lawless border. It's the leniency we've shown toward the most dangerous nuclear-trafficking operation in history -- an operation masterminded by one man, Abdul Qadeer Khan.

For nearly four years, under the banner of the "war on terror,'' Bush has refused to demand access to Khan, the ultranationalist Pakistani scientist who created a vast network that has spread nuclear know-how to North Korea, Iran and Libya. Indeed, Bush has never seriously squeezed Musharraf over Khan, who remains a national hero for bringing Pakistan the Promethean fire it can use to compete with its nuclear-armed nemesis, India. Khan has remained under house arrest in Islamabad since 2004, outside the reach of the CIA and investigators from the International Atomic Energy Agency, who are desperate to unlock the secrets he carries. Bush should be equally adamant about getting to the bottom of Khan's activities.

Bush's sluggishness over Pakistan-based proliferation, even as he has funneled about $10 billion in military and financial aid to Musharraf since Sept. 11, 2001, is even harder to explain when one considers the damage Khan has done to the world's fragile nuclear stability. Khan used stolen technology and black-market sales to help Pakistan obtain its nuclear arsenal, setting the stage for a possible atomic showdown with India. He played a pivotal role in helping Iran start what we increasingly fear is a clandestine nuclear-arms program, allowing Tehran to make significant progress in the shadows before its efforts were uncovered in 2002. He gave key uranium-enrichment technology to North Korea. And if all this weren't enough, he was busily outfitting Libya with a full bomb-making factory when his network was finally shut down in late 2003. Khan has been held incommunicado ever since, leaving the world with new nuclear flashpoints -- and some burning, unanswered questions about his black-market spree.

The most urgent line of inquiry -- particularly given Bush's bellicose statements about the threat posed by Iran's nuclear ambitions -- centers on what exactly Khan provided to the Iranians over 15 years of doing business with them. He could help answer the questions on which war may depend: Is Iran trying to get the bomb? If so, how close is Tehran to obtaining it? Or are the mullahs simply pursuing a civilian nuclear capacity? We do know that Khan sold Iran advanced equipment to manufacture and operate the centrifuges that can enrich uranium, either to generate electricity or to provide the fuel for a weapon. But Khan's nuclear bazaar trafficked in other goodies as well -- including the blueprints for a Chinese-made nuclear warhead, which were found in Libya after Moammar Gadhafi abandoned his atomic aspirations in December 2003 and fingered Khan as his chief supplier.

Despite all these compelling reasons for interrogating Khan, the Bush administration has treated Musharraf with kid gloves, insisting that the general is simply too critical to the fight against Islamic extremism to jeopardize his tenuous hold on power by forcing him to hand over such a national icon. (The same type of flawed rationale is now being rolled out to defend U.S. timorousness in the face of Musharraf's repugnant crackdown on his political foes, the judiciary, the media and human rights groups.) The nastiest legacy of Musharraf's reign will almost certainly not be his turn toward tyranny. It will be his reluctance to get tough on Khan in the past and to question him now -- a reluctance echoed by U.S. reticence about demanding that Pakistan's leaders control its rogue nuclear network. The dangers those failures created will threaten the world long after Musharraf and Bush are gone.

In fact, Khan could have been stopped before he got started. In the mid-1970s, he was working as a mid-level scientist at a research laboratory in Amsterdam, preparing to steal top-secret Dutch plans for building centrifuges and busily compiling a list of potential suppliers for Pakistan's nascent atomic-weapons program -- the seeds of the procurement network that led Pakistan to the bomb. In the fall of 1975, the Dutch secret service discovered what Khan was up to and grew eager to arrest him on espionage charges. But more pragmatic officials from the Dutch economics ministry urged them to hold off, worried about the embarrassment of exposing a spy in the heart of their nuclear establishment.

The CIA turned out to be a tiebreaker. Ruud Lubbers, the Dutch economics minister at the time and later prime minister, told us that the security service had asked the CIA to support its pleas to bust Khan. But the Americans surprised their Dutch colleagues, asking that the scientist be allowed to continue working so that they could monitor his budding procurement operation. Instead of being thrown in jail, Khan was transferred to a less sensitive job. That demotion tipped him off that time was running out, so he bolted for home, taking with him the nuclear secrets that would help make Pakistan a nuclear power. It was a "monumental error,'' said Robert Einhorn, a senior State Department official who worked on arms control under Bush and President Bill Clinton.

Four years later, Washington got a second chance to stop Khan. By 1979, U.S. intelligence agencies had a clear picture of Pakistan's pursuit of nuclear arms and Khan's crucial role as the chief of its uranium-enrichment efforts. In April, Carter slapped economic sanctions on Pakistan -- a shrewd move that turned out to be woefully short-lived.

