Peace Picks June 27-30

  1. Restoring NATO’s Power And Purpose| Monday, June 27th | 1:30  | Atlantic Council | 1030 15th St NW, Washington, DC 20005, USA| Register HERE | After Britain’s historic vote to leave the European Union, the NATO Alliance has become more important than ever as a platform for European cooperation and security. What the Alliance achieves at its upcoming Warsaw Summit will be integral in defining NATO’s role in the new Euro-Atlantic security environment and strengthening international peace and stability in a turbulent world. Framing a critical conversation about the Alliance’s strategic priorities, this event will present the final conclusions of an Atlantic Council-chartered study on the future of NATO co-chaired by Ambassador R. Nicholas Burns and General James L. Jones. The study is premised on the belief that the Alliance is facing its greatest set of internal and external challenges since the Cold War. The report calls for renewed leadership by the United States and key European allies to restore NATO’s power and purpose in the face of an entirely different security landscape.  Featuring a panel discussion with Nicholas Burns, Roy and Barbara Goodman Family Professor of the Practice of Diplomacy and International Relations at the Harvard Kennedy School of Government and Former US Ambassador to NATO; and General James L. Jones, Chairman and Board Director, Brent Scowcroft Center on International Security at the Atlantic Council; the event will convene key transatlantic officials and leaders to discuss what the US, UK, and crucial European Allies must do to bolster NATO’s strength and solidarity in a post-Brexit Europe.
  2.  Challenges And Opportunities For The U.S. Government To Improve The Protection Of Civilians In Armed Conflict| Monday, June 27th | 3:30-5:00  | Stimson Center | 8th floor, 1211 Connecticut Ave NW, Washington, DC 20036 | Register HERE | To mark the Washington, D.C. launch of Protection of Civilians, a comprehensive volume published by Oxford University Press, the Stimson Center will host a discussion examining how the U.S. government can advance the protection of civilians agenda. Panelists from inside and outside the U.S. government will explore how the government has engaged through bilateral diplomatic channels and multilateral institutions to prevent and respond to violence against civilians in conflict zones. The panel discussion will be followed by a reception with drinks and hors d’oeuvres. This event will be held under the Chatham House Rule. Speakers include: Victoria K. Holt, Deputy Assistant Secretary of State; Bruno Stagno Ugarte, Deputy Executive Director at Human Rights Watch, Lise Grande, Deputy Representative of the Secretary-General to the United Nations Assistance Mission for Iraq, Tamara Guttman, Director General, Stabilization and Reconstruction Task Force (START).
  3. Is China’s Door Closing? | Tuesday, June 28th | 2:30-4:00  | Woodrow Wilson Center | 1300 Pennsylvania Ave., NW, Washington, D.C. 20004 | Register HERE | Ever since Deng Xiaoping launched his reforms in 1978, “openness” (对外开放) has been a central tenet of Chinese policy. While the actual degree of China’s openness has varied from time to time and sector to sector over the past 38 years, the trend toward greater liberalization of society, institutions, and the economy has been clear. Until recently. The passage of China’s foreign NGO law raises doubts about Xi Jinping’s commitment to further opening and reform. The law, which places foreign NGO’s under the supervision of the Ministry of Public Security, is the latest in a series of regulations meant to control “hostile foreign forces.” Surveys indicate that foreign companies are concerned about tightening business regulations in China and wonder whether they are as welcome as they were in recent decades. International journalists and publishers, too, are finding it difficult to obtain visas and to reach Chinese audiences. Is China’s door closing to foreigners? Why are conditions changing for international actors in China? How should the United States respond? Please join us for a discussion of the future of American NGO’s, corporations, and media in Xi’s China. Speakers: Erin Ennis, Senior Vice President, US-China Business Council Isaac Stone Fish, Asia Editor, Foreign Policy Shawn Shieh, Deputy Director, China Labour Bulletin.
