By Eric Vandenbroeck and co-workers
From the standpoint
of thirty- five years of Sino-Iranian cooperation, the specific strategic content
of that cooperation in specific periods is secondary. During the 1970s
Sino-Iranian cooperation was directed primarily toward containing Soviet
Indian- Iraqi "expansionism." During the 1980s its primary content
focused on the conduct and international politics of the Iran-Iraq war. During
the 1990s the substance of Sino-Iranian cooperation shifted to an oil
for-capital-goods swap and countering u. s. "unipolarity" in an
"unbalanced" post -Soviet world. Taking an even longer view, in
ancient times Sino-Persian cooperation was directed against the Xiongnu. During the early medieval period it was directed
against the Arabs. In the future it may well be directed against some other
power. The specific opponent and content are transitory. It is the element of
cooperation between China and Persia that endures and is fundamental. To say it
another way, the Sino-Iranian relation is essentially about power and influence.The Sino-Iranian relation partners two proud
peoples who see in the other an affirmation of their own self-identity. They
respect the history of the other and are aware of the long chronicle of
mutually beneficial contact and, sometimes, cooperation between the two
nations. They see that historic cooperation as an important element of the
world order prior to the European eruption and their consequent humiliation,
and are determined to cooperate in putting the world once again to right. They
share a large set of values about the unjust condition of the modern world.
Each respects the power, strong national consciousness, and national
accomplishments of the other and sees in it an influential partner well worth
cultivating. The ways in which China and Iran cooperate will vary depending on
mutual interests, but the impulse toward cooperation will remain constant.
In the event of a
U.S.-PRC military confrontation that became protracted and in which the United
States used its naval supremacy to blockade China 's coast, China 's ability to
continue prosecution of the war would be influenced by its ability to import
vital materials overland. In such a situation it would be extremely useful to
have robust and redundant transport links via Pakistan and Iran and to have
long-standing, cooperative ties "tested by adversity" with both of
those countries.
Iran, along with
Pakistan, plays an increasingly important role in providing western China
access to the oceanic highway of the global economy. Economic and strategic
factors converge here. The striking success of China 's post -1978 development
drive was predicated on integrating eastern China into the global economy, and
that, in turn, was predicated on the many fine ports on China 's east coast.
Those ports offered access to the oceanic highways that carried
China-manufactured goods to distant markets. Western China, locked deep in the
interior of Eurasia , suffered a distinct disadvantage in this regard. Western,
interior provinces, with strong support from Beijing, attempted to mitigate
this disadvantage by opening transport links with their neighbors. Yunnan
province in China 's southwest achieved considerable success in opening or
improving road, riverine, and rail links with and through Myanmar to ports
(including several that were China built) on the Bay of Bengal. Myanmar 's
location in the southeastern foothills of the Tibetan plateau had for many
centuries made it a natural transit route between southwestern China and the
Bay of Bengal . Xinjiang was not so fortunate. Its traditional international
trade routes were the long and tenuous lines of the various "silk
roads" across Central Asia . Beijing attempted to strengthen Xinjiang's
transport links with Central Asia.
In 1990 the Soviet
Central Asia railway grid was finally linked to that of Xinjiang when a line
was opened between Urumqi and Aqtoghay, Kazakhstan.
Then in the late 1990s a rail line was pushed south along the western rim of
the Tarim Basin, reaching Kashgar
by 1999. As of 2005, construction of two trans- Kyrgyzstan highways running
westward from Kashgar is under way, with the
intention of eventually transforming one of those routes into a rail line The
China-supported construction of the rail line from Mashhad to Tedzhen, Turkmenistan, opened in 1996, as noted earlier,
was also part of this effort to link Xinjiang to Iranian ports. The map (drawing)
below shows these various transport routes.
China 's adoption in
2000 of a program to accelerate development of its western regions made
development of transportation lines to the southwest even more important.
Pakistan was China 's major partner in this regard. In August 2001 Premier Zhu Rongji committed China to provide $198 million to support
the first phase of construction of a new seaport at Gwadar in Pakistan 's
Baluchistan.(" China Assisted Gwadar Port to Be Completed in Three
Years," Karachi Business Recorder, September 16, 2002 ).