On Christmas Eve 1979, Soviet troops landed at Kabul International Airport, and by Christmas morning, Red Army soldiers were rolling across pontoon bridges in northern Afghanistan and fanning out across the country. Zbigniew Brzezinski, Carter's national security adviser, saw an opportunity to confront the Soviets by funneling money and arms to the nascent Afghan resistance movement, dominated by the zealous Muslim fighters who would one day become the Taliban and al-Qaida. But Brzezinski's plan required using Pakistan as a conduit for aid to the anti-Soviet jihad, which meant abandoning the sanctions on Islamabad. "This will require a review of our policy toward Pakistan, more guarantees to it, more arms aid, and, alas, a decision that our security policy toward Pakistan cannot be dictated by our nonproliferation policy,'' Brzezinski wrote Carter in a memo dated Dec. 26, 1979.

Carter reluctantly agreed. But by revoking the sanctions, he granted Pakistan -- and Khan -- carte blanche on the nuclear front. Washington sacrificed the goal of stopping Pakistan's nuclear-arms effort, and the moral authority that the United States had used to advocate the cause of nuclear nonproliferation was severely damaged.

The blame did not end with Carter. During a campaign stop in Florida in January 1980, Ronald Reagan was asked about Pakistan's atomic ambitions. "I just don't think it's any of our business,'' he replied.

In office, Reagan and his aides made an art of ignoring Pakistan's march toward the bomb, including intelligence in 1987 that warned that Khan had transferred nuclear equipment to Iran. That transaction started Tehran's clandestine atomic program and marked Khan's transformation from a buyer of nuclear technology to a seller of it. Once again, an opportunity to stop him -- and to derail Iran's fledgling efforts -- was missed.

Bush brags that he helped shut down Khan's network. In fact, much of the damage had already been done. And even Bush's supposed great nonproliferation victory -- persuading Libya to abandon its secret nuclear program -- was too little, too late.

Between 1997 and 2003, we found, Libya paid Khan and his associates nearly $100 million for bomb-making technology and expertise. Among Libya's purchases were detailed plans, which arrived in Tripoli in 2000 or early 2001, for a Chinese warhead. International experts who have seen those designs strongly suspect that the Libyans copied them before turning the plans over to the Americans, along with their nuclear hardware.

In fact, the Americans could have acted against Khan before Libya ever got the nuclear designs. A CIA case officer nicknamed "Mad Dog'' had recruited a Swiss technician at the center of Khan's ring who was providing regular reports on what was going to Libya. We don't know whether the mole was aware of the warhead plans, but we do know that he provided the CIA with a list of equipment so frighteningly thorough that British intelligence, after learning how much material Gadhafi was receiving, was clamoring for action against Libya well before the Americans agreed to move.

The mole also revealed another bombshell. In previously secret briefings with senior IAEA officials in Vienna, he disclosed that he had made electronic copies of the warhead plans in the fall of 2003, acting on orders from Khan, according to diplomats with direct knowledge of the briefings. The mole said that he sent the copies to Khan and one of his associates. But the plans have never surfaced.

Other items from Khan's deadly inventory are missing, too, including a shipment of centrifuge components and precision tools that disappeared in mid-2003. International inspectors worry that the material wound up in the hands of a previously unknown Khan customer -- perhaps Saudi Arabia or Syria, both countries where Khan had tried to peddle his wares before he was arrested. Another possible destination: Iran, where some U.S. and Israeli intelligence officials suspect that the military is operating a second, parallel enrichment program buried deep within the mountains that cover much of the country. But solving such dangerous riddles is apparently not as attractive as propping up a dubious ally in the fight against Islamic extremism.

In the Carter and Reagan years, the justification for going soft on Pakistan's nuclear adventures was always the hope of defeating the Soviets in Afghanistan. Under George H.W. Bush and Clinton, the CIA argued convincingly that it needed more information before striking at Khan. When it comes to Pakistan, there's always something -- some perfectly sensible, hard-headed reason for putting the dangers of nuclear proliferation on the back burner. And Washington's priorities may well stay that way until the very moment when the unthinkable occurs.

Source: Salt Lake Tribune

After mystery raid, the prospect of Syrian-Israeli talks

Tuesday, November 13, 2007

DAMASCUS, Syria: Israel's reported new secret peace feelers to Syria have deepened the mystery over the countries' relations and the reason why Israeli warplanes bombed a target inside Syria two months ago.

The United States has unofficially said that Israel's target was a nascent Syrian nuclear program. But outside analysts and the U.N. maintain there isn't proof of that, and say the Syrian site could well have been something else, including possibly a radar station.

Syria also has disputed that the site contained anything of significance and drawn a parallel to satellite imagery before the U.S.-led invasion of Iraq, which proved unreliable.

In addition, Syria has publicly said the Sept. 6 bombing proves Israel is not interested in peace.

