I have been asked to comment on the possible
evolution of relations between the
In this case, the challenge may be especially
acute. Because of the widespread international frustration with the
the previous administration, there is clearly a danger of attributing
new President the opposite of all that his predecessor did. Obama
represents a major discontinuity in American political history, because
not part of the political establishment and has a very short previous
as senator – in addition to his background and the much emphasized fact
is the first Afro-American to reach to the pinnacle of the State. It is
therefore legitimate to expect that he will bring substantial change –
would be excessive to expect total change. Just to quote one issue on
continuity appears more likely than change, most observers do not
Caution is required and conditional statements should be the norm - but there are certain key campaign themes, central inspirational values that are not likely to be abandoned or forgotten. In particular, I believe it is fully to be expected that the new administration will abandon the extreme unilateralism which has characterized its predecessor, and will move decisively towards injecting new life into multilateral approaches and institutions.
This will not translate into unconditional acceptance of everything that originates from the UN, but greater attention to international opinion will surely be paid.
In this context, one cannot fail to note that
the one area in which the United States under George W. Bush have been
thoroughly isolated has been the debate on climate change, and the
of the same on the global supply of energy. Notwithstanding the
It is, in conclusion, highly justified to
expect that the attitude of the new
That said, it is also necessary to
acknowledge that energy and the environment are not likely to be the
policy issues shaping US-GCC relations. Although I have chosen to focus
aspect of the relationship – because this is where my expertise lies –
nevertheless I believe it is quite obvious and natural that US-GCC
will inevitably be shaped primarily by the evolution of the security
Both issues are of supreme importance for the
GCC countries. The latter, with the exception of
Such fears have been fully justified by
subsequent developments. When the Baker-Hamilton report suggested
Of course the Iraqi situation is
interconnected with the second main political and security issue, i.e.
Iranian nuclear program. Obama has indicated that he will seek to
Iranian leadership in a dialogue without preconditions, in this way
As mentioned already, I believe that a change
The Iranian case is more complicated, because
of the deeply rooted nationalist preference and the difficulty that the
has encountered in shaping any kind of national consensus when it comes
matters: it is quite possible that even in the event of a successful
dialogues with the US, accompanied by the abolition or scaling down of
sanctions imposed on Iran so far, the country’s oil and gas production
exports might not change radically. Yet also in the case of
prospects for increased oil and, especially, gas exports are surely very substantial.
Is it conceivable that Obama will take the
military option out of the table in dealing with
Can a compromise be found which will allow a
way out of the nuclear stalemate acceptable to both sides? Such
would need to save
Among other difficulties, the search for a
compromise in all likelihood also requires a new approach towards the
non proliferation and the revision of the NPT. So far, nothing that
It is thus evident that issues of regional
politics and security are closely intertwined with energy issues.
energy may not be the main preoccupation of the Gulf countries, they
energy issues as being closely linked to regional security; and the
course will apply to the
What then can we expect of the new administration with respect to policies towards the global environment and energy? We shall base our discussion on the Obama-Biden campaign material, although, as said already, it is to be expected that not all that was proposed in the campaign will be implemented by the new administration.
Energy and the environment figured very prominently in the campaign until about August of this year, when the financial crisis exploded and became the foremost preoccupation of the two candidates. This preoccupation is obviously still there, and the president-elect has concentrated his attention on economic woes even before taking office. It is fully justified to expect that the first priority of the new administration will be to launch a package of measures to revive the economy.
The question is: to what extent will these measures incorporate policies addressing energy and environmental issues? In the campaign, Obama insisted that tackling environmental and energy problems also serves the purpose of reviving the economy: in other words, you can kill three birds with one stone: revive economic activity, reduce carbon emissions, improve energy security. He asserted that his energy policy would “help create five million new jobs by strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future.” In the light of the seriousness of the economic crisis, it is likely that this amount of money, or even more, might be made available for spending in an even shorter period of time. However, the difficulty of actually setting in motion an ambitious investment plan which, by its very nature, would require the convergent decisions of millions of independent actors – some big, like the automakers who need to radically renew their models; some small, like the homeowners who will be expected to invest in insulation, or maybe shift to a smaller home, closer to work in order to reduce commuting costs – should not be underestimated.
