Arctic Riches for Exxon, Texas Tea for Russia's Rosneft

The links below together tell a story that has reached a milestone this week as President Elect Vladimir Putin created a new deputy energy ministry and named Pavel Fedorov to the position.  Fedorov has been with Russian oil giant Rosneft and was point man for the massive deal announced in 2011 whereby Exxon is to be contracted to work with Rosneft on Arctic (and other, such as western Siberian) oil exploration and extraction, etc, while  Rosneft gets to enter the U.S. energy exploration business in Texas and the Gulf of Mexico.  When it comes to business, the reset policy is paying off for at least one U.S. energy giant.

Rosneft challenges Exxon as #1 producer (2011)

Exxon-Rosneft deal (Arctic & US resources)

Possible area where Rosneft can expand its operations

Putin chooses Rosneft leader to be energy minister (2012)

3 year Dow Jones

Balancing and Bandwagoning: Changing Alliance Networks in the Middle East

Picking up from my last post's reference to Hamas moving away from Iran, the Jamestown Foundation's Terrorism Monitor points out Hamas' outreach to the Egyptian Muslim Brotherhood as indicating a strategic reversal of Hamas' alliance with Iran.  The turn toward Cairo is not surprising, given Hamas' history as a breakaway organization from the Palestinian MB.  However, the changing landscape of Egyptian politics has given voice to previously suppressed forces, some of which resent Hamas' dalliance with the Shi'ite Iranians:

                           What is the difference between Jews, Hezbollah and Iran when 
                           they are all gathered in going against God’s word and wish to 
                           break down Islam?

These words welcomed Hamas leader Haniyeh as he arrived in Egypt, in a statement issued by "Egypt's largest Salafist group, al-Da’wa al-Salafiya (The Salafist Call) that also condemned the Muslim Brotherhood for arranging his visit to Egypt in the first place," according to the Jamestown Foundation.  Needless to say, the fractious sectarianism of political Islam is on display.

The context for this issue in my last post was the decline in Iran's international support network, which has recently included Hamas.  By moving away from Syria and toward Egypt, Hamas knows it is making a bold and risky statement to Iran; from the same Jamestown Foundation piece:   "Hamas deputy leader Moussa Abu Marzouk rejected the Syrian approach to political dissent but noted the Hamas position would have a price: 'Our position on Syria is that we are not with the regime in its security solution, and we respect the will of the people…The Iranians are not happy with our position on Syria, and when they are not happy, they don’t deal with you in the same old way'" (BBC, February 28, emphasis mine).

The future of Egypt and its relationship with the Palestinians and especially Gaza will play out over the next several months and years, with potential for disorder along the way.  However, the more immediate crisis that has overshadowed all others is centered on Iran.  With Hamas moving back toward Egypt, it is emphasizing (among other things) that its priority is local, not regional and global, and Egypt may provide the security lost by the consequences of Iran's intransigence.  Meanwhile, Iran seems to be losing a toehold near the Sinai, one that was somewhat fragile to begin with, but with Iran's forced isolation gaining intensity, any loss compounds the injury.

Next: The Gulf Cooperation Council

Finding Fault(lines) in Iran

The isolation of Iran continues to intensify.  Hamas takes a step toward clearing the air for those who, over the past year or so, have been concerned about closer ties between Iran and Hamas in spite of the Shi'ite-Sunni divide. Now, however, with Israel-Iran tensions on the uptick, Hamas announced that they will not ally with Iran in the case of war.  See reports here, here and here.  Elliot Abrams comments for the Council on Foreign Relations here.  Abrams also discusses the Lebanese finding their voice against Syria's Assad.

Meanwhile thousands of Syrians are escaping to Lebanon.  This is not endearing Syria to the Lebanese, and challenges the governing capacity of Hezbollah (40,000 rockets aren't very helpful in refugee crises), raising questions of the latter's allegiance to Iran in the case of war with Israel as a matter of practicality.  Additionally, Hezbollah is increasingly reliant on criminal activities for funding, as support from Iran tends to fluctuate with the price of oil and with spikes in instability in Iran and Syria. Foreign Affairs offers a good summary here (the author is Matthew Levitt; this column can be found on CNN's Fareed Zakaria's site also).