Yet on Tuesday, Israel's Yediot Ahronot newspaper said that Israeli Prime Minister Ehud Olmert had hinted in a briefing to an influential parliamentary committee that he was holding secret peace contacts with Syria.

Olmert also told parliament's Foreign Affairs and Defense Committee on Monday that he was "ready for peace with Syria and prepared to conduct negotiations" as long as Syria abandoned any ties with North Korea and Iran and did not support terror, according to participants.

In addition, Olmert and Israeli Defense Minister Ehud Barak have both said publicly in recent days that they hoped Syria would take part in a U.S.-sponsored peace conference in Annapolis, Maryland, later this month.

The focus of the conference will be on the Israeli-Palestinian conflict, however. And Syria has said it would not attend unless the issue of the Golan Heights also is on the table. Israel captured the strategic Golan from Syria in the 1967 Mideast war.

Syria did not comment Tuesday on the latest Israeli report of peace talks. But Damascus has in the past rejected claims that it was holding secret talks and has insisted on U.S. participation in peace talks to improve the chances of success.

Syria also might be loathe to give up ties to Iran, with whom it has economic and military relations. Both Syria and Iran also support Hezbollah in Lebanon and Palestinian militants, and Syrian President Bashar Assad has said there is no conflict between supporting militants and working for peace.

The reports of talks are not the first between the two staunch enemies, who have no diplomatic ties and have fought four times since Israel's 1948 creation — three in Mideast wars and the latest in Lebanon in 1982 during the Israeli invasion of the neighboring country.

In 2000, formal U.S.-sponsored Israel-Syria talks neared agreement but broke down over final border and peace arrangements. Since then, reports of talks have popped up occasionally — most recently a half-year ago when Israeli media reported that Olmert had relayed messages to Assad through Turkey.

But those reported talks did not lead to a breakthrough, and over the summer, war talk between Syria and Israel heated up — capped by the September air strike by Israel into northern Syria.

Syria's slow move to provide any specific details of the raid afterward, and Israel's near-silence after the raid, were seen by some as a sign the two countries were engaged in some secret dance outside the public eye.

Likewise, the silence from other Arab countries, who did not condemn the raid, was seen as a sign of Syria's own poor relations with those countries. Syria, under pressure from the United States for allegedly interfering in Lebanon and without many Arab friends, could find talks with Israel a relief, and a chance for some regional political leverage.

Meanwhile, many in the region and in Europe remain skeptical about what proof the United States or Israel have that the bombed Syrian site was nuclear-linked.

"There hasn't been anything that constitutes a definitive smoking gun proof that this facility the Israelis attacked was indeed a nuclear facility," said David Hartwell, Middle East and North Africa editor for Jane's Country Risk in London.

Syria has denied any nuclear ambitions and the U.N. nuclear watchdog, the International Atomic Energy Agency, has asked the United States and Israel to show proof.

A diplomat familiar with IAEA affairs, speaking on condition of anonymity because of the issue's sensitivity, said one theory being considered within the agency is that the bombed site may have been a forward radar system, and not a nuclear site.

But John Bolton, former U.S. ambassador to the United Nations, said last week that the site indicated nuclear cooperation between North Korea and Syria, and perhaps also cooperation with Iran.

Source: IHT

Arabic Press - nuclear related 141107

Gulf diplomatic sources revealed some of the most prominent results of the preparatory meeting of the foreign ministers of the Gulf Cooperation Council held in Doha yesterday, and said that the ministers discussed the preliminary feasibility study for joint nuclear peaceful program of the Gulf Cooperation Council, according to international standards, pointing out that the Adviser to the Secretary General of the Cooperation Council, Adnan Shihab Din confirmed in a study in this regard that the program would take 15 years to prepare and build.

Egypt is also studying the nuclear resources available on nine sites for uranium ore, identifying the places available and sedimentary rocks, determining the size of the reserves of in preparation for the implementation of the draft for nuclear plants.

They are currently conducting intensive meetings with specialists of the different sectors, the nine sites identified are : Abu Znimh in South Sinai, Jtar South Hurghada, Abu Rashid Eastern Desert, Grabs, Arabic at Kilo 85 by-Sfaja Qena, south of Umm Lara Aswan, and the thirsty South Eastern Desert, Cap Amiera and a means of sub-Saharan East.

Source: Al Mysrioun, Al Qabas

oil related 131107

"Invisible hands" of speculators help fuel crazy oil prices

Huang Xin

BEIJING, Nov. 13 (Xinhua) -- The volatility of global stock markets has seemingly worn down speculators' patience, as they shift to the oil markets which look more alluring against the backdrop of a falling greenback.