Other key points included in Obama’s energy policy manifesto are:
“Put 1 million Plug-In Hybrid
cars – cars that can get up to 150 miles per gallon – on the road by
2015, cars that we will work to make sure are built here in
“Ensure 10 percent of our electricity comes from renewable sources by 2012, and 25 percent by 2025”
“Implement an economy‐wide cap‐and‐trade program to reduce greenhouse gas emissions 80 percent by 2050”
On the first point, the president elect has
hinted that he would consider a bailout of the auto industry, as
the three big American automakers, only contingent upon the companies
offering to the market a new range of fuel efficient cars. It is not
that all of these will be plug-in hybrids, but surely the car
will be requested to offer a choice of these alongside other, more
traditional internal combustion engines and non plug in hybrids. This
was reiterated by the President elect in his press conference of
The gravity of the financial situation of the
But other points are not as easily pursued in the immediate. The goal of producing 10 percent of electricity from renewable resources by 2012 is unlikely to precipitate much new investment in the short run. In fact, the immediate effect of the impending recession and of the (temporary) collapse in oil prices has been the postponement of several projects for power generation out of renewable sources, mostly solar and wind. This might be reversed with measures offering privileged access to credit at favorable conditions and priority access to the grid, but consumers may not be happy about paying the higher cost of electricity that supporting new investment in producing power from renewable sources inevitably entails.
But the biggest challenge will be the
implementation of the proposed cap-and-trade program for emission
which is also the most significant of all measures because it is
the spirit of the Kyoto protocol, establishes a base for international
coordination with the existing EU program, and tackles the major
stationary emissions, which offer the greatest benefits towards
emissions. It is very unlikely that this program will be launched for
Nevertheless, the President-elect reiterated on November 18 that
despite a deepening economic crisis, he would still push forward with
aggressive cap on industrial carbon emissions, which he added would be
economic stimulus and create badly needed jobs. "My presidency will
new chapter in America's leadership on climate change that will
security and create millions of new jobs in the process," Obama was
to have said in taped remarks before more than 800 participants in the
Governors Global Climate Summit in Los Angeles. He also spoke of his
cap on power plant, oil refinery and other industrial emissions, which
would rejuvenate the
It may be rather more likely that the administration will push measures to encourage energy savings, although very few details are included in Obama’s platform on this side of the coin. Requiring energy certification of appliances and possibly banning the sale of clearly wasteful ones (beginning with incandescent light bulbs?) is a possibility, but the major savings would have to be expected from a progressive modification of the suburban lifestyle, with families moving to smaller, more energy efficient homes, and seeking locations closer to work and/or public transportation in order to minimize commuting costs. The Obama electoral platform proposes “a national commitment to weatherize at least one million low‐income homes each year for the next decade”. This process is unlikely to be easy considering that the mortgage crisis is at the source of the financial maelstrom, and families are not in a position to consider important new investment. In a sense, the real estate crisis may speed up the process, forcing families to abandon large new homes for smaller ones, but the loss of value in all real estate property would obviously discourage investment in home improvement, such as insulation. Families that are already suffering under the burden of large mortgage payments can ill afford to raise additional finance to pay for the required improvements. Distant suburbs may see the value of housing decline, but they are unlikely to be abandoned. Overall, it is not at all clear that the real estate crisis will be beneficial for reducing the pattern of energy consumption, at least in the short run.
Another point of relevance in Obama’s electoral platform has been the intention to “crack down on excessive energy speculation”. He proposes to do so by way of “loopholes in Commodity Futures Trading Commission regulations” which “have contributed to the skyrocketing price of oil on world markets.” He also proposes to use the strategic petroleum reserve to resist excessive price increases (originally, he said bring prices down – this might no longer be relevant).
How does this ambitious approach to energy and the global environment affect relations with the Gulf countries?
