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The Oil and the Glory
The Weekly Wrap: Feb. 11, 2011
Saudi Turnabout on Egypt: When geopolitical chess players observe the uprising in Egypt, they don’t see Egypt and Hosni Mubarak, who has now stepped down from power. They see Saudi Arabia and the rest of the big Persian Gulf oil producers, and the question mark of whether they are immune to the Tunisian Contagion, the ...
Saudi Turnabout on Egypt: When geopolitical chess players observe the uprising in Egypt, they don’t see Egypt and Hosni Mubarak, who has now stepped down from power. They see Saudi Arabia and the rest of the big Persian Gulf oil producers, and the question mark of whether they are immune to the Tunisian Contagion, the popular uprising ignited by the ouster of Tunisian President Bine Zine El Abidine Ben Ali (who incidentally received refuge in Saudi Arabia). After all, Saudi Arabia alone produces 10 percent of the world’s oil supply, and through its ability to produce a few million barrels a day on top of that singularly influences whether or not oil traders go into panic.
It turns out that the Saudi regime sees the same thing. So in recent days, the kingdom toned down its categorical support for Mubarak’s continuation as president, reports Abeer Allam at the Financial Times. Specifically, Allam points out the recently more measured reporting on the Egyptian events on Saudi-owned al-Arabiya TV. Allam quotes one expert close to the Saudi regime: "They do not want to be seen as against the [Egyptian] people."
Meanwhile one wonders at the role of the Egyptian Army in edging Mubarak out. In recent days, Mohamed ElBaradei, the Nobel laureate and former international arms inspector, called on the Army to step in and stave off a situation that he says may otherwise "explode." This was almost certainly an ElBaradei blunder — one thing a popular uprising does not want is a record of reliance on military force, because, historically speaking, once an army senses it’s responsible for a fellow or movement being in power, it cannot resist later issuing reminders of it in the form of requests (read: demands) for more power and privileges.
In Tunisia, Ben Ali left in the face purely of the popular uprising. In Egypt, the uprising in Tahrir Square was the technical cause of Mubarak’s abdication. But if it was the Army that ultimately pushed him out — with the request of the uprising’s leaders — the opposition may come to regret it.
Egypt and oil prices: No sooner did Hosni Mubarak step down then oil prices continued their slide of recent days. Immediately, prices dropped to about $86 a barrel in New York. The price of U.K.-based Brent crude, traded abroad, continued its very strange, unanchored trajectory upward; one presumes that later today European traders will realize that there is still a glut in global oil.
Whatever the case, at least for now we are looking at stable oil prices in the $80-$100 per-barrel range, more toward the lower end. The Paris-based International Energy Agency continues to remind us that global demand continues to rise, so that supplies are becoming tighter. But that is to worry about next year.
Grandiosity on the Silk Road: At Oil and Glory, we keep receiving emails from current and former U.S. diplomats unhappy with our skepticism about a plan to turn Afghanistan and all the surrounding nations including China, the former Soviet Union and South Asia (excluding Iran of course) into one, big, happy Silk Road family. The people suggesting this idea, meaning a spider’s web of interconnected electric lines, roads, energy pipelines and other projects, believe possibly rightly that only trade and infrastructure — a connection with the rest of the world in every direction — will ultimately bring peace to the region. Their most recent announcement is a two-lane, U.S.-financed highway straight through the militant stronghold of South and North Waziristan in Pakistan’s trial belt, abutting Afghanistan, reports Matthew Green at the FT.
Is this region truly ready for expensive infrastructure projects imposed from the outside that they themselves cannot — according to the people sending me emails — plan, build or manage themselves? How about some food for thought — yesterday in the Pakistani city of Quetta, near the Afghan border, Baluch rebels for the second time in a week blew up the biggest natural gas pipeline in the province, leading to the Pakistani gasfields at Sui. Virtually all the trans-Afghan pipeline plans I’ve seen call for transit through Baluchistan. So do the trans-Afghan road networks. Are these Baluch on board with you?
More food for thought: China meanwhile is again going where the West fears to tread. It has agreed to build $13 billion in railroads in Iran, Reuters reports.
Spying and batteries: A month ago, Renault filed a criminal complaint against three executives claiming that they had spilled electric-car secrets to China. Two of the accused have since filed defamation suits against the company, denying they were doing any such thing. One of the executives said the whole matter must be the result of dirty tricks by rivals in the high-stakes electric-car race. So what is really going on?
In an interview with the Wall Street Journal‘s Sebastian Moffett and David Pearson, Renault CEO Carlos Ghosn suggests that it comes down not to specific evidence of why the trio had Swiss bank accounts, the proceeds of which were allegedly traced to China. Instead, Ghosn said, there was an unacceptable risk that, given the allegations of an appearance of financial impropriety, he could not gamble that they had divulged secrets, for example, on the cost of Renault’s battery.
Ghosn said: "The most interesting information I can have about a competitor is the cost. For a battery, the most important element is the cost per kilowatt. From the cost per kilowatt, I may guess what kind of technology you’re developing."