Admittedly, there is a persistent rise in global oil demand, but it is unreasonable to solely blame the market for the "oil bubble" as described by many veteran oil analysts. It should be noted that there are other "invisible hands" behind the crazy oil prices.

U.S. crude surged to a record 98.62 dollars on Nov. 7 before retreating on profit takings. Since mid-August, oil prices have swelled about 40 percent because of the anemic dollar, robust global demand and diminishing inventory levels, which have summoned huge speculative investment estimated to be equivalent to one billion barrels under futures contracts.

Institutional investors such as hedging funds joined the rally to further drive up global oil prices. These speculative investors, who do not need oil themselves, pocketed substantive profits in recent price rises, said analysts.

To prop up oil prices, suppliers deliberately cut their output. According to the Washington Post, countries rich in oil had not been fully exploiting their reserves. The newspaper said Iraq was producing almost 2 million barrels a day less than its 1970s peak. Production had declined for various reasons in Venezuela, Nigeria, Mexico, the United Arab Emirates, around the Caspian Sea and elsewhere.

Saudi Arabia and Kuwait trimmed production a year ago to drive up then-sagging oil prices at 55 to 60 U.S. dollars a barrel. Saudi output had been running about half a million barrels a day lower than last year, said the newspaper, citing the International Energy Agency.

The weak dollar poured oil on the flames. The difference between the sagging dollar and the strong euro had caused an imbalance of foreign earnings and spending for oil producers and increased their domestic inflationary risks.

Developing countries like China are paying much of the skyrocketing prices as imports account for about 50 percent of the nation's oil consumption.

Faced with worsening fuel shortages in the country, China raised petrol, diesel and jet fuels prices by nearly 10 percent to boost domestic supplies but its wholesale petrol prices are still lower than the international average. (about 76 U.S. dollars a barrel compared with the international average of 102 dollars)

This means the Chinese government has to continue offering large amount of subsidies to refineries to cover losses they incur by selling oil at state-set prices. The government subsidized Sinopec, the nation's largest refinery company, to the tune of 1.2billion U.S. dollars in 2005 and 640 million dollars in 2006.

In the meantime, soaring oil prices add to the financial burden for enterprises and individuals, and likewise increase inflationary risks. In fact, oil crises have caused at least two global economic downturns, one in 1973 and the other in 1979.

China has been touted as the new engine of the world economy. Therefore, if the engine fails because of high oil prices, the global economy might stall along with it.

Despite a temporary fall on Thursday after U.S. Federal Reserve Chairman Ben Bernanke highlighted the dual threats of slower growth and inflation for the U.S. economy, U.S. crude Friday regained some of the ground as worries that supplies may come up short ahead of the Northern Hemisphere winter prompted fresh buying in crude oil futures.

Irresponsible speculative investing is threatening global economic security and its effect will linger on until the global oil market restores its own pricing abilities on a rough balance between supply and demand.

In history, there was no bubble that never burst, be it stock or oil prices. Oppenheimer and Sons analyst Fadel Gheit held that oil was 30 dollars a barrel overpriced. Oil share experts are studying to what extent company profits would be affected by possible oil price falls.

One thing for sure is that irrational oil price rises will dampen the outlook for the global economy. And that, in turn, may yet make the bubble makers pay for what they have done.

Source: Xinhua

What resource wars?

By David G Victor

Rising energy prices and mounting concerns about environmental depletion have animated fears that the world may be headed for a spate of "resource wars" - hot conflicts triggered by a struggle to grab valuable resources. Such fears come in many stripes, but the threat industry has sounded the alarm bells especially loudly in three areas.

First is the rise of China, which is poorly endowed with many of the resources it needs - such as oil, gas, timber and most minerals - and has already "gone out" to the world with the goal of securing what it wants. Violent conflicts may follow as the country shunts others aside. A second potential path down the road to resource wars starts with all the money now flowing into poorly governed but resource-rich countries. Money can fund civil wars and other hostilities, even leaking into the hands of terrorists. And third is global climate change, which could multiply stresses on natural resources and trigger water wars, catalyze the spread of disease or bring about mass migrations.

Most of this is bunk, and nearly all of it has focused on the wrong lessons for policy. Classic resource wars are good material for Hollywood screenwriters. They rarely occur in the real world. To be sure, resource money can magnify and prolong some conflicts, but the root causes of those hostilities usually lie elsewhere. Fixing them requires focusing on the underlying institutions that govern how resources are used and largely determine whether stress explodes into violence. When conflicts do arise, the weak link isn't a dearth in resources but a dearth in governance.

Feeding the dragon

Resource wars are largely back in vogue within the US threat industry because of China's spectacular rise. Brazil, India, Malaysia and many others that used to sit on the periphery of the world economy are also arcing upward. This growth is fueling a surge in world demand for raw materials. Inevitably, these countries have looked overseas for what they need, which has animated fears of a coming clash with China and other growing powers over access to natural resources.