Zhu also promised
unspecified support for two subsequent phases of the project. When complete,
the new Gwadar port was to have a cargo throughput capacity equivalent to
Karachi , thereby nearly doubling Pakistan 's maritime capacity and allowing
cargoes to circumvent Karachi 's extremely crowded facilities. Also in 2001,
China committed $250 million to assist Pakistan in modernizing its railway
system.(Nadeem Malik, " China Pledges US$1 Bn Honeypot for Pakistan ,"
Asia Times, May 15,2001)
In March 2003 Beijing
committed an additional $500 million to Pakistan 's railway modernization,
including construction of new tracks. ("Finance Advisor Speaks on Jamali's
China Visit," Nation, Islamabad, March 24, 2003).
China also agreed to
provide financial support for construction of a new rail line northward from
Gwadar and linking up at Dalbandin with the existing east-west rail line. China
also agreed to finance construction of a highway east from Gwadar along the Makran coast. Simultaneously measures were taken to
expedite the flow of truck traffic along the Karakoram Highway running from Kashgar to Rawalpindi in northern Pakistan.
While China 's major
transportation investments in southwest Asia have been in Pakistan , Iran has
played a role via several railway projects that dovetailed with China 's
efforts in Pakistan . The first of these Iranian projects was construction of a
rail line between Kerman in southeast Iran and Zahedan on the Iran- Pakistan
border. Work on this line was under way in 2002.When complete, this rail line
will link the Iranian and Pakistani rail systems for the first time. Work was
also under way on a new rail line extending southwest from Mashhad directly
across northeastern Iran to Bafq. This line was to be
operational by early 2005. The completion of these new lines will mean that
Chinese cargo moving via the Tedzhen-Mashhad link can
proceed directly to seaports without having to take the long, circuitous, and
crowded but previously required detour via Tehran . Once these new lines are
open, Chinese cargo will also be able to move between Pakistan and Iran and via
ports in either of those two countries. These new lines will add considerable
redundancy to China 's southwest Asia transportation system. ("Finance
Advisor Speaks on Jamali's China Visit," Nation (Islamabad ), March 24,
2003).
There also have
been elements of conflict as well as cooperation in the Sino- Iranian
relationship. Throughout the history of post-1971 Sino-Iranian relations there
has typically existed an asymmetry in interest in a closer partnership to
counter one or another superpower. During the pre-1979 era, it was China that
was the more ardent suitor in the SinoIranian
relationship, with Beijing pressing Tehran to playa
greater role in what Beijing saw as the emerging global united front against
Soviet social imperialist expansionism. The shah was reluctant to go down that
path. His aim in cooperating with China was deterring and moderating Soviet
behavior, not provoking the Soviet Union . China , however, felt a dire threat
of encirclement or even direct attack by the Soviet Union, and urgently wanted
a global anti-Soviet coalition that would lessen Soviet pressure on China .
During the post-1979 period, the situation was reversed. Tehran became the more
ardent suitor and Beijing the more hesitant party. Confronted with the
deterioration of relations with the United States , the European countries, and
its Arab neighbors, Iran needed friends. The end of the Iraq- Iran war freed
Moscow from its alliance obligations to Iraq and opened the door to
Soviet-Iranian cooperation, but the dissolution of the Soviet state greatly
reduced the willingness and ability of Russia to support Iran against the West.
In its search for international partners during the 1990S, Tehran propounded
joint Iranian-Chinese confrontation of the United States and various sorts of
anti-u. S. hegemony blocs to include China, Iran, India, Pakistan, Russia , and
even Japan. Beijing was not interested. Tehran responded by criticizing China's
close relations with the United States in 1979, during Reagan's 1984 visit, and
again when Beijing capitulated to U. S. pressure over nuclear and missile
cooperation in 1997. Beijing moved to mollify Iranian criticism but did not
alter the course of its underlying U. S. policy.
Beijing has been wary
of overly close association with the I R I. The potential financial costs of
close association with Iran may have been one Chinese consideration here. A
major element of antihegemony, Third World solidarity was to be, Tehran
insisted, robust Chinese financial support for development projects in Iran. A
key theme of China 's post-1978 foreign policy line was to avoid, with rare
exceptions (one of which was the Tehran metro), such costly overseas projects
that, Deng Xiaoping felt, had helped impoverish China under Mao Zedong's rule.