Obama’s electoral platform is rich in
statements that point to the desirability of energy independence and
specifically speak of imports from the Gulf countries as a threat to
security of the
are part and parcel of the inevitable rhetoric in American political
in practice one administration after the other have had to come to
the inevitability of growing global dependence on OPEC oil, and the
attempting to make the
projections from the International Energy Agency, included in the World
Outlook 2008, confirm the expectation that the world will need
supplies from the OPEC countries, notably from the Gulf. In the
scenario, which represents the consequences of “business as usual”,
demand increases by 1% per year on average, and passes from 85 million
2007 to 106 in 2030. This represents an important downward revision
previous edition, by 10 m b/d. In fact, the IEA expects that OECD
marginally decline, and all of the projected increase comes from
countries. The bulk of the required increase in oil output is expected
from OPEC countries, whose share in global production would increase
from 44 to
51%. Specifically, the production of
Of course, what Obama is proposing is not business as usual. We should therefore refer to the two alternative scenarios proposed by the Agency, which are characterised, respectively by stabilisation of greenhouse-gas concentration in the atmosphere at 550 and 450 parts per million (ppm) respectively. The 550 scenario predicts OECD lower oil demand relative to the reference scenario, by about 2 mb/d by 2020 and about 4.5 mb/d by 2030; global demand keeps rising to 97.6 mb/d by 2030. The 450 scenario has global oil demand declining after 2020 to 90 mb/d in 2030. OECD demand is reduced by 17% relative to the reference scenario. This last scenario would see little change in Saudi production relative to the current level. As for US imports, even with declining consumption, imports might need to increase, unless domestic production is stabilised. Emphasis on expanding domestic production has been the characterising theme of the Bush administration: Obama speaks of “promoting the responsible domestic production of oil and natural gas” and of “getting more from our existing oil fields”, but a stabilisation of production is extremely unlikely.
From the above we derive the conclusion that even the aggressive pursuit of reduced dependence on fossil fuels and lower carbon emissions would not translate into the marginalisation of the Gulf producing countries. In fact, the business as usual scenario still requires an increase in their production level that may go beyond the wishes of the respective governments, while the 450 ppm scenario (which is nothing short of an energy revolution, in the words of the same IEA; and would require a degree of international cooperation which makes it quite low probability) would envisages a stabilisation of production levels while also expecting very high prices (required to justify investment in alternative energy sources).
It is, in
this light, not necessarily very productive to frame the proposed
environment policies of the OECD countries as being motivated by the
specifically reduce dependence on OPEC production, whose member
viewed as “hostile”. Obviously such statements, when read in
The same IEA has expressed the opinion that the current oil prices (50-60 $/b) are dangerously low and may discourage investment, setting the stage for a new crisis of insufficient capacity as soon as global growth will be revived.
months, the Saudi Minister of Petroleum and Mineral Resources, Ali
repeatedly spoken in favour of alternative sources of energy. In an
French oil newsletter Petrostrategies, he stated: “For a country like
recently, speaking in
other alternative energy sources figure prominently in the research
such Saudi institutions as the
It should be noted that the Gulf oil producers are very favourably positioned to make systematic use of carbon capture and sequestration, because of the concentration of carbon emission sources in their territory (oil refineries, petrochemical, steel and cement plants, power generation) and the potential for sequestration in oil and gas field using CO2 injection as enhanced oil recovery method. They have much to gain out of international schemes promoting CCS, for example through a form of revamped or extended Clean Development Mechanism.
Thus it would
be a mistake to interpret the interests and policy stance of the GCC
in a narrow perspective, in which the only concern is maximising
of the main
to prices, it should be noted that the
important aspect is the strong and unanimous will, expressed by the GCC
as by other Arab countries, to invest in nuclear power generation. In
two years, the UAE especially has moved very forcefully to launch a
power generation programme, in full compliance with international
and in close cooperation with the IAEA. This policy direction has
been interpreted as being connected with
that the GCC countries would see much merit in a new
How can we envisage US-GCC energy relations evolving in the near future? I will propose two scenarios, which, in my opinion, represent the two extremes of the spectrum of possible outcomes.
scenario (Green Growth) is optimistic and based on the assumption that
The rationale for the first scenario is that the current economic crisis is such that a revival of global growth is possible only if there is massive fiscal stimulus and widespread international cooperation. This is apparently already accepted in most key countries, and one can expect that a serious attempt will be made to move accordingly.