Within the next three years, China will be the world's largest consumer of energy. Yet, it's not just oil wells that are working harder to fuel China, so too are chainsaws. Chinese net imports of timber nearly doubled from 2000 to 2005. The country also uses about one-third of the world's steel (around 360 million tons), or three times its 2000 consumption.

Even in coal resources, in which China is famously well-endowed, China became a net importer in 2007. Across the board, the combination of low efficiency, rapid growth and an emphasis on heavy industry - typical in the early stages of industrial growth - have combined to make the country a voracious consumer and polluter of natural resources. America, England and nearly every other industrialized country went through a similar pattern, though with a human population that was much smaller than today's resource-hungry developing world.

Among the needed resources, oil has been most visible. Indeed, Chinese state-owned oil companies are dotting Africa, Central Asia and the Persian Gulf with projects aimed to export oil back home. The overseas arm of India's state oil company has followed a similar strategy - unable to compete head-to-head with the major Western companies, it focuses instead on areas where human-rights abuses and bad governance keep the major oil companies at bay and where India's foreign policy can open doors. To a lesser extent, Malaysia engages in the same behavior. The American threat industry rarely sounds the alarm over Indian and Malaysian efforts, though, in part because those firms have less capital to splash around and mainly because their stories just don't compare with fear of the rising dragon.

These efforts to lock up resources by going out fit well with the standard narrative for resource wars - a zero-sum struggle for vital supplies. But will a struggle over resources actually lead to war and conflict?

To be sure, the struggle over resources has yielded a wide array of commercial conflicts as companies duel for contracts and ownership. State-owned China National Offshore Oil Corporation's (CNOOC) failed bid to acquire US-based Unocal - and with it Unocal's valuable oil and gas supplies in Asia - is a recent example. But that is hardly unique to resources - similar conflicts with tinges of national security arise in the control over ports, aircraft engines, databases laden with private information and a growing array of advanced technologies for which civilian and military functions are hard to distinguish. These disputes win and lose some friendships and contracts, but they do not unleash violence.

Most importantly, China's going-out strategy is unlikely to spur resource wars because it simply does not work, a lesson the Chinese are learning. Oil is a fungible commodity, and when it is sourced far from China it is better to sell (and buy) the oil on the world market. The best estimates suggest that only about one-tenth of the oil produced overseas by Chinese investments (so-called "equity oil") actually makes it back to the country. So, thus far, the largest beneficiaries of China's strategy are the rest of the world's oil consumers - first and foremost the United States - who gain because China subsidizes production.

Until recently, the strategy of going out for oil looked like a good bet for China's interests. But, despite threat-industry fear-mongering, we need not worry that it will continue over the long term because Chinese enterprises are already poised to follow a new strategy that is less likely to engender conflict. The past strategy rested on a trifecta of passing fads. One fad was the special access that Chinese state enterprises had to cheap capital from the government and by retaining their earnings.

The ability to direct that spigot to political projects is diminishing as China engages in reforms that expose state enterprises to the real cost of capital and as the Chinese state and its enterprises look for better commercial returns on the money they invest. Second, nearly all the equity-oil investments overseas have occurred since the late 1990s, as prices have been rising. Each has looked much smarter than the last because of the surging value of oil in the ground. But that trend is slowing in many places because the cost of discovering and developing oil resources is rising.

And the third passing fad in China's going-out strategy is the fiction that China can cut special deals - such as by channeling development assistance to pliable host governments - to confer a durable advantage for Chinese companies. While there is no question that the special deals are rampant - by some measures, most of China's foreign assistance is actually tied to natural-resources projects - the Chinese government and its overseas enterprises are learning that it is best to avoid these places for the long haul. Among the special havens where Chinese companies toil are Sudan, Nigeria, Chad, Iran and Zimbabwe - all countries where even Chinese firms find it hard to assure adequate stability to reliably extract natural resources.

As China grapples with these hard truths about going out, the strategy will come unstuck. It won't happen overnight, but evidence in this direction is encouraging. China already pursues the opposite strategy - seeking reliable hosts, multiple commercial partners and market-oriented contracts - when it secures natural resources that require technical sophistication. China's first supplies of imported natural gas, which started last year at a liquefied natural gas terminal in Shenzhen, came from blue-chip investments in Australia, governed by contracts and investments with major Western companies.

With time, China will shift to such arrangements and away from the armpits of governance. At best, badly governed countries are mediocre hosts for projects that export bulk commodities, such as iron ore and raw crude oil. These projects, however, are least likely to engender zero-sum conflicts over resources because it is particularly difficult to corner the market for widely traded commodities, as China has learned with its equity-oil projects. Resources that require technical sophistication to develop tend to favor integration and stability, rather than a zero-sum struggle.