Iran 's very size meant that as an ally its demand on Chinese resources could
be quite heavy.
Political factors
were probably more important in explaining the distance Beijing maintained in
ties with the IRI. Overly close association with the IRI could hurt China 's
international reputation. Deng Xiaoping strove quite effectively to shed China
's revolutionary image acquired during Mao's rule. Close association with
revolutionary Iran ran counter to Deng's effort to normalize China 's
reputation and diplomacy. After 1978 and with increasing clarity into the
1990s, China desired to be accepted as a responsible power qualified to be
admitted by the international community into the ranks of the leading nations
of the world. Achievement of this respectability was not facilitated by close
association with Islamic revolutionary IRI or by implication in possible IRI
nuclear weapons efforts. Close alignment with the IRI could also injure China
's ties both with the Arab countries and with Israel.
There were also
numerous smaller frictions in the Sino-Iranian relationship. The propensity of
some Iranian foundations, and perhaps even the IRI government, to foster radical
Islamic thought in China's Muslim communities and in Central Asian countries
contiguous to China generated conflict in the P RC- IRI relation. This conflict
led not to estrangement but, paradoxically, to greater emphasis on
"friendship." Beijing sought to demonstrate to Tehran that
cooperation with China was valuable, but that such cooperation would be
impossible ifIranian "interference" in the
affairs of China 's Muslim communities continued. In effect, Beijing made
cessation of Iranian subversion the price of Chinese friendship and
cooperation. Conflict thus led to engagement and friendship, rather than to
sanctions and hostility.
Tehran sometimes
defaulted on payment of its bills to Beijing . Difficulties of doing business
in Iran certainly tested the patience of Chinese businesspeople no less than
German, South Korean, Canadian, or Norwegian. Arbitrary and unilateral Iranian
changes in agreements sometimes led to Chinese protests. So to
did Iranian "discrimination" against Chinese goods in favor of
Western technology. Negotiations over business deals were often long and hard,
with Iranian calls for Third World solidarity being met with Chinese insistence
on mutual benefit.
The U.S. invasion of
Iraq was not, on the face of it, an overtly "colonial" venture.
Judging by the Bush administration's own objectives, the invasion of Iraq in
fact was a colossal blunder, and although not geared towards imperialist
objectives in the Middle East, it was indeed relying on military force. Yet the
United States did not become the dominant power by military means. Victory in
the Second World War was followed by the establishment of the United Nations
and the Bretton Woods institutions and the Marshall Plan.
Nevertheless the
behavior of the United States was not always exemplary-the CIA was busy
hatching plots, planning assassinations, and arranging coups d'etat ; but most of these activities were clandestine, and
when they were revealed, the CIA was reined in. The Vietnam War ended in defeat
and broke the can-do spirit that had characterized America until then. The
United States continued to fight proxy wars and to sustain authoritarian
regimes. But these were aberrations.
The world order is
based on the sovereignty of states. An anachronistic concept at the time, it
first entered the vocabulary of modernity with the Treaty of Westphalia in
1648. After thirty years of religious wars, it was agreed that the ruler had
the right to determine the religion of his subjects. Next the French Revolution
overthrew King Louis XVI and the people seized sovereignty. Since then, the two
instances of partial sovereignty, have gradually transformed into the
democratic principle as recognized by the United Nations, following the end of
WWII. There has never been a world order capable of preventing war, but the
idea that there is no world order other than the use of force is a fallacy-a
companion piece to the misinterpretation of the nature of power.
After the collapse of
the Soviet empire, America under George W. Bush, used its dominant position to
promote its national self-interest. The United States , as the dominant power,
however could have chosen instead to concern itself with the well-being of
humanity in addition to pursuing its self-interest. There has been a profound
shift in American attitudes since the Marshall Plan was implemented. When the
Soviet Union collapsed, the idea of a Marshall Plan for the former Soviet
empire could not even be discussed. The emergence of a different attitude from
the one that gave birth to the Marshall Plan can best be identified as ‘market
fundamentalism’-a belief that the common interest is best served by people
pursuing their self-interest.
