The Oil and the Glory

The Weekly Wrap — Dec. 23, 2011

They love me, they love me not: Sometimes the best way to gauge danger in unfamiliar territory is to study the eyes of your guide — if that person has a deer-in-the-headlights look, or gallops away screaming in the night, it generally means something is amiss. In concrete terms, when should we understand that a ...

Mark Ralston AFP/Getty Images
Mark Ralston AFP/Getty Images

They love me, they love me not: Sometimes the best way to gauge danger in unfamiliar territory is to study the eyes of your guide — if that person has a deer-in-the-headlights look, or gallops away screaming in the night, it generally means something is amiss. In concrete terms, when should we understand that a petro-ruler we are observing — even one saying, "What, me worry?" — is actually in serious political peril? For that answer, let’s measure the political waters of Kazakhstan.

Trouble there began last weekend, when police shot and killed at least 14 striking oil workers in the western city of Zhanaozen. Locals said the police action was unprovoked, but President Nursultan Nazarbayev sided with his forces, dismissing the violence as the fault of "hooligans." Meanwhile, he shut off the Internet and phones, and blocked all the roads in and out of the trouble spot. Then, an amateur video surfaced showing that police had in fact shot strikers in the back as they were running away. In short order, Nazarbayev flew out to Zhanaozen, fired the regional governor and several senior executives of the state oil company, known as KMG, whose local subsidiary was a target of the strikes. Nazarbayev also said he was firing his powerful billionaire son-in-law, Timur Kulibayev, as head of Samruk-Kazyna, the national wealth fund that controls KMG. Watching action and reaction, I saw the proverbial galloping guide — it is a far cry from "[they are] a group of hooligans," to offing the head of your probable chosen successor. Nazarbayev is worried. But why? Parliamentary elections are scheduled Jan. 15, and if that viral video tars his personal narrative as Kazakhstan’s guarantor of stability, what does Nazarbayev have left?

Still, let’s retain our equilibrium.  It is notable that this is not the first time that Nazarbayev has fired Kulibayev. Since the 1990s, the sphinx-like playboy son-in-law has steadily risen as a young banking executive, to a variety of positions in private and state oil companies, a progression interrupted throughout by dismissal from his posts. Given that history, one is led to consider what posts are more senior than head of Samruk-Kazyna, which controls two-thirds of Kazakhstan’s economy. Have you selected a more senior spot? Should Nazarbayev weather the storm, look for Kulibayev to appear there within about 18 months.

Go to the Jump for more on Kazakhstan, and the rest of the Wrap.

As for what actually transpired in Zhanaozen, security forces are still circumscribing movement in the area, and the best reporting has come from Russian reporters who have managed to get in. The government continues to insist that the death count was 14, but locals who carried bodies from the Zhanaozen square to the city morgue describe counting 64 bodies there, writes Yelena Kostyuchenko of Novaya Gazeta. One emergency room doctor said 23 people died on his watch, she reports.

In my own view, it still seems a reasonably safe bet that Nazarbayev will get past the current crisis. But other analysts are more pessimistic about his future. Among them is William Courtney, the first U.S. ambassador to Kazakhstan, and among the most insightful analysts of the former Soviet Union. Courtney emailed me the following take on events, which he had left as a comment elsewhere on the Web:

Thus far, President Nazarbayev seems reluctant to take bold steps to get in front of the crisis. Burdened by immense personal and family corruption, which stokes widespread resentment in Kazakhstan, he depends on loyal security forces to keep him in power. Yet to get ahead of the current crisis, Nazarbayev must acknowledge their abuses, be truthful about the number of dead and wounded, apologize to and compensate victims and their families, and provide for a credible investigation of what went wrong. …

The example of [ousted Egyptian leader] Hosni Mubarak offers insights. He exercised dictatorial power for decades, but suffered an unhappy fate after he stole elections and his security forces killed unarmed protestors. Mubarak’s military protectors turned against him, and he was swept from power and put on trial for murder.