  4. Changing Tides: The Road To Reconciliation And The Future Of Turkish – Israeli Relations | Tuesday, June 28th | 4:00-6:00  | Turkish Heritage Organization | Carnegie Endowment Conference Center | 1779 Massachusetts Avenue NW | In light of these recent developments and the possibility that a deal between Turkey and Israel is imminent, the Turkish Heritage Organization is hosting a roundtable discussion on Tuesday, June 28th from 4-6pm at the Carnegie Endowment Conference Center to explore and discuss the prospects for reconciliation between Turkey and Israel, the final stages of a deal and what the future might look like for both countries. Spakers include: Dr. Brenda Shaffer, Non-Resident Senior Fellow at the Atlantic Council; Dan Arbell,  Nonresident senior fellow in the Center for Middle East Policy at Brookings and Former Deputy Chief of Mission, Embassy of Israel in Washington, DC; and Moran Stern,  Georgetown University, Center for Jewish Civilization. The moderator will be Dr. Mark Meirowitz, Assistant Professor at SUNY Maritime College.
  5. Media Activism Amid Civil War: The Role of Syrian Women Journalists | Wednesday, June 29th | 12:30-1:45  | Middle East Institute | 1761 N Street NW Washington, DC 20036 | Register HERE | Syrian citizen-journalists, bloggers, and media activists have played a critical role covering one of the world’s most dangerous conflicts. They do so in the face of significant challenges – from fear for their safety, to overcoming international indifference to the story of an unending conflict. Women journalists face even greater challenges and yet many continue to work in the field. Non-profit initiatives like the Syrian Female Journalists’ Network are providing training and support while promoting a better understanding of the important role of women in the Syrian uprising. The Middle East Institute (MEI) is pleased to host the founders of the Syrian Female Journalists Network, Rula Asad and Milia Eidmouni, and radio journalist Caroline Ayoub for a discussion of their work in promoting the roles of Syrian women in journalism and civil society. Kate Seelye will moderate the discussion with the activists, who are visiting Washington as part of an Asfari Foundation-backed program to highlight the ongoing role of Syrian civil society.
  6. Kurdistan Rising? Considerations For Kurds, Their Neighbors, And The Region | Wednesday, June 29th | 3:00-4:30  | American Enterprise Institute |1150 Seventeenth Street, NW Washington, DC 20036| Register HERE | Two decades ago, many US officials would have been hard-pressed to place Kurdistan on a map, let alone consider the Kurds as allies. Today, Kurds loom large on the Middle Eastern stage, highlighting their renewed push for independence amid the chaos in Iraq. In his new monograph, “Kurdistan Rising? Considerations for Kurds, Their Neighbors, and the Region,” AEI’s Michael Rubin examines the effects of Kurdish independence and unresolved questions that would follow an independent Kurdistan, including citizenship, political structures, defense, economic systems, and renegotiation of treaties to include the Kurds. Lukman Faily, Iraqi ambassador to the United States; James F. Jeffrey, former US ambassador to Iraq and Turkey; and Michael Rubin, resident scholar at AEI, will speak.
  7. Congo Crisis: Getting to Good Elections in a Bad Neighborhood | Wednesday, June 29th | 4:00pm | Institute of World Politics | 1521 16th Street NW Washington, DC | Register  HERE |  Charles Snyder, Former Acting Assistant Secretary of State for African Affairs Professor of African Affairs, IWP, will speak about prospects for Congo.