Furthermore,
facilitating the international movement of capital has made it difficult for
individual countries to tax or regulate capital. Since capital is an essential
factor of production, governments have to pay more attention to the
requirements of international capital than to their own citizens. Thus the
development of international institutions has not kept pace with the growth of
global financial markets. Private capital movements far outweigh the facilities
of the International Monetary Fund and the World Bank. Developing countries are
vying to attract capital, yet the world's savings are being sucked up to
finance over consumption in the United States, and now also Europe as ‘feel
good’ countries today.
But not only has
American power and influence suffered a serious setback by now, the world order
is in disarray. One could even argue that in a world of sovereign states, the
lack of a dominant power that has the common interests of humanity at heart
leads to instability and conflict.
But today it is not
enough to reestablish the status quo that prevailed prior to 9/11, and
especially, no overhaul is possible without the participation, of the United
States. Tough we do not necessarily advocate the solution presented in the just
released “Terrorism, Human Rights, and the Case for World Government” by Louis P.Pojman, there is obviously a need for greater
international cooperation based on enforceable internationally. What we see
as more important however is a change of attitude from the single-minded
pursuit of national self-interest to showing some concern for the common
interests of humanity.
But how can we foster
democracy and deal with the likes of Saddam Hussein? How can we address nuclear
proliferation and global warming? How can we deal with the resource curse? How
can we keep the global economy on an even keel and reduce its iniquities?
Let’s start with the
first; In his second inaugural address, President Bush made the promotion of
democracy throughout the world the centerpiece of his program. Yet The Bush
administration's policies where full of contradictions. President Bush argued
against "nation building" in the television debate of the 2000
elections, and nation building was furthest from his mind when he ordered the
invasion of Afghanistan. Yet advocating democratization in other countries, it
failed democratic development in Afghanistan .
Or consider another
case, Pakistan . President Pervez Musharraf is a very uncertain and unreliable
ally: The top leadership of al Qaeda is hiding in Pakistan , and the resurgence
of the Taliban is supported by elements within Pakistan . President Musharraf
tells us that the choice is between him and the Islamic fundamentalists; with
Pakistan in possession of nuclear weapons, that makes the choice obvious. But
Musharraf is in alliance with the religious parties; that makes it difficult
for him to exert pressure on them. Little effort has been made to reform the
madrassahs, and the state spends less than two percent of its budget on
education. Even so, the religious parties would probably get only a minority of
the votes in free elections. The two moderate parties that alternated in power
when the military allowed elections have deep roots in society in spite of all
the efforts of the military dictatorship to destroy them. Musharraf dismisses
them as corrupt; but the military are no better. Musharraf himself is not as
popular as his supporters have us believe; that is why he refuses to carry out
his promise to stand for elections; that is why he has to rely on the religious
parties. This is a case where free elections could resolve what is presented as
an intractable problem. The real problem is how to persuade the military to
hold free elections. Egypt has some similarities with Pakistan , the major
difference being that in free elections the Moslem Brotherhood would gain a
majority.
Another issue is
nuclear proliferation, for example the lack of international resolve to move
quickly to stop proliferation activities, such as those of A.Q. Khan (a worse
case from that of Iran ), also cripples the international non-proliferation
regime. In these circumstances, the incentives tend to outweigh the
constraints. The more countries acquire nuclear weapons, the greater the
pressure on others to do likewise. Regional tensions and nuclear armament in
South and East Asia make nuclear weapons appealing for neighbors. Nuclear
modernization efforts by the world's two largest nuclear powers heighten the
perceived importance of nuclear weapons for national security. The inducements
may not be strong enough to push countries to actually violate the
non-proliferation treaty, but they have every reason to line up at the starting
line. That is where a number of countries are heading. In addition to North
Korea and Iran , countries such as Argentina , Brazil , and Japan are now
believed to have the capacity to use their peaceful nuclear technology to
produce weapons grade material if they chose to do so. Estimates are that,
outside the nine countries that have produced nuclear weapons, up to 40
countries could produce nuclear weapons if they were willing to devote the
necessary resources. Only the ever thinning taboo against nuclear weapons
possession remains between these nuclear-capable states and nuclear weapons.