Coal sufferers: Coal is under siege in its biggest consuming countries. In the U.S., coal plants must comply with stiff new environmental regulations starting next month, and also face daunting price competition from cheap, plentiful and relatively clean natural gas, reports the Wall Street Journal’s Rebecca Smith. As a result, U.S. coal plants will use 6 percent less coal next year than they did in 2010; over the next five years, they will burn 10 percent to 20 percent less coal, Smith writes. The development is important politically — Washington’s coal lobby, among its most powerful influences for decades, is likely to lose power as the fuel is used less. It also portends lower emissions of heat-trapping gases.

The trend is different in China — it is not regulation and price challenging coal use, but public sentiment, reports Reuters. In the Guangdong provincial town of Haimen, police today used tear gas to break up a fourth day of protests against the expansion of a local coal-burning power plant (pictured above). The protesters say the current plant already heavily pollutes their air and water. In response, Chinese officials said they would suspend the expansion, writes the New York Times’ Edward Wong, quoting local news agencies, but many Haimen residents appear to be skeptical. They are right to be, yet the long-term trend favors trusting the government.

Haimen is a harbinger of China’s future. Simply put, already-coal-choked Chinese are not likely to tolerate a doubling of their local pollution, as would occur under widely embraced projections of China’s future energy appetites in the next couple of decades. So, as long as China’s rulers wish to stay in power, they are going to have to either figure out how to clean up coal (a difficult task to say the least) or use more natural gas as a substitute in the country’s power stations.

Take a look at this video, on two separate public uprisings in Guangdong.


European fire sale? China has splashed $18 billion in cash on the world market for oil, gas and other energy properties, reports Bloomberg’s Benjamin Haas. Most recently, a Chinese company called Three Gorges paid $3.5 billion for a Portuguese power producer called EDP. At the Wall Street Journal, Wayne Ma predicts that Chinese companies are just getting started. "China’s deep pockets and Europe’s deep distress always made two likely partners. Now the deals have started to roll out, and there will be more to come," Ma writes. The calculus for this conviction is fairly easy: Three years after the near-collapse of the global financial system, we appear to be still mired in bad economic muck, with no clear signposts of a better road ahead. As Ma writes, this means troubled companies will be seeking a helping hand, and the folks most capable of doing so are cash-rich Chinese companies, with Beijing’s resources behind them. But the writers of the Lex column at the Financial Times are not so sure. They say that the Portuguese bail-out is one thing, but that much of the rest of Europe’s energy properties is not nearly as attractive. "The Eurozone’s new year sale will not be a bargain for anybody," Lex writes. I side with Lex. While Chinese companies are deep-pocketed, it is a long-standing myth that they will top any price in order to obtain a valuable resource or company. In the case of North American shale gas, oil shale and oil sands, one can see upside in the form of enormous volumes — there, one can imagine another year of Chinese acquisitiveness. In the case of European utilities, the benefits are harder to identify.


Arctic tragedy: Russia says it has given up hope of finding more survivors from a Gazprom drilling rig that sank with 67 men aboard in a savage storm as it was being towed from the Sea of Okhotsk to Sakhalin, on Russia’s east coast.  Just 14 of the crew were rescued; 18 bodies have been recovered, including that of a Bulgarian named Zhivko Zhekov. The tragedy reinforces misgivings regarding Arctic energy development: With the north’s challenging weather and distant locations, oil workers face perhaps their most dangerous conditions anywhere on the planet; that would vex not only rescue operations, but spill cleanup in the event of an environmental accident. In the United States, Shell has crossed another hurdle in its long effort to drill off Alaska in the Chukchi Sea — offshore leasing regulators have approved the drilling. The company complains that it still must obtain more licenses, including one from regulators who must approve its emergency spill plan. But such obstacles look highly unlikely to be lifted soon.

Trending Now Sponsored Links by Taboola

By Taboola

More from Foreign Policy

By Taboola