Pernicious tents

The second surge in thinking about resource wars comes from all the money that is pulsing into resource-rich countries. There is no question that the revenues are huge. OPEC cashed US$650 billion for 11.7 billion barrels of the oil it sold in 2006, compared with $110 billion in 1998, when it sold a similar quantity of oil at much lower prices. Russia's Central Bank reports that the country earned more than $300 billion selling oil and gas in 2006, about four times its annual haul in the late 1990s. But will this flood in rents cause conflict and war?

There is no question that large revenues - regardless of the source - can fund a lot of mischievous behavior. Iran is building a nuclear-weapons program with the revenues from its oil exports. Russia has funded trouble in Chechnya, Georgia and other places with oil and gas rents. Hugo Chavez opened Venezuela's bulging checkbook to help populists in Bolivia and to poke America in ways that could rekindle smoldering conflicts. Islamic terrorists also have benefited, in part, from oil revenues that leak out of oil-rich societies or are channeled directly from sympathetic governments.

But resource-related conflicts are multi-causal. In no case would simply cutting the resources avoid or halt conflict, even if the presence of natural resources can shift the odds. Certainly, oil revenues have advanced Iran's nuclear program, which is a potential source of hot conflict and could make future conflicts a lot more dangerous. But a steep decline in oil probably wouldn't strangle the program on its own. Indeed, while Iran still struggles to make a bomb, resource-poor North Korea has already arrived at that goal by starving itself and getting help from friends. Venezuela's checkbook allows Chavez to be a bigger thorn in the sides of those he dislikes, but there are other thorns that poke without oil money.

As we see, what matters is not just money but how it is used. While al-Qaeda conjures images of an oil-funded network - because it hails from the resource-rich Middle East and its seed capital has oily origins - other lethal terror networks, such as Sri Lanka's Tamil Tigers and Ireland's Republican Army, arose with funding from diasporas rather than oil or other natural resources. Unlike modern state armies that require huge infusions of capital, terror networks are usually organized to make the most of scant funds.

During the run-up in oil and gas prices, analysts have often claimed that these revenues will go to fund terror networks; yet it is sobering to remember that al-Qaeda came out in the late 1990s, when oil earnings were at their lowest in recent history. Most of the tiny sums of money needed for the September 11 attacks came from that period. Al-Qaeda's daring attacks against the US embassies in Kenya and Tanzania occurred when oil-rich patrons were fretting about the inability to make ends meet at home because revenues were so low. Ideology and organization trump money as driving forces for terrorism.

Most thinking about resource-lubed conflict has concentrated on the ways that windfalls from resources cause violence by empowering belligerent states or sub-state actors. But the chains of cause and effect are more varied. For states with weak governance and resources that are easy to grab, resources tend to make weak states even weaker and raise the odds of hot conflict. This was true for Angola’s diamonds and Nigeria’s oil, which in both cases have helped finance civil war. For states with stable authoritarian governments - such as Kuwait, Saudi Arabia, most of the rest in the western Gulf, and perhaps also Russia and Venezuela - the problem may be the opposite. A sharp decline in resource revenues can create dangerous vacuums where expectations are high and paltry distributions discredit the established authorities.

On balance, the windfall in oil revenues over recent years is probably breeding more conflict than would a crash in prices. However, while a few conflicts partly trace themselves to resources, it is the other pernicious effects of resource windfalls, such as the undermining of democratic transitions and the failure of most resource-reliant societies to organize their economies around investment and productivity, that matter much, much more. At best, resources have indirect and mixed effects on conflict.

Climate dangers

The third avenue for concern about coming resource wars is through the dangers of global climate change. The litany is now familiar. Sea levels will rise, perhaps a lot; storms will probably become more intense; dry areas are prone to parch further and wet zones are likely to soak longer. And on top of those probable effects, unchecked climate change raises the odds of suffering nasty surprises if the world's climate and ecosystems respond in abrupt ways. Adding all that together, the scenarios are truly disturbing. Meaningful action to stem the dangers is long overdue.

In the United States over the last year, the traditional security community has become engaged on these issues. Politically, that conversion has been touted as good news because the odds of meaningful policy are higher if hawks also favor action. Their concerns are seen through the lens of resource wars, with fears such as: water shortages that amplify grievances and trigger conflict; migrations of "climate refugees", which could stress border controls and also cause strife if the displaced don't fit well in their new societies; and diseases such as malaria that could be harder to contain if tropical conditions are more prevalent, which in turn could stress health-care systems and lead to hot wars.

