How I started a war with Russia

Al Qaeda chose three strategic oil assets to attack — two large Saudi Arabian refineries, two choke points in Southeast Asian sea lanes, and five refinery complexes in and near Houston. In all, the attacks immediately pulled 8 million barrels a day, or about 10 percent of global demand, off the market, and forced the rerouting of another 15 million barrels. Global oil prices spiked to $250 a barrel, as the United States, the Saudi kingdom, and the rest of the world’s major nations contemplated how to respond.

So went the scenario at the "energy games," a day-long role-playing exercise yesterday at the Heritage Foundation in Washington. Teams played China, the European Union, India, Iran, Japan, Russia, Saudi Arabia, various parts of the U.S. government, and of course al Qaeda. As a condition of playing — I was on the European team — I agreed not to identify the other participants. But suffice to say that those around me were a realistic bunch.

Three countries provided the game’s best moments: China, Iran, and Russia. All of them were resource-rich and suddenly cash-rich — and wanted to exploit the situation for all it was worth. What they did was instructive. In real life, we know that an oil-price spike is probably coming in the middle to late part of the next decade. This is because of an expected oil supply shortage, the result of a decision by oil companies to halt numerous exploration and production projects in the three years since oil prices dipped below $100 a barrel. By the 2020s, oil prices will probably start declining because of a steady and long-term fall in global demand. But if yesterday’s energy games were at all representative of the middle period between now and the 2020s, some of the world’s resource-rich nations, suddenly in possession of a commodity of unprecedented value, may change the global economic landscape for decades to come.

As one might expect, China used its cash pile to strike long-term deals, securing pipelines and much more oil and natural gas from Russia, Central Asia, and resource-rich nations in Africa and Latin America. The sums Beijing threw around were astonishing. The Chinese offered my team $100 billion — all we had to do was identify what China would receive in return. Mulling over the offer, and grasping that Europe ought to diversify away from oil so as to reduce our vulnerability to such crises, we decided to build up our shale gas and electric car industries; gas-fired power plants could create electricity for a new electric car fleet, and Europe would use much, much less oil. China said that was fine — it would send us $100 billion to invest in shale gas and electric cars. All we had to do in exchange was allow it to join the Paris-based International Energy Agency as an equal member with everyone else, and generally be treated like a first-class citizen. We said okay.

Iran’s team foisted a ruse on the world. While building up its cash reserve and forming oil supply and production relationships around the world, Tehran pretended that government "moderates" had seized power domestically. The moderates needed the world’s help and understanding in order to keep this advantage, and both Washington and Europe grabbed Iran’s outstretched hand. My team agreed to oppose economic sanctions pending against Iran in exchange for it consenting to end the longstanding tension with the West over its nuclear ambitions. Tehran would ship all its uranium to France; France in turn would provide Iran all the nuclear fuel required for its nuclear power plants. But the Iran team confessed at the end that it in fact intended to use the deals to buy time while continuing secret development of its nuclear weapons (which really angered the snookered player in the role of the U.S. president).

Being resource-poor, and possessing almost nothing of value to any of the other players, Europe — my team — embarked on a humble friendship-making and resource-securing campaign. As part of that effort we tried to cozy up to Russia, to ensure that we would not lose our oil and gas supply. In exchange, we offered to keep supporting its aims to build giant natural gas pipelines into Europe, and to aid its efforts at economic diversification. Moscow wants to build a facsimile of the Silicon Valley, and we offered up a full partnership with Britain’s legendary Cavendish Laboratory toward that aim.

In response, the Russian team thanked us, and "offered" to buy up a string of Europe’s liquefied natural gas facilities, plus the rights to shale and tight natural gas deposits in Hungary, Poland and elsewhere. Feeling a bit crowded, we tried more diplomacy: We counter-offered joint development of shale gas reserves in Russia and Europe, using technology developed in our fields. Russia said it was happy to accept that help — along with the LNG and shale and tight gas fields.

Now the European team was alarmed by Russia’s threatening tone. What would happen if we didn’t wish to sell our energy assets? We feared Russia would sell supplies meant for us to a more strategically valuable buyer, such as China. Needing secure energy supplies, we turned to one of the few cards we had up our sleeve: NATO membership for Azerbaijan and Georgia in exchange for the rights to all 1.1 million barrels a day of Azerbaijani oil shipped to the Mediterranean through the Baku-Ceyhan oil pipeline. Washington agreed to the idea.

As we discovered later, Russia had in fact lost track of Europe — it had gotten entirely caught up in its dealmaking with China and the rest of Asia, and we had moved to its back burner. But we didn’t know that. Russia now felt blindsided. Denouncing NATO aggression, it dispatched troops into Georgia, marching to the capital of Tbilisi, and imposed a naval blockade around Baku.

Time!

The game was over.

The gamemaster said that, when he writes up and distributes the game results, he might simply omit the bit about NATO absorption and war — it would never happen in real life, he said.

Perhaps.