Although the spread
of nuclear weapons constitutes a threat to humanity, the arguments for
non-proliferation are undermined by the fact that the nuclear weapon states
have not fulfilled their obligations under the non-proliferation pact: they
have made only very limited moves toward complete disarmament, as required by
Article VI of the NPT. Thus the situation is much more dangerous than at any
time in the Cold War, yet much less thought is given to the subject than during
the Cold War. The best brains are not engaged. Insofar as there is public
discussion, it is focused on weapons of mass destruction falling into the hands
of terrorists. This is obfuscation. The very term "Weapons of Mass
Destruction" is misleading, because it lumps together weapons with very
different characteristics. The most potent threat, in my opinion, is the
proliferation of nuclear weapons in the hands of states. That threat is not
receiving the attention it deserves.
There is little hope
for a solution while the United States is modernizing its strategic arsenal and
continuing to have plans to use nuclear weapons. A solution could only exist if
a new non-proliferation agreement was negotiated-a new non-proliferation treaty
that would put all nuclear programs under international supervision. It would
not deprive the United States and other states of their weapons, but it would
place them under international monitoring to ensure immediate detection if a
country decided to initiate the use of nuclear weapons. But since there are
plentiful amounts of highly enriched uranium already in existence, it is
possible for nations to acquire fissile materials without producing their own.
The other necessary treaty component must therefore implement international
control of the production and disposal of the fissile materials necessary to
build nuclear weapons. Such an arrangement would run counter to the prevailing view
that American sovereignty is sacrosanct but it could make the world, a safer
place.
The United States is
right to believe that Iran is hell-bent on acquiring nuclear weapons in
fact Iran has done nothing to discredit this notion. The world is heading
toward a confrontation. Only the timing is uncertain. As I mentioned in the
previous chapter, I believe it may be possible to reach an accommodation with
Iran but it ought not to permit Iran to become a nuclear power. Iran has been
the main beneficiary of the invasion of Iraq but if it overplays its hand it
may lose all the benefits. If Iraq deteriorates into a regional Shia-Sunni
confrontation, Iran is liable to be drawn into it. A commitment by the United
States to withdraw its troops could serve both as a threat (because it would
leave the United States free to bomb Iran 's nuclear installations) and as an
inducement to cooperate in a political settlement (because it would consolidate
the gains Iran has already made without risking them in a war.) Iran has
suffered greatly during eight years of fighting with Saddam Hussein and another
war may not appeal to at least some segments of the power structure. Giving up
the nuclear program may not be much of a sacrifice especially if the
international community were willing to enter into a new nonproliferation
agreement that would put all existing nuclear weapons under an international
regime and impose a freeze on all further development of nuclear capabilities.
If most of the world were lined up behind such a treaty, Iran would find it
difficult to resist, and if it did, preemptive action by the United States
would encounter fewer adverse consequences than at present.
As for world economy,
the financial authorities are reinforced in their belief that with proper
supervision financial markets can take care of themselves. However the global
economy has been sustained by a housing boom, that notably in the United
Kingdom and Australia , has subsided, with a soft landing. But there are
reasons to believe that the slowdown in housing prices in the United States
will see repercussions.
Combined factors
there are likely to ensure that housing prices, once they subside, will not
rise again soon. And if an initial soft landing turns into a hard one when the
slowdown does not end. A slowdown in the United States could be transmitted to
the rest of the world via a weaker dollar. This, as an illustration of the kind
of dislocation that are bound to occur, because the global economy is prone to
periodic dislocations and it will require international cooperation to keep
them within bounds.
Even in the absence
of a crisis there is something perverse in the current constellation: The
savings of the world are sucked up to the center to finance over consumption by
the richest and largest country, the United States . This cannot continue
indefinitely, and when it stops the global economy will suffer from a
deficiency of demand.