Studies of Al Qaeda in the Islamic Maghreb (AQIM) have shown that the group's increasing reliance on criminal activities -- or its addiction to it, given the tens of millions of dollars crime is bringing in to AQIM, and similar amounts to Hezbollah as well -- raises questions about its allegiance to the religious nature of their commitment to Al Qaeda. It's not uncommon to read analysts ask if AQIM is an Islamist terrorist organization funded by crime, or a criminal organization that carries out terrorist attacks. The relevance here is to ask what effect a similar path will mean for Hezbollah, an organization whose reach is global compared to AQIM's wanderings and plundering around the Sahel.  Much of Hezbollah's global network is criminal, not theocratic.  The need to maintain those connections and keep the money flowing can affect Hezbollah's calculation of risk and benefit, especially in strategic decisions such as becoming party to an Israel-Iran war. In short, pragmatism may overcome Islamism to some degree.

I'm not at all talking about an end to conflict, including the potential for armed conflict, between Hezbollah and Israel.  I am saying that it's possible that Hezbollah will simply sit this one out, hoping that Israel and/or the United States can strike and go, and that Iran will lick its wounds, hope for greater domestic unity against the evil interlopers, and go about rebuilding its drive for power again.

The last time oil reached triple digits, even to $145 per barrel in July 2008, Iran was able to double its financial support of Hezbollah, to $200 million.  But the time between that spike and the current one saw prices dip as low as $60 per barrel, an Iranian protest movement take a stand, civil war in Syria, and the return of triple digit oil prices.  However, also in the meantime American and international sanctions have changed the dynamics of Iranian financial support for offshore armed operations.

So where is this heading? It is not looking good for Iran, no longer able to count on Syria, Hamas and even Hezbollah as brothers in arms, though there is no certainty of how deep these rifts may go.  The USS Enterprise arrives in the Persian Gulf this month, joining two other carrier groups led by the USS Carl Vinson and the USS Abraham Lincoln. This is the first time I know of that the United States has deployed three carrier groups in the Gulf without one being scheduled to rotate out of the area.  The results of recent elections giving Ayatollah Khameini a strengthened hand in the Majlis, or parliament, spells trouble for President Ahmadinejad in that long simmering power contest, and a small positive nudge in the right direction on the nuclear front. However, we should not lose sight of the degree to which the Iranian people support progress in nuclear research, and this includes what is known about many in movements opposing the regime.  There are many cross-cutting fault lines that will likely continue to fracture the internal and international sovereignty of the Islamic Republic.   The results could include desperate moves and miscalculations, and not necessarily by the Iranian policymakers alone.  But with the stakes so high given the fragile global economic system and the lives of 79 million Iranians, perhaps change can be managed without catastrophe....What are the chances?

Amended Energy Outlook

I just realized I left out additional stats and the brief conclusions to the previous article on a survey of oil and gas industry leaders.  The conclusions are that industry spending will increase in 2012, but the following information points to regulatory hurdles that (a) are seen as obstacles by industry and (b) are seen as necessary protection against unaccountability on the part of industry by industry watchdogs.  Also interesting is the problem of skilled labor or lack thereof.  Community colleges may be taking the lead on this issue. I know that Bossier Parish Community College in Bossier City, LA, now offers a two year degree that is tailored to meet the needs of the natural gas industry, particularly in regard to the Haynesville Shale.

*********************************************************************************:

• "Risk remains a key challenge:

An overwhelming majority of respondents
- 82% - either strongly or somewhat agree
that regulatory issues have become more
important in the post-Macondo period.
Increasing regulation is regarded by more
than 30% of respondents as the main
challenge for their company over the next 12
months.