The main difficulty with an internationally coordinated fiscal stimulation policy is that it is politically difficult to shape a consensus on what to spend for. Ruling out the possibility of dropping money from helicopters or hiring unemployed workers to dig holes and then fill them back, what is required is a broad purpose for spending government money which will receive sufficient political support. This is extremely difficult to find at the international level, but if expenditure is increased purely for domestic purposes the door is opened to free riding and to protectionist tendencies. Thus, if we wish to be very optimistic we shall note that the fight against climate change and the search for a more secure energy future are objectives around which international consensus might be established, allowing a fiscal stimulation package that is not purely national. Of course, most fiscal packages will remain primarily national, but an international effort to revive growth and turn it green may add a significant international dimension, which might have an impact on investment and discourage protectionist tendencies,
scenario envisages a new phase of multilateralism, very much centred on
and climate issues. The UN family of international organisations (from
World Bank to UNFCC, to the IAEA and many more) would be mobilised to
a cooperative platform to invest in non-fossil fuel based energy
promote energy saving and contain emissions through CCS and other
This effort should ensure the cooperation of the main emerging
The possibility of reaching a broad agreement for the stabilization of oil prices should not be discarded. This should not be viewed as taking the shape of a price band or even less a fixed price, but the functioning of the international oil market can be improved in order to limit the impact of speculation and make prices more responsive to fundamentals. Greater transparency and more extensive trading of physical oil may help in this respect. Loose coordination in the management of official and/or strategic oil stocks would also greatly enhance the situation. A degree of international coordination exists in the management of currencies – not always effective but nevertheless real – and the same should be aimed at with respect to oil prices.
The scenario also envisages rapid progress on NPT revision and implementation to “unlock” the potential for investment in nuclear power generation. The world needs much increased mobilization of human and financial resources to serve the rapidly increasing demand for new nuclear power plants, and for personnel required for their operation thereafter. Resources for this purpose will not be available in the absence of a revival of the NPT, which was exactly meant to facilitate the adoption of nuclear technology for peaceful purposes in all signatory countries, and has ended up achieving the opposite.
One barely needs to underline that the Green Growth scenario requires an extraordinary level of political leadership and international coordination. As for any venture that is based on consensus action, the probability of success can only be very small. The fundamental change in US political direction may offer an opportunity for shaping the required international consensus, but it would be little short of a miracle.
If we are not interested in visions that are likely to remain dreams, we shall expect to fall back on the Prudence Prevails scenario. As the name indicates, this scenario would be characterised by prudence, rather than boldness. Countries will adopt fiscal stimulation packages, but they will not be able to coordinate, they will take more time, more limited measures, and wait to see the outcome.
conditions, global economic recovery will be slower. All countries will
affected, including the emerging economies, and things may still become
before they improve again. Protectionist temptations will grow stronger
countries, including the
Energy prices would remain relatively low, as demand slows down, and investment in new energy sources would be discouraged. The perceived urgency of addressing energy issues will be reduced, and investors will tend to postpone costly projects. Governments will refrain from aggressive policies to reduce emissions, to avoid adding to the burden of struggling domestic industries.
The GCC countries will suffer in this scenario on many counts. First of all, as major investors in the industrial economies they will see the value of their investment decline (this has happened already) and will be encouraged to progressively redeploy their assets in new regions and countries, with whom they might develop a more satisfactory division of labour. Secondly, they will review and postpone investment projects (again, they have already done so), waiting to see more clearly how global oil demand will evolve.
context, attempts at closer economic cooperation between the GCC
major emerging clients, such as
The possibility of a constructive phase in US-GCC relations exists. In a context of revived multilateralism, the potential for global convergence on fundamentally important goals such as avoiding climate change and ensuring energy supplies to a rapidly growing global economy is not to be excluded. Important unresolved problems – such as the Israeli-Palestinian conflict – would not necessarily be insurmountable obstacles.
However, the world has moved a long way towards undermining multilateral institutions, resist change and disregard mutual trust. Much time has been lost in putting in place the necessary ingredients for a new phase in global growth, and this time cannot easily be recovered.
Hence we should neither be too optimistic nor exaggerate the extent of differences. Potentially, the GCC countries are important partners, rather than enemies, of the new environment and energy agenda of President-elect Barack Obama.
 This and
other subsequent quotes are from “Barack Obama and Joe Biden: New
 Platts Energy Bulletin,
 Platts Energy Bulletin,
 Excerpts from
the speech were published by the Middle East Economic Survey on
JIME Center.All rights reserved.