Furthermore a
community of democracies that would exercise the responsibility to protect is
an attractive idea in theory, but it has been disappointing in practice. The
idea was launched in the waning days of the Clinton administration, in the
summer of 2000, at a conference held in Warsaw . From the outset, the
initiative suffered because it was a product of the foreign ministries and
lacked support from the ministries of finance. As a result, the Warsaw
Declaration has remained an empty gesture; it would not even have made it into
the newspapers if France had not refused to sign it because it had been sponsored
by the United States . And during its recent meeting, in Chile in April 2005,
the community of democracies could not agree about endorsing the proposed Human
Rights Council. Many developing democracies were suspicious that the United
States would use the Human Rights Council to further its’ imperial goals’….
Finally in regards to
the resource question, developing countries that are rich in natural resources
tend to be just as poor as countries that are less well-endowed; what
distinguishes them is that they usually have more repressive and corrupt
governments and they are often wracked by armed conflicts. This has come to be
known as the resource curse.
It started with a
campaign launched in early 2002 called Publish What You Pay. It was supported
by a number of international NGOs, including Global Witness, which is grounded
in the environmental movement. The aim of the campaign was to persuade
oil and mining companies to disclose all the payments they make to individual
countries. The amounts could then be added together to establish how much each
country receives. This would allow the citizens of those countries to hold
their governments accountable for where the money goes.
The line of reasoning
that led to the campaign, however, did not survive closer examination. (That is
why I call it a fertile fallacy). Companies listed on the major stock exchanges
could not be legally compelled to publish country-by-country accounts. British
Petroleum had to back down, but along with Shell, has announced that it will
publish its payments in countries where the government allows it. Nigeria has
waived the confidentiality clause and asked companies to report their payments
individually. Other EITI adherents, including Azerbaijan , do not allow
individual reporting, but ask all operating companies to pool their payment
data for public reporting purposes. Azerbaijan , where British Petroleum is the
lead operator, has established an oil fund on the Norwegian model and adopted
EITI principles. Kazakhstan has also set up an oil fund and has signed on to
EITI. Advances were especially made in Nigeria , when after the reelection in
2003, of President Olusegun Obasanjo he embarked on far-reaching fiscal,
monetary, and banking reforms.
One obstacle to
further progress on the resource curse is China , and, to a lesser extent,
India . In its quest for energy and other raw material supplies, China is fast
becoming the sponsor of rogue regimes. It is the main trading partner and
protector of the military dictatorship in Myanmar . It feted President Islam
Karimov of Uzbekistan immediately after the massacre at Andijan, and it
conferred an honorary degree on President Robert Mugabe of Zimbabwe . It is the
main buyer of Sudan 's oil, and it hindered the work of the United Nations in
dealing with ethnic cleansing in Darfur . It extended a large credit to Angola
when Angola failed to meet the conditions imposed by the International Monetary
Fund.
No single measure is
sufficient to ease the crisis. Many different actions will have to be taken at
the same time, in addition to carbon-free coal, nuclear energy, wind, biomass,
and, of course, demand reduction. That is where the price mechanism can be
useful: A carbon tax combined with carbon credits would provide the economic
incentives to introduce the appropriate adjustments both on the demand side and
on the supply side. The Kyoto Protocol set targets for carbon emissions and
facilitated the trading of carbon credits. It was a step in the right
direction, but it did not go far enough.
The global energy
crisis is more complex than any other crisis. It is not a single crisis but a
confluence of disparate developments that have reinforced each other and
reached crisis point more or less at the same time. They endanger our
civilization in various ways. Global warming and nuclear proliferation are only
aspects of a more complex situation that threatens to deteriorate into global
disintegration. Although the core of the crisis is the tight supply situation
for oil, the developments that may bring about disintegration are mainly
political.
See our earlier
in-depth comment about what next with the tight supply situation for
oil:
Financial markets
often go to the brink and then recoil. Our political system is less
well-equipped to avoid disaster however. We have experienced two world wars and
wars have a tendency to become increasingly devastating. The threat of nuclear
war should not be minimized. Our current civilization is fuelled
by energy; the global energy crisis could create immense havoc.
