The Oil and the Glory
The Weekly Wrap: July 15, 2011
Kremlin Contest: Who will be Russia’s next president? Dmitry Medvedev, Vladimir Putin, or a surprising candidate? Put your conjecture to the test in the Kremlin Contest. It’s dead easy — tell me who will be president, who will be prime minister, and what date Putin will make his choice clear. This is a wagering contest ...
Kremlin Contest: Who will be Russia’s next president? Dmitry Medvedev, Vladimir Putin, or a surprising candidate? Put your conjecture to the test in the Kremlin Contest. It’s dead easy — tell me who will be president, who will be prime minister, and what date Putin will make his choice clear. This is a wagering contest – you must bet a small, non-cash item that, should you lose, you can mail to the winner (so far, glasses of alcohol drinks are favorites though no one has said how they will be mailed). The deadline is Sept. 1. Email me from the About this Blog box on the right on the site, or tweet at @stevelevine.
Worms, energy and war: If one ponders the biggest energy stories of the last couple of years, big accidents come to mind — the BP oil spill in the Gulf of Mexico, the Fukushima nuclear reactor meltdown. But the one that gets overlooked, because most people regard it as a security matter, is Stuxnet — the attempt by highly sophisticated hackers to seriously hobble Iran’s nuclear weapons development program through the use of a diabolical computer worm. The hack had serious though apparently temporary impact, discombobulating hundreds of Iranian centrifuges. Stuxnet overlaps into energy by association — Iran claims all it is doing is building a nuclear energy industry, while much of the rest of the world thinks that’s naked subterfuge. If and when cyberwar becomes more common and dangerous, energy infrastructure will be serious targets, since they are among society’s most sensitive nerve centers. In Wired this month, Kim Zetter deconstructs how Stuxnet was deciphered by ingenious cyber detectives. It is must reading.
Oil prices and optimism: There is the joke about the pummeled boxer who, asked by a neighbor how the fight went, replies: I got them best of him — I hit him in the fist five times with my face. So goes the International Energy Agency’s battle with oil traders. Over the last three weeks, traders have battered, spit, stomped and cackled at the IEA and the United States, which surprised them June 23 by announcing the release of 60 million barrels of light crude into the market from their strategic petroleum reserves. The idea was to shock and awe by making traders uncertain that their bets would prove good — how could they be if IEA members might abruptly put more oil on the market? Nice idea, and it worked at first — oil prices plunged to about $90 a barrel. But then traders brushed off their trousers and skirts, and piled back in with the implicit taunt: How often are you prepared to tussle with us and with what volume? It was a good bet, because while traders might be wrong-footed here and there, the IEA will not intervene with much frequency — these are strategic reserves after all, and we are experiencing not Armageddon, but only annoyingly high oil prices. Since then, traders have pushed prices back through the pre-release price into the upper $90s a barrel, daring the IEA to attempt to outgame them again. Yet, like the proverbial boxer, the IEA may not be satisfied with its current bruises. The agency will decide next week whether to intervene again, the IEA’s David Fyfe tells the Financial Times’ David Blair.
The Bedouin challenge to Camp David: One of the underpinnings of President Jimmy Carter’s Camp David Accords (photo above of signing ceremony) was energy — Egypt would sell Israel a substantial volume of natural gas every year for hundreds of millions of dollars in hard currency. The idea was to integrate Israel into the regional economy. Now the Arab Spring is challenging that natural gas relationship, which brought Egypt $300 million last year. This week, saboteurs thought to be Egyptian Bedouins blew up part of the natural gas pipeline for the fourth time in the last several months.
For all these decades, Egyptian leader Hosni Mubarak played his own foreign policy game while neglecting to bring along the Egyptian public with him. Now that he is gone, the Egyptian Army, while vowing to honor all treaties, also must pay closer attention to popular opinion, which complicates the deal. This is not pure politics — we are talking a private venture with a company called East Mediterranean Gas. The company, whose big foreign shareholders include Chicago real estate titan Sam Zell (the raider of the Chicago Tribune and the Los Angeles Times), Thailand’s PTT and Israeli businessman Yossi Maiman, is suing Egypt for $8 billion in damages, the Wall Street Journal reports. The geopolitics may be unfavorable, but perhaps not long-lived, as news continues to build of offshore Israeli natural gas holdings, Bloomberg reports. Israel may itself become a gas exporter.
Foreign bribery and the Swiss merry-go-round: Viktor Kozeny, the Czech-born wheeler-dealer, figures large in the annals of modern global oil shenanigans. A decade ago, Kozeny snookered a clutch of high-flying American investors into thinking they could buy part or all of the Azerbaijan oil company, and walk away with billions of dollars in profit. Anyone who has ever set foot on Azeri soil would know that is ludicrous — the ruling Aliyev family would never loosen its talons from the oil company, certainly not to foreigners. Yet the scent of large sums of cash intoxicates the ostensibly shrewdest individuals — American investors lost hundreds of millions of dollars. Today, Kozeny is sunning himself in the Bahamas, safe from U.S. federal agents, who want to try him on foreign bribery charges. But the case has reappeared on our radar screens because of the role of Hans Bodmer, a Swiss lawyer with whom Kozeny carried off his scheme.
Bodmer was the pivotal fellow who actually funneled the cash from Swiss banks to important Azerbaijan officials, as he himself testified in U.S. federal court in exchange for leniency (the testimony came in the foreign bribery trial of American handbag maker Frederic Bourke, who was one of Kozeny’s marks but ended up ensnared by a zealous prosecutor). Notwithstanding the hapless Bourke, the rehabilitation of the actual culprits continues as Bodmer, still awaiting sentencing in the United States, has been reappointed to the board of directors of the Swiss bank through which he passed on the bribes, reports David Glovin at Bloomberg. Said the chairman of Hyposwiss Private Bank Zurich, "Hans Bodmer [has] … years of management experience in private banking as well as in its regulatory environment. … I am convinced that we are in a good position to continue our controlling and management tasks efficiently and effectively." Glovin further quotes Bodmer’s Washington lawyer, Saul Pilchen: "Mr. Bodmer’s case, dating back nearly 10 years, did not involve any violations of Swiss law. The appointment by Hyposwiss shows the bank’s well-placed confidence in his integrity as well as his business judgment." Bourke, who did not plot the scheme but knew or should have understood the Kozeny-Bodmer strategy, may be the only one who actually serves time.