• Skills shortages are becoming more acute:

According to the Economist Intelligence
Unit’s research, skills shortage comes out of
the survey as one of the major obstacles to
growth over the next 12 months. Last year,
skills issues came fifth on the list of barriers
and were only identified as a top three issue
by 25% of respondents. This year, the issue
has risen to second on the list, and has
been identified as a key barrier by 34% of
respondents.

Conclusions:
Companies are preparing to spend big in 2012,
despite a slower growth in demand for oil and
gas during the second half of last year, and
concerns over the future of the global economy.
Findings from the report highlight a wealth
of barriers to success, from rising operating
costs to the worry of an impending shortage of
skilled professionals and an uncertain regulatory
environment in the post-Macondo era.
Capital expenditure looks set to take off,
industry leaders will need to invest selectively
this year, keeping operating risks low during
a period of prolonged uncertainty. Their
success will be defined by an ability to develop
innovative approaches to operating more safely,
efficiently and sustainably than ever.
Findings from the report highlight a wealth
of barriers to success, from rising operating
costs to the worry of an impending shortage of
skilled professionals and an uncertain regulatory
environment in the post-Macondo era.
While capital expenditure looks set to
take off, industry leaders will need to invest
selectively this year, keeping operating risks low
during a period of prolonged uncertainty. "

Energy Outlook 2012

Interesting report on Oil/Gas outlook from survey of industry leaders, part of newsletter found here.

The Oil and gas industry leaders have forecast improved performance and higher
levels of capital expenditure this year, despite concerns over global economic instability,
according to the new report on the future of the sector by the Economist Intelligence Unit in its
second annual industry barometer.

• 82% of the 185 board-level directors and industry policy makers surveyed for

the report are either highly or somewhat
confident about the business outlook for their
company, compared with 76% last year. Just
8% of those polled described themselves as
pessimistic over performance in 2012.

• Increased investment across the industry

will focus on exploration activity, with North
America emerging as the area with the
greatest opportunities in 2012.

• Findings from the research also show that

nearly two thirds (63%) of executives plan to
invest either somewhat or substantially more
over the next year, in contrast to 49% in 2011.

• 41% of industry professionals expect to

see increased investment in exploration
activities over the next year, with only 4.3%
anticipating a decline. However, if global
economic conditions deteriorate, oil and
gas companies will have to scale back their
spending commitments where they can do
so without creating damage to their wider
portfolios, according to the report.

Gingrich's Afghan Modernization Plan

Cell phones! Give every Afghan a cell phone, says Newt. The underlying logic is sensible, of course, but not applicable. As I told a friend recently, making sense and being delusional are not necessarily mutually exclusive.  And people complain about "free Obama phones"! (Referring to a policy begun under President GW Bush's administration and in some cases is a state policy by which inexpensive and limited cell phone usage is provided to Americans who meet a criteria based on poverty and employment related measures.  Internet usage is coming soon, by the way.) I wonder what they think of Gingrich's cell phone strategy for Afghanistan....

Anyway, every insurgent and every conflicting tribal leader would, I think, greatly welcome the policy of flooding Afghanistan with cell phones.  The policy would have some positive developmental results, especially if managed in conjunction with related policies, but would provide many opportunities to the insurgents for recruitment, cyberwar, theft and identity theft, and disinformation campaigns.

Foreign policy in U.S. presidential campaigns has never been the high point of serious debate, and has often provided fodder for strategic messaging likely based on exaggerations, especially if an incumbent is running for reelection, although the open election of 1960 provides a good example, referring to JFK's exaggeration of the missile gap between the U.S. and U.S.S.R.   Fear is irresistible, and propagating fear is not challenged in foreign policy as it is in, say, welfare policy, in part because it traditionally plays a relatively minor role in electoral decisions and outcomes.

Containing the violence that will shape Afghanistan's socio-political future is rapidly becoming the priority, and that can happen with an offshore presence. The United States would be better served strengthening relations with neighboring Central Asian societies who also have great interest in seeing Afghan instability to remain in Afghanistan.  Handing out cell phones in Kyrgyzstan makes a great deal more sense than doing so in Afghanistan.