The present
phase of the crisis is the outgrowth of misconceptions, including those related
to 9/11. Although we cannot rid ourselves of misconceptions, we can correct
them when we become aware of them. Perhaps the biggest mistake is for the
United States to think that it is powerful enough to deal with these problems
on its own. The competitive position of one state vis-a-vis the others is not
what matters when the viability and sustainability of the world order is at
stake. The prevailing view that the world order, like a market, will take care
of itself if left alone, is plain wrong. Global warming, energy dependency, the
resource curse, and the nuclear nonproliferation regime require international
cooperation.
Although the global
energy crisis demands international cooperation, we must be wary of going to
the opposite extreme and disregarding the national interests of sovereign
states. No matter what systemic changes are introduced, they need to take these
interests into account. Consider China . Until 1993, it was self-sufficient in
oil; now it imports almost half its consumption. Its share of the world oil
market is only 8 percent, but it accounts for 30 percent of incremental demand.
China has a genuine interest in harmonious development, although we are next
also exploring the alternative viewpoint meaning if, the current situation is
not properly handled the next WW might be between China and the US .
Today however, since
China has a serious energy-dependence problem as well as serious pollution
problems, it is a natural partner for developing alternative clean fuels,
particularly from coal, which is plentiful in China . But China is not a natural
partner in curing the resource curse. On the contrary, in its search for
alternative energy sources it has become a customer of rogue states in Africa
and Central Asia, a situation that is contrary to China 's interest in
harmonious development; but its leadership sees no alternative, particularly
after its bid for Unocal was rebuffed. It would behoove the United States
government to allow China to acquire stakes in legitimate energy companies, but
only if it cooperated in dealing with the resource curse.
Europe could lead the
way in energy cooperation. It is heavily dependent on natural gas and Russia is
its main supplier. The European Union imports 50 percent of its energy needs
and imports are projected to rise to 70 percent by 2020. Russia is by far the
biggest supplier of its imported oil (20 percent) and natural gas (40 percent).
And as we have seen before (the indicated presentation/link above), many EU
countries depend heavily on gas from Russia, which supplies 40 percent of
Germany's total demand, 65-80 percent of Poland's, Hungary's, and the Czech
Republic's demand, and almost 100 percent of the gas needs of Austria,
Slovakia, and the Baltic states. This makes Europe particularly vulnerable
because Russia has begun to use its control over gas supplies as a political
weapon. The story is a complicated one and I can give only a brief outline
here. When the Soviet system disintegrated, the energy sector was privatized in
a chaotic fashion. Devious transactions were perpetrated, like the loan for shares
scheme, and enormous fortunes were made. When Vladimir Putin became president,
he used the power of the state to regain control of the energy industry. He put
the president of Yukos, Mikhail Khodorkovsky, in jail and bankrupted the
company. He put his own man, Alexey Miller, in charge of Gazprom and pushed out
the previous management that had built a private fiefdom out of Gazprom's
properties. But he did not dissolve the fiefdom but used it to assert control
over the production and transportation of gas in the neighboring countries.
This led to the formation of a network of shady companies that served the dual
purpose of extending Russian influence and creating private wealth. Billions of
dollars were siphoned off over the years. The most valuable asset was the gas
of Turkmenistan which was resold by a company registered in Hungary at a
multiple of the price at which it was bought. While the ownership of Eural Trans Gas was never disclosed, the decisions to give
it contracts were made jointly by President Putin and the then-president of
Ukraine, Leonid Kuchma. I believe that was one of the reasons why Putin exposed
himself so publicly in backing Kuchma's nominee, Viktor Yanukovich,
for president of Ukraine in 2004. After the Orange Revolution, the contract with
Turkmenistan passed into the hands of Ros Ukr Energo, a company with shady ownership set up by Raiffeisenbank of Austria. At the beginning of 2006, Russia
cut off the gas supply to Ukraine. Ukraine , in turn, tapped into the gas that
was passing through Ukraine on its way to Europe. This forced Russia to restore
supplies to Ukraine; but in the subsequent settlement, Russia gained the upper
hand: It promised gas supplies at reduced prices through RosUkrEnergo for six
months, but Ukraine committed itself to fixing the transit fees for five years.
Mter six months, Russia will be able to exert
political pressure on Ukraine by threatening to raise gas prices. Russia
already exercises control over Belarus.
