The Oil and the Glory

The Weekly Wrap — Dec. 30, 2011

The Weekly Wrap — Dec. 30, 2011

End-of-year edition

Bad year for petro-tyrants: Did today’s trouble for petrocrats truly originate with Muhamad al-Bouazizi, the Tunisian fruit-and-vegetable seller whose self-imolation a year ago preceded the Arab Spring? I don’t think so. Before Tunisia and Egypt, before the crumbling of the Berlin Wall and the Soviet collapse, before the rise of Benazir Bhutto, and before even the fall of Chun Doo-Hwan and the birth of South Korean democracy — there was Corazon Aquino’s People Power revolution in the Philippines. At this moment 26 years ago, yellow-clad Aquino supporters with their ubiquitous "L" signs, made with outstretched thumb and forefinger (in photo above, re-enacted earlier this year in a Manila celebration), seemed quaintly outmatched by then-dictator Ferdinand Marcos as they prepared for a snap presidential election. Yet, just two weeks after a fraudulent count gave Marcos the victory, a pair of military men defected, setting off the massive crowds of EDSA, Marcos’ ignominious flight out of the country aboard a U.S. aircraft, and his exile in Hawaii. The remarkable string of democratic breakouts in the quarter-century since — regardless of their imperfection in action — began on EDSA, with the Laban hand signs, and Freddie Aguilar’s haunting renditions of "Bayan Ko."

I am reminded of the Philippine events not because of the anniversary — I witnessed the revolution as a young correspondent in my first foreign posting — however, but some similarities with current events in Russia. The fatal cracks in the Marcos edifice were defections, starting with the Catholic church; then government election-commission computer workers; and finally the desertion of Marcos’ defense minister, Juan Ponce Enrile, and his vice chief of staff, Fidel Ramos. In Moscow, Patriarch Kirill I, the leader of the Russian Orthdox Church, is an outspoken critic of this month’s Russian parliamentary elections, reports the New York Times’ Sophia Kishkovsky (the Wall Street Journal’s Greg White and Rob Barry have produced a must-read systematic evaluation of the elections.). A regional executive of the powerful state company Gazprom — Sergei Filippov — has called for a full accounting of the indications of fraud, reports the NYT’s Michael Schwirtz. An unidentified official in the city of Vladimir sums up the quandary for Putin and the ruling United Russia party: "This is probably what United Russia is scared of most: that someone from the inside will start to talk," this official tells Schwirtz.

This unnamed Vladimir official is right. A truly massive public uprising in Russia appears all but impossible, not the least since there is no unifying opposition figure. Lucian Kim writes that that is not necessarily a bad thing — Putin, he argues, is actually a pretty good reformer. Yet, recalling those days in Manila, I do not recollect a single colleague or source forecasting Marcos’s ouster, either.

Go to the Jump for more of the Wrap.

Year of the pipeline: Time magazine’s Person of the Year is the protester, and that is probably valid, but we think that the editors missed an important also-ran — the pipeline. Few care to stop and notice the elegance in unsung lengths of steel cylinders stirring fierce passions such as nationalism, greed and tear-inducing anger. We are talking the 24- and 36-inch steel cylinders that carry oil and gas across continents, under bodies of water and over mountains to the 7 billion people of the Earth. Who for instance considered nominating the Keystone Pipeline as political instrument of the year for how it threatened to shut down the whole of the U.S. government, and may yet in the coming couple of months? Then there is Nabucco, a proposed natural gas line that has much of Europe, Russia along with the U.S. tied up in sanctimonious knots over who will exercise geopolitical and economic leverage in Europe. This week Russia notched up the temperature by securing crucial support from Turkey for its repost to Nabucco, a pipeline that it calls South Stream. That battle also will carry over into the new year. And who can forget the proposed trans-Afghanistan gas pipeline, known by the acronym TAPI? A powerful and high-kicking chorus is backing TAPI, led by Secretary of State Hillary Clinton and CIA director David Petraeus, who embraced the line when he was running the ground game as a general in Afghanistan. Observers, including this blog, have cast doubt on TAPI’s feasibility given Afghanistan’s chaos. Yet we celebrate it as a worthy addition to this improbable pantheon — inanimate objects that somehow transmogrify into organic, breathing beings capable of arousing high-stakes emotion in humans.