While there are many reasons to fear global warming, the risk that such dangers could cause violent conflict ranks extremely low on the list because it is highly unlikely to materialize. Despite decades of warnings about water wars, what is striking is that water wars don't happen - usually because countries that share water resources have a lot more at stake and armed conflict rarely fixes the problem. Some analysts have pointed to conflicts over resources, including water and valuable land, as a cause in the Rwandan genocide, for example. Recently, the UN secretary-general suggested that climate change was already exacerbating the conflicts in Sudan.

But none of these supposed causal chains stay linked under close scrutiny - the conflicts over resources are usually symptomatic of deeper failures in governance and other primal forces for conflicts, such as ethnic tensions, income inequalities and other unsettled grievances. Climate is just one of many factors that contribute to tension. The same is true for scenarios of climate refugees, where the moniker "climate" conveniently obscures the deeper causal forces.

The dangers of disease have caused particular alarm in the advanced industrialized world, partly because microbial threats are good fodder for the imagination. But none of these scenarios hold up because the scope of all climate-sensitive diseases is mainly determined by the prevalence of institutions to prevent and contain them rather than the raw climatic factors that determine where a disease might theoretically exist. For example, the threat industry has flagged the idea that a growing fraction of the United States will be malarial with the higher temperatures and increased moisture that are likely to come with global climate change.

Yet much of the American South is already climatically inviting for malaria, and malaria was a serious problem as far north as Chicago until treatment and eradication programs started in the 19th century licked the disease. Today, malaria is rare in the industrialized world, regardless of climate, and whether it spreads again will hinge on whether governments stay vigilant, not so much on patterns in climate. If Western countries really cared about the spread of tropical diseases and the stresses they put on already fragile societies in the developing world, they would redouble their efforts to tame the diseases directly (as some are now doing) rather than imagining that efforts to lessen global warming will do the job. Eradication usually depends mainly on strong and responsive governments, not the bugs and their physical climate.

Rethinking policy

If resource wars are actually rare - and when they do exist, they are part of a complex of causal factors - then much of the conventional wisdom about resource policies needs fresh scrutiny. A full-blown new strategy is beyond this modest essay, but here in the United States, at least three lines of new thinking are needed.

First, the United States needs to think differently about the demands that countries with exploding growth are making on the world's resources. It must keep their rise in perspective, as their need for resources is still, on a per capita basis, much smaller than typical Western appetites. And what matters most is that the United States must focus on how to accommodate these countries' peaceful rise and their inevitable need for resources.

Applied to China, this means getting the Chinese government to view efficient markets as the best way to obtain resources - not only because such an approach leads to correct pricing (which encourages energy efficiency as resources become more dear), but also because it transforms all essential resources into commodities, which makes their particular physical location less important than the overall functioning of the commodity market. All that will, in turn, make resource wars even less likely because it will create common interests among all the countries with the greatest demand for resources. It will transform the resource problem from a zero-sum struggle to the common task of managing markets.

Most policymakers agree with such general statements, but the actual practice of US policy has largely undercut this goal. Saber-rattling about CNOOC's attempt to buy Unocal - along with similar fear-mongering around foreign control of ports and new rules that seem designed to trigger reviews by the Committee on Foreign Investment in the United States when foreigners try to buy American-owned assets - sends the signal that going out will also be the American approach, rather than letting markets function freely.

Likewise, one of the most important actions in the oil market is to engage China and other emerging countries fully in the International Energy Agency - which is the world's only institution for managing the oil commodity markets in times of crisis - yet despite wide bipartisan consensus on that goal, nearly nothing is ever done to execute such a policy. Getting China to source commodities through markets rather than mercantilism will be relatively easy because Chinese policymakers, as well as the leadership of state enterprises that invest in natural resource projects, already increasingly think that way.

The sweep of history points against classic resource wars. Whereas colonialism created long, oppressive and often war-prone supply chains for resources such as oil and rubber, most resources today are fungible commodities. That means it is almost always cheaper and more reliable to buy them in markets.

At the same time, much higher expectations must be placed on China to tame the pernicious effects of its recent efforts to secure special access to natural resources. Sudan, Chad and Zimbabwe are three particularly acute examples where Chinese (and in Sudan's case, Indian) government investments, sheltered under a foreign-policy umbrella, have caused harm by rewarding abusive governments. That list will grow the more insecure China feels about its ability to source vital energy and mineral supplies. Some of what is needed is patience because these troubles will abate as China itself realizes that going out is an expensive strategy that buys little in security.

Chinese state oil companies are generally well-run organizations; as they are forced to pay the real costs of capital and to compete in the marketplace, they won't engage in these strategies. The best analog is Brazil's experience, where its state-controlled oil company has become ever smarter - and more market oriented - as the Brazilian government has forced it to operate at arm's length without special favors. That has not only allowed Petrobras to perform better, but it has also made Brazil's energy markets function better and with higher security.