Springtime of the Tribes

A new batch of gray clouds moves overhead every few hours as we move a little closer to April, one of my two favorite months in Louisiana (the other being October) and a little further from February. The GOP nomination process continues on like a long February as well. But I suppose every presidential election year is a leap year, in some ways more than others.  Calendar-wise, check.   "Leap of faith" is a common enough term, but less so in the political arena.  Taking a leap of faith requires confidence, security, trust, and adaptability.  But as we proceed into another most important election in our history, each of these qualities is in decline.  Confidence is applied only to the notion that one's opponent is beyond wrong....the wrongness is driven by evil forces, the worst of humankind's potential for social destruction is manifest. Horrendous comments on Andrew Breitbart's death, for example, have no doubt already spread across cyberspace, providing ample fodder for "the other side" to reciprocate the demonization, happily implying that the decidedly non-random sample of such comments represents all adherents to the other other side's ideology.  The latest Rush-invented controversy is similarly exemplary.

Such confidence in the absolute nature of others' destructive potential only betrays insecurity in the resilience of one's society and political system. "American Exceptionalism" has become an exercise in exceptional self-rebuke, exceptional weakening of the social contract, and exceptional fear from threats that are by almost every measure asymmetric and manageable except that the momentum for destructive policies will likely outpace that of reasoned recommendations.

I feel like I can just skip over the trust part. To say that no comment, no action, no accident even is above suspicion is understating the case, as, again there is full confidence in the distrust necessary to succeed politically.  It's probably the adaptability point that I'm most concerned about in the long run. The winner-take-all electoral system has locked in the two major parties long past their ability to represent a nation of 300+ million people.  The networking power of the information revolution is not allowed to operate in the electoral process except as tools of the struggling parties and mass media demagogues. Dissatisfaction can drive increasing numbers of Americans to deny allegiance to either party, but because of the political structures in place for so long, and the dominance of winner-take-all elections in the Electoral College, no candidate outside the two major parties will win a presidential election.  He or she may hold some influence over the outcome of the two party contest, but no more. This is not to say there aren't downsides to any system that would replace the current one, of course, but the reality of the moment is a system made increasingly dysfunctional because of resistance to change. This dynamic is at work throughout many areas of society and in the realm of global politics as well.

Social and political expectations of the politically attentive public have reached utopian levels. Notions of public goods and civil society have been blunted by anger over exaggerated fears and demands for absolute security from bad news. There are no doubts that the challenges we face are daunting and in some ways unprecedented. But to paraphrase a Republican candidate, it's more common to set one's hair on fire and scream about worst case scenarios than it is to return to the true American ideology in search of answers -- the anti-ideology of reasoned pragmatism.  In the world depicted by today's ideological rhetoric, all legislation, all executive actions, and even all position statements are frozen in time, ends but not beginnings as well, and, of course, ultimately destructive of a great power sovereign state that sports 300 million people, a $14+ trillion economy and the most sophisticated diplomatic-intelligence-military security system in the world.

To conclude for now, it's likely to be a long and depressing campaign year, punctuated by spikes of hilarious and/or completely mystifying statements. But what does this say about where we are, about our political culture?  I do not hold that in the short-term, the country, or the economy, or the security future is at risk of destruction from either internal or external forces, though the resilience of the system is strained by such forces, especially the internal centrifugal forces of ideological tribalism.  What's at immediate stake is quite simply the ability to work toward the resolution of problems, which has traditionally been difficult but workable among opposing, but ultimately pragmatic, political forces.

Taking Stock: March 1

Dow Jones

NASDAQ

S&P 500

From 3/1/2012 www.washingtonpost.com

Looks like the upward trends took hold in November and have persisted for nearly two quarters.

But good news can bring unfortunate consequences. As discussed here, oil prices remain high as tension over Iran increases and as improving economic indicators point to increased fuel demand. Also noteworthy is the continued depression of natural gas prices, which has direct impact on the region where I live, especially the "Haynesville shale" just north of here.