Three big missed calls: Some of our most famous humorists and keynote speakers have profited from variations of the aphorism, "Predicting is difficult, especially about the future." Yet they and others (including this blog) go on to attempt the feat. Here are some of the biggest bloopers of the year:

I shall return: I committed a large blunder last summer by betting that Dmitry Medvedev would remain Russia’s president, and Vladimir Putin the country’s prime minister, in orchestrated elections March 4, 2012. So certain was I that I built a contest around the forecast.  My reasoning was this: Their tandem of power worked as it was, so why mess with success? As we learned in September, however, the conventional wisdom was right — Putin and Medvedev announced that they would swap positions; the former said in fact that they had decided this course of action years ago. Mea culpa. I cannot resist adding however that Putin made an even bigger miscalculation by failing to heed the essence of my argument, and taking the huge risk of shaking the cage. If he had left things as they were, arguably the Russian populace would not have awoken politically. Now he faces angry people in the street.

The Pull of Roads Once Travelled: In the 13th century, a Venetian merchant named Marco Polo famously walked to China with his father and uncle, and since then his name has been associated with a road and a marvelous fabric created from cocoons found in mulberry trees. In our current time, there is another in a cycle of proposals to resurrect Polo’s long-defunct Silk Road. U.S. politicians, generals and full-time intellectuals cannot seem to elbow their way fast enough to claim leadership of this initiative, which would include electric lines, roads and especially a gas pipeline (the TAPI pipeline, described above), all of it transiting Afghanistan. In a September speech, U.S. Secretary of State Hillary Clinton said she is "clear-eyed about the entrenched obstacles standing in the way." Clinton did not elaborate, but we will — those obstacles include suicide bombings, assassinations, a mortal struggle for power, and general mayhem, the sort of landscape that makes a 40-year-life project seem risky to financiers. In the 1990s, when the last iteration of this route was proposed, serious commercial players with fat wallets were the ones proposing it. They failed, and this time are absent from the playing field. That makes one suspicious — if no consequential profiteer on the planet sees potential personal benefit, there might actually be none. In other words, the New Silk Road, at least as envisioned, isn’t going to materialize. Given its unlikelihood, why are distinguished Americans proposing that it be undertaken? Bluntly speaking, it is to save face as U.S. forces withdraw and the Taliban and their rivals plunge into a determined fight for power. What would be a more credible call? A less-ambitious, Afghan-led commercial venture, which would have the virtue of a better prospect of success.

Let freedom ring! For years, a leading mantra in energy has been Peak Oil, a theory that the world has either already reached, or will soon, the highest daily volume of oil production that it possibly can, and will imminently experience a long drop in output, along with an ugly war for the remaining supplies. In recent months, a competing theory has begun to take hold — that the western hemisphere is actually on the brink of oil abundance; the U.S. specifically, it is said by some of our most prominent oil experts and writers, is on the way to independence from foreign oil.

In concrete numbers, these sources suggest that the U.S. will produce a sustained 19 million barrels of oil a day, more than double its current output, or in another scenario, supplement U.S. domestic supplies with a bit of Canadian oil sands (as a comparison, petroleum king Saudi Arabia can produce 12 million barrels a day, or 63 percent of the volume forecast for the U.S.). The trouble is that the numbers do not add up — there is no credible scenario in which, when accounting for the natural decline of existing fields, North America produces an additional 10 million barrels of oil a day to add up to the total of 19. So what is going on with this bad call? My own inkling is that we are witnessing a natural inclination to get carried away with new trends. In this case, more oil is coming out of the ground in North Dakota and Texas; Alberta’s oil sands do seem poised to produce a lot more oil. Elsewhere in the western hemisphere, Brazil also is on the way to a big uptick in production. Combine these field developments with exuberant new projections published by industry-affiliated experts and think tanks, fed by lobbying interests, and at once the only worry is how fast can we drill. O&G’s call: The United States, alone or with Canada, will never produce a sustained volume of 19 million barrels of oil a day.

‘I’ll just sit this one out’ Faced with trouble in the streets, Hosni Mubarak and Muamar Qadhafi adopted a similar strategy. Their tough-it-out approach ended up bad for both, worse for Qadhafi of course. Yet the companion response to the Arab Spring — ‘I’ll give in just a bit and the crowds will melt away’ (Example: Tunisia’s Zine al-Abidine Ben Ali) — did not work out so well either. With no easy answer, Syria’s Bashar al-Assad and Yemen’s Ali Abdullah Saleh themselves have opted for the former method. Given the oucome in the streets and palaces of all the countries, the Middle East strongmen collectively win the O&G title for bad call of the year.

Thanks for a great year, and see you in 2012.