Beyond patience, the West can help by focusing the spotlight on dangerous practices - clearly branding them the problem. There's some evidence that the shaming already underway is having an effect - evident, for example, in China's recent decision to no longer use its veto in the UN Security Council to shield Sudan's government. At the same time, the West can work with its own companies to make payments to governments (and officials) much more transparent and to close havens for money siphoned from governments. Despite many initiatives in this area, such as the Extractive Industries Transparency Initiative and the now-stalled attempt by some oil companies to "Publish What You Pay", little has been accomplished. Actual support for such policies by the most influential governments is strikingly rare. America is notably quiet on this front.

With regard to the flow of resources to terrorists - who in turn cause conflicts and are often seen as a circuitous route to resource wars - policymakers must realize that this channel for oil money is good for speeches but perhaps the least important reason to stem the outflow of money for buying imported hydrocarbons. Much more consequential is that the US call on world oil resources is not sustainable because a host of factors - such as nationalization of oil resources and insecurity in many oil-producing regions - make it hard for supply to keep pace with demand. This yields tight and jittery markets and still-higher prices.

These problems will just get worse unless the United States and other big consumers temper their demand. The goal should not be "independence" from international markets but a sustainable path of consumption. When the left-leaning wings in American politics and the industry-centered National Petroleum Council both issue this same warning about energy supplies - as they have over the last year - then there is an urgent need for the United States to change course. Yet Congress and the administration have done little to alter the fundamental policy incentives for efficiency. At this writing, the House and Senate are attempting to reconcile two versions of energy bills, neither of which, strikingly, will cause much fundamental change to the situation.

Cutting the flow of revenues to resource-rich governments and societies can be a good policy goal, but success will require American policymakers to pursue strategies that they will find politically toxic at home. One is to get serious about taxation. The only durable way to rigorously cut the flow of resources is to keep prices high (and thus encourage efficiency as well as changes in behavior that reduce dependence on oil) while channeling the revenues into the US government treasury rather than overseas.

In short, that means a tax on imported oil and a complementary tax on all fuels sold in the United States so that a fuel import tax doesn't simply hand a windfall to domestic producers. And if the United States (and other resource consumers) made a serious effort to contain financial windfalls to natural-resources exporters, it would need - at the same time - to confront a more politically poisonous task: propping up regimes or easing the transition to new systems of governance in places where vacuums are worse than incumbents.

Given all the practical troubles for the midwives of regime change, serious policy in this area would need to deal with many voids.

Finally, serious thinking about climate change must recognize that the "hard" security threats that are supposedly lurking are mostly a ruse. They are good for the threat industry - which needs danger for survival - and they are good for the greens who find it easier to build a coalition for policy when hawks are supportive. Building a policy on this house of cards is no way to muster support for a problem that requires several decades of sustained effort. One of the greatest hurdles in the climate debate - one that is just now being cleared, but will reappear if policy advocates seize on false dangers - has been to contain the entrepreneurial skeptics who have sown public doubt about the integrity of the science on causes and effects of climate change.

The false logic now runs in both directions. Not only will climate change multiply threats by putting stress on societies, but a flood of articles warns of new territorial conflicts as warming opens the formerly ice-bound Arctic for exploration. Russia recently planted a flag on the seabed at the North Pole. In fact, the underlying causes of this exploration rush are ambiguous property rights and advances in undersea drilling that are unrelated to climate change. A similar pattern unfolded in the 1950s in Antarctica, which led to a standoff of territorial claims and no real harm to the region, no production of usable minerals and no resource wars.

The real dangers lie in the growing risk that climate change could be a lot worse than the likely scenarios, which could create severe and direct harm to societies that is much more worrisome than the indirect and remote risk of climate-induced resource wars. Yet politicians give more attention to imagined insecurities from climate change and rarely talk about climate as a game of odds and risk management. They talk even less about the resource war that nobody should want to win - mankind's domination of nature. For the real losers in unchecked climate change will be natural ecosystems unable, unlike humans, to look ahead and adapt.

Source: Asia Times

Saudi oil minister: OPEC won't discuss output levels at meeting in Riyadh

Tuesday, November 13, 2007

RIYADH, Saudi Arabia: Saudi Arabia's Oil Minister Ali al-Naimi on Tuesday said the Organization of Petroleum Exporting Countries will not discuss output levels at the group's upcoming summit in Riyadh but left open the possibility that production could be discussed at a meeting next month.

"There is absolutely not going to be talk of a supply increase during the summit," said al-Naimi, according to Dow Jones Newswires.

"We will discuss it in December" in Abu Dhabi, United Arab Emirates, he said, adding that the group "might increase" production.

Leaders from many of the world's top oil producers will meet this weekend in the Saudi Arabian capital to discuss the challenges a potential global recession and the slumping dollar present to the oil market.

Source: IHT