A more recent
example, since a few days ago, the Russian environmental agency, Rosprirodnadzor, is suing Royal Dutch/Shell, alleging that
the oil supermajor has violated environmental regulations and failed to submit
timely reports…
The net result is
that Europe is relying for a large portion of its energy supplies on a country
that does not hesitate to use its monopoly power in arbitrary ways. Until now,
European countries have been competing with each other to obtain supplies from
Russia . This has put them at Russia 's mercy. Energy dependence is having a
major influence on the attitude and policies of the European Union towards
Russia and its neighbors. It will serve the national interests of the member
states to develop a European energy policy. Acting together, they can improve
the balance of power. In the short run, Russia is in the driver's seat; an
interruption of gas supplies disrupts European economies immediately while an
interruption of gas revenues would affect Russia only with a delay. In the long
run, the situation is reversed. Russia needs a market for its gas and few
alternatives exist as long as Europe sticks together. Europe could use its
bargaining the opposite extreme and disregarding the national interests of
sovereign states. No matter what systemic changes are introduced, they need to take
these interests into account.
Consider China .
Until 1993, it was self-sufficient in oil; now it imports almost half its
consumption. Its share of the world oil market is only 8 percent, but it
accounts for 30 percent of incremental demand. China has a genuine interest in
harmonious development. It also has a serious energy-dependence problem as well
as serious pollution problems. Therefore, it is a natural partner for
developing alternative clean fuels, particularly from coal, which is plentiful
in China. But China is not a natural partner in curing the resource curse. On
the contrary, in its search for alternative energy sources it has become a
customer of rogue states in Africa and Central Asia, a situation that is
contrary to China 's interest in harmonious development; but its leadership
sees no alternative, particularly after its bid for Unocal was rebuffed. It
would behoove the United States government to allow China to acquire stakes in
legitimate energy companies, but only if it cooperated in dealing with the
resource curse.
Meanwhile, encouraged
by the energy shortage and America 's weakness, Russia is assuming an
increasingly assertive posture that goes well beyond energy policy. Russia has
sold Iran (through Belarus ) S300 anti-aircraft missiles and has refused to
rescind the sale in spite of strong U.S. pressure. The missiles will be
installed by the fall of 2006 and after that time it will be more difficult for
Israel to deliver a preemptive strike against the Iranian nuclear installations.
Russia has also granted Hamas a $10 million-a month subsidy to replace the
subsidy withdrawn by the European Union and is reported to be selling arms to
Syria . (See Sergei Ivanov, " Russia Must be Strong," The TVall Street Journal, January 11, 2006; and Sergei Lavrov,
" Russia in Global Affairs," Moscow News, March 10, 2006. "
Russia Helps Israel Keep an Eye on Iran," The New York Times, April 25,
2006 - Associated Press).
Russia seems to be
counting on the disunity and inertia of the West. Unfortunately, its
calculation may prove to be correct. Both the United States and Europe are
internally divided and far apart from each other; the European Union is held
together by bureaucratic inertia. The business community is also inclined to
seek individual deals with Russia rather than to demand certain standards of
behavior. There is an urgent need for the West to pull together. International
cooperation ought to extend beyond the immediate emergency. Global warming
requires a global solution, but the attitude of the Bush administration stands
in the way. On this issue, the American public is ahead of the administration,
and it ought to impose its views on the government.
The most pressing
task today therefore, is to agree upon a new non-proliferation treaty. The
present treaty is breaking down. Iran is determined to develop its nuclear
capabilities and if it is not stopped, nothing can stop a number of other
countries from doing the same thing.
A missile attack on
Iran in the current circumstances on the other hand, would be
counter-productive. It would consolidate public support for the current regime
and reinforce the determination of the regime to develop nuclear bombs. It
would unite the Moslem and much of the developing world against the United
States . It would render the position of the occupying forces in Iraq untenable
and it would disrupt the world economy without stopping Iran from eventually
having nuclear bombs. Both scenarios lead to disaster. The only way out is to
agree upon a more equitable non-proliferation regime that would have near
universal support. Iran would either agree to join such a regime or it could be
forced to do so without incurring the disastrous consequences that a missile
attack under the current circumstances would entail.
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