 

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Brexit’s impact in the Middle East

The Middle East Institute, where I am affiliated as a Scholar, published my short assessment of Brexit’s impact in the region this morning, along with briefs by Paul Scham on Israeli reaction and Alex Vatanka on reshuffling of Syria portfolios in Tehran:

The Middle East seems far from Great Britain, but the reverberations of Brexit will still be felt there. The immediate impact on British and European stock and real estate markets, where Gulf oil sovereign wealth funds and individuals have a lot of money at risk, will be a dramatic fall. The E.U. economy, the world’s largest, was just beginning to pick up. It will likely now return to recession, due as much to uncertainty and lack of confidence as to any real economic impact of Brexit, which will take at least two years to implement.

Seasoned investors will hold on for the ride, but the impact on global economic prospects will be negative and persistent. Oil prices, which had gradually managed to climb back above $50/barrel, will slide again, due to reduced energy demand, a rising U.S. dollar as investors seek a safe haven, and the declining pound and euro. Iran, Saudi Arabia and other Gulf monarchies will feel the renewed pinch brought on by Brexit.

The U.K. and other European states have been important partners for the United States in the Middle East, in particular when intervening militarily in Iraq, Libya and Syria. Allied help will be harder to come by in the future, as the U.K. and the rest of Europe turn inwards and seek to block Middle Eastern immigrants even more vigorously than in the past. Turkey’s European perspective will evaporate. Nativist sentiments in Europe and America will increase, potentially accelerating radicalization, especially among Muslims in the U.K. who largely voted to remain. This will further distance Americans and Europeans from the Muslim world and make the Middle East easier prey for both Russia and extremists.

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Rare success

I’m no expert on Colombia, but you don’t have to be one to welcome the ceasefire negotiated with Cuban mediation between the government and the Revolutionary Armed Forces of Colombia (the FARC) after 52 years of rebellion. The Economist gives an excellent overview of the accomplishment and the problems that lie ahead.

I would just signal the capital importance of preventing FARC cadres from going the way of rebels in El Salvador and Guatemala. In the aftermath of their civil wars, which ended in the 1990s, criminality has remained a major problem and even grown dramatically in El Salvador. Colombia has had significant success against its once rampaging drug cartels, but demobilization of the guerrillas will increase the challenge. Thousands of unemployed youth with few talents other than avoiding the authorities and handling a gun constitute a serious problem. Nor will their commanders miss an opportunity to organize protection and smuggling rackets, especially if they don’t do well in the post-war political competition.

Colombia has a neighbor to the east, Venezuela, already in desperate straits. Its left-wing Chavistas have wrecked the country’s economy, despite sitting on what are arguably some of the world’s largest, albeit low quality, oil reserves. They have also made a hash of the government’s institutions, which include a parliament now controlled by the opposition. The power struggle there and its consequences may well boil over to Colombia as Venezuelans flee economic implosion, straining Bogotá’s capacities just as it embarks on the challenge of implementing a complicated and for some people not very palatable peace deal.

A slowdown in Colombia’s economic growth will likely worsen in the aftermath of Brexit as the world slips into recession. The government will have trouble anteing up all the resources needed to implement the peace deal, which includes commitments to rural development among other things. The US has spent about $8 billion on Plan Colombia, one of Washington’s more comprehensive efforts to strengthen a fragile state and help it block both drug cartels and leftist guerrillas from damaging US national security. While criticized on human rights grounds and for its efforts at drug eradication, the Plan appears to have contributed a good deal to Colombia’s current success.

Sustainment will not be automatic. A special tribunal and disarmament, as The Economist reports, will be particularly important to the Colombian public. Jobs and political inclusion will be important to the guerrillas. Colombia is the third most populous Latin American country, with 50 million people (only Brazil and Mexico are larger). It needs to make at least as much success of its post-war transition as it has already made of its internal wars. Success in negotiating the end of a rebellion is rare, but success in managing the post-war process is even rarer.

 

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Iznenadjenje!

Former Foreign Minister and Ambassador Mico Vlahovic, whose own reaction to Brexit is published here, has provided a translation into Montenegrin of mine for the Podgorica daily Pobjeda:

Da, glas da Britanija napusti EU me je iznenadio. Očekivao sam da ekonomska recionalnost i politička smirenost odnesu prevagu nad nezadovoljstvom zbog imigranata i nad onima koji mašu zastavama i viču “Engleska na prvom mjestu”. Politika identiteta je ponovo trijumfovala. Neka mi to bude lekcija.

Neposredne ekonomske implikacije su već poznate: oštar pad britanske funte, rasprodaja na berzama širom svijeta, još više uzdrmani euro i još izvjesnija obnovljena recesija u Evropi i jače [ekonomsko] usporavanje u ostatku svijeta. SAD bi mogle biti izuzetak za sada, jer će mnogi potražiti sigurno utočište u dolaru, ali će ga sve ovo poskupjeti, što će oslabiti izvoz i dodatno usporiti razvoj. Nesigurnost će opstati: Škotska će ići na drugi referendum, Vels može poći tim stopama, a i Katalonija će pokušati isto.

A što je sa Balkanom i Srednjim Istokom, na koje je usmjerena moja pažnja?

Na Balkanu, kratkočni i dugoročni efekti su vrlo ozbiljni. Region je u velikom mjeri zavisan od evropske trgovine i investicija, koji će i sami biti odmah u teškoćama. Ali, politički efekat će biti značajniji. Balkanci su i do sada imali sumnje u svoju evropsku perspektivu, koja se sada čini daljom nego što je to bio slučaj prije pet godina. Sada bi oni bili budale ako ne posumnjaju u spremnost Evrope umanjene za Veliku Britaniju da im omogući članstvo.

Te sumnje će otvoriti vrata povećanom ruskom uticaju, ne samo na Balkanu, već i u Ukrajini. Niko od britanskog referenduma na političkom planu nije dobio više od Putina: rezultat slabi njegove protivnike u Ujedinjenom Kraljevstvu i u Evropskoj Uniji, čini njegovu aneksiju Krima i okupaciju jugoistočnog dijela Ukrajine prihvatljivijim i opravdava njegov etnički nacionalizam. Mora da ovih dana votka teče potocima u Moskvi. Stići će votka i do Balkana. Putin će, bez sumnje, pojačati napore u Srbiji, Republici Srpskoj i u Makedoniji kako bi odvratio Slovene od njihovih evropskih i NATO snova.

Srednji Istok je teži slučaj. Ima puno bogatih šeika iz Zaliva sa uloženim novcem i imovinom u Britaniji. Njima se neće svidjeti da vide kolaps funte. Neki od njih su već toliko izgubiki zbog niske cijene nafte da se mogu uspaničiti i napustiti Britaniju. Ali, ipak mislim da će mnogi ostati. Usporeni ekonomski rast na globalnom nivou će nastaviti da obara cijenu nafte, poslije njenog nedavnog povratka na nešto preko pedeset dolara. Zbog toga je sudbina zalivskog novca u Britaniji još i gora nego ranije.

Britanska uloga na Srednjem Istoku može biti izmijenjena. Britanija je bila najveći evropski kontributor ne samo u Iraku, već i u Libiji i Siriji. Britanija koja je više okrenuta sebi samoj i sa smanjenom ulogom vani neće imati iste resurse i neće biti u stanju da nastavi sa takvim angažmanom.

S druge strane, Britanija će, naravno, podići barijere imigrantima sa Srednjeg Istoka, mada ni do sada nije primila neki veći broj. Glavni fokus nezadovoljstva je bio usmjeren prema istočnim Evropljanima i prema prijetnji imigranata sa Balkana. Mladi Albanci, Srbi, Bosanci i Makedonci će izgubiti mogućnosti za školovanje i posao, koje su imali posljednjih godina.

Ironično, jedan od mnogih problema koji mora biti riješen u toku dvogodišnjih pregovora o primjeni Bregzita, će biti Britanci koji žive u ostatku Evrope, kojih ima oko milion i dvije stotine hiljada. Tri miliona ljudi iz zemalja Evropske Unije živi u Velikoj Britaniji. Ukoliko se ne postigne sporazum koji će omogućiti ovim ljudima da ostanu, mogli bi biti suočeni sa masovnim kretanjima stanovništva sa nepredvidljivim posljedicama. Čak i ako im bude dozvoljeno da ostanu, ovoj vrsti migracije je došao kraj. Sljedeća britanska vlada će biti primorana da učini sve što bude mogla da spriječi strance da se domognu njenih, uskoro – manje značajnih, obala.

Dakle: Bregzit je loša vijest za Ujedinjeno Kraljevstvo, za EU, za SAD, Balkan i Srednji Istok. To je dobra vijest za Vladimira Putina. Ja i moji prijatelji nemamo što da slavimo.

Continued dependence on Gulf oil

Doug Hengel, formerly at the State Department and now at the German Marshall Fund (and also teaching at SAIS), allowed me to republish his excellent notes for his talk at Woodrow Wilson last week, already posted here:

There is a great deal of uncertainty in oil markets at the moment.  The big questions, beyond when the market will rebalance, include:

  • Are we in the midst of another boom and bust cycle in the oil market or are there structural changes that define a new paradigm?  Has U.S. tight oil changed market dynamics forever?
  • Has the Saudi/Iranian rivalry evolved to the point where geopolitics now dominates Riyadh’s approach to oil?  Are the Saudis using oil as a weapon?
  • Is the Saudi 2030 Vision OPEC’s “obituary notice” as some have declared?  Will the Saudis continue to invest in oil or are they pumping all out now due to concerns that oil demand is going away?
  • Are we in a “lower for longer” scenario for oil prices?  Or have the large cuts in investment by oil companies in the past couple years simply planted the seeds for the next price spike?

As we think about these questions, and more importantly what the future of oil geopolitics might look like, it is helpful to ground ourselves with a few facts.  It is important to remember:

  • The countries of the Persian Gulf account for almost 1/3 of global oil production and hold roughly 50% of proven oil reserves.  They generally have the lowest cost oil to produce.
  • About 17 million barrels a day (mbd) of crude oil and refined products move through the Strait of Hormuz, only a small fraction of which could get to market via alternative routes if the strait was blocked.
  • Oil fields have a natural decline rate averaging 3-6 percent a year, much higher for U.S. tight oil.  This means that every year investment in existing or new fields is needed to bring to market about 4 mbd of additional oil just to keep global production at current levels (not including any increase in demand).  Those 4 mbd are equivalent to the total surge in U.S. tight oil production over the 2011-14 period.  It also means we need to add the equivalent of a new Saudi Arabia to the market every 3 years.

By one estimate, global upstream project cancellations could create a 4 mbd ‘‘hole” in global oil supplies by 2020.  Estimates of production in Brazil, Canada, Mexico and elsewhere in coming years have been revised downwards.  There is growing concern that the large reduction in investment by the international and national oil companies will lock in the world’s reliance on OPEC, and in particular on the lower-cost supplies from the Persian Gulf, for decades.  The International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) have pointed to this risk in their most recent global energy outlooks.

Are there structural issues that might mitigate against greater reliance on OPEC and the Persian Gulf?  Two are often cited – the U.S. tight oil boom and climate change.

U.S. TIGHT OIL:  While U.S. tight oil production jumped by an average 1 mbd per year from 2011 through 2014, over the past year U.S. tight oil production is down about 1 mbd.  In the meantime U.S. gasoline consumption has increased sharply and is expected to hit a record in 2016.  So U.S. oil imports are growing again.  Last year U.S. net crude oil imports dropped to only a quarter of U.S. consumption, the lowest level since 1970.  This year it looks like we will need to import one-third of our oil.  Some believe that with prices of $50 or more per barrel there could be a renewed surge of U.S. production this year adding perhaps as much as 1 mbd to U.S. output by the end of the year.  But that is a very optimistic scenario.  And after that?  There is no doubt U.S. production could resume an upward climb with higher prices, but almost certainly not enough to offset reduced output elsewhere in the world.

CLIMATE:  All scenarios that would reduce carbon emissions enough to keep global warming to 2 degrees or less require a huge shift away from petroleum for transportation.  Both Statoil and the IEA have modeled what very aggressive introduction of electric vehicles (EVs) might do to oil demand, in the case of Statoil’s “renewal” scenario new car sales would be 90 percent EVs or hybrids by 2040.  Even with such an enormous change in how light duty vehicles are powered global oil demand would still be in the range of 75-80 mbd by 2040 — as much as 20 mbd below today’s consumption but still requiring very large investments to compensate for the decline of existing fields.  Supply could well decline much faster than demand.

So what does this all mean for the U.S. and the world?

  • We are not in a new paradigm.  Oil is not going away and the world’s dependence on the Persian Gulf for global supplies is very likely to increase going forward.  Therefore the U.S. will need to play an active role in the region to ensure the oil keeps flowing, including protection of sea lanes.
  • U.S. “energy independence” remains a chimera even if we were self-sufficient in oil, which is very unlikely to happen in any case.
  • OPEC is not dead.  Notwithstanding the Saudi/Iranian rivalry, they are likely to be able to and want to work together to influence the oil market once markets are more in balance.  Recent statements by the new Saudi oil minister indicate they will continue to invest heavily in maintaining their production capacity.
  • We need to keep our eye on the ball regarding constraining oil demand – continued progress on more efficient vehicles, facilitating the move to EVs, to natural gas for trucking, etc.
  • Innovation is essential (e.g., autonomous vehicles), ideally in cooperation with international partners.
  • We should continue to encourage and assist new and non-OPEC oil producers seeking to boost their output, in particular Mexico and emerging suppliers in Africa.
  • We should not be treating our Strategic Petroleum Reserve as a piggy bank – selling off oil to meet other budgetary requirements.  We may need the SPR to cushion a supply disruption, U.S. tight oil is not a substitute.  At the same time we should continue to promote cooperation by China and India with the IEA on a coordinated response to an oil supply disruption given their increasing importance to the market (and since they are building their own strategic reserves).

 

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The Gulf’s still risky future

Wednesday the Middle East Program at the Wilson Center hosted The Gulf, Iran, and Future Oil Geopolitics, featuring David Goldwyn, President of Goldwyn Global Strategies; Douglas Hengel, Senior Resident Fellow at the German Marshall Fund; Elizabeth Rosenberg, Senior Fellow and Director of the Energy, Economics, and Security Program at the Center for New American Security; and Jean-Francois Seznec, Non-Resident Senior Fellow and Director at the Atlantic Council’s Global Energy Center. Jan Kalicki, Global Fellow at the Wilson Center and Senior Fellow at the Watson Institute for International and Public Affairs at Brown University, moderated the discussion.

Rosenberg discussed how lifting most sanctions on Iran has influenced Iranian politics. While the economy has opened up considerably since January, there are still many obstacles to doing international business in Iran. The prohibition on doing business with the Iranian Revolutionary Guard Corps (IRGC) leaves much of the economy untouchable by foreign investors. Many of the remaining sanctions are secondary, which requires Iranian companies to cut ties to groups like the IRGC that control 20-60% of the Iranian economy.

Iran is currently producing 3.5-3.8 million barrels per day and exporting 2 million. Iran could get up to 4 million per day. Beyond that, Iran would have to make substantial infrastructure investments. Several international oil companies have signed exploratory contracts, but there are still a lot of unknowns. With Iran upping the ante in  Syria and around the region, the future of the broader Middle East is in question.

Goldwyn said that Iraqi oil production had recently reached 1.8 million barrels per day, its highest level ever. This is Iraq’s peak. It will not even be able to maintain this level. Iraq suffers chronic problems:

  1. the government is weak and unable to make plans or execute them;
  2. failure to resolve ethnic and sectarian conflicts opened the door to the Islamic State (ISIS) and maybe worse in the future;
  3. the government is spending a huge portion of its budget on the war effort: $33 billion between 2009 and 2014.

The Iraqi army’s progress in retaking Fallujah is promising, but Fallujah has been liberated many times—each time escalating ethnic tensions to still higher levels.

Iraq will barely be able to maintain production in the coming months. The Iraqi government is spending all of its diminished oil revenue on its military, and low oil prices have limited the government’s ability to function on a basic level—let alone invest in infrastructure to boost oil production. Iraq’s near future looks grim.

Seznec commented on how Saudi Arabia’s deputy Crown Prince Mohammed bin Salman is transforming his country in dramatic ways. His new “Vision 2030” intends to wean Saudi Arabia off oil dependence and diversify its economy. Saudi Arabia intends to maintain its current production of 10.2 million barrels per day, while growing its private sector. To accomplish this, King Salman bin Abdulaziz Al Saud appointed Khalid al-Falih as minister of the newly revamped Ministry of Energy, Industry, and Mineral Resources.

A major component of “Vision 2030” is selling 5 percent of the government’s shares in Aramco. Aramco is currently valued at 2 trillion dollars, so this will likely be the biggest IPO (initial public offering) in history. Part of Mohammed bin Salman’s plan is to revolutionize the workforce. By 2030, the government hopes that women will fill 45 percent of public and private sector positions. There are big changes on the way for the Kingdom, and we will have to wait and see what else the young deputy crown prince has in store for us.

Hengel addressed major factors that will affect all the countries discussed. His bottom line is that dependence on the Gulf will continue. The natural decline in current production means that continued investment in existing oil fields and new discoveries are essential. Hengel predicts that the United States and the world will continue to be dependent on OPEC. There is much uncertainty about the future of consumption. Many countries have started shifting towards electric vehicles and are moving away from their dependence on oil. But the United States continues to lead in consumption with the lion’s share, 10%, of global consumption. Gulf oil supplies are likely to remain important for the foreseeable future.

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