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Tuesday, July 12, 2005
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Ignoring The Coming Collapse
J. Bradford DeLong
July 12, 2005
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J. Bradford DeLong, professor of economics at the University of California at Berkeley, was assistant U.S. treasury secretary during the Clinton administration.
This month, the Bank for International Settlements (BIS) was the latest to worry aloud about the financial risks that the world seems to be building into its future. “[A]ll the countries hit by financial crisis...experience[d] a very sharp slowdown,” the BIS says of Mexico in 1994-5, East Asia in 1997-98, Russia in 1998, as well as Brazil, Turkey, and Argentina subsequently. It then cites “global current account imbalances,” particularly “the U.S. external deficit,” describing it as “unprecedented for a reserve currency country to have a current account deficit of such magnitude.” In short, the world has become “increasingly prone to financial turbulence.”
The BIS hints at the possibility of a financial crisis that, with the United States at its center, would dwarf all crises since 1933. The BIS issues the standard recommendations: “Deficit countries should reduce the rate of growth of domestic spending below that of domestic production. Allowing their currencies to depreciate in real terms would make their products more competitive, and also provide an incentive for production to shift out of non-tradables into tradables.”
This is economists’ code for the message that the United States must gradually cut its budget deficit, while other countries—like China and Japan—must gradually let the value of the dollar fall and that of their own currencies rise.
But America’s government has stuck its head in the sand. As Stan Collender, a noted observer of the U.S. federal budget, has commented, “No one with federal budget responsibilities actually seems to be interested in the budget.” This is not “because the budget committees are too busy....[T]he House and Senate...are not doing much of anything...[because] they don’t want to.” Within the Bush administration, Director of the Office of Management and Budget Josh Bolten “has been virtually invisible,” while “the president and vice president...avoid talking publicly about the budget.”
It is not that politicians wish to take the lead on fiscal consolidation but are failing to gain traction; it is that there are no influential politicians who are even trying to steer the United States toward a more responsible fiscal policy.
Governments that pursue policies—whether America’s fiscal laxity or China’s exchange-rate peg—that create unsustainable imbalances do so for what they regard as important political reasons. Appeals to change their policies, and thus contribute to the common global good of financial stability, are fruitless unless others also are seen to change their policies, act responsibly and so contribute to the common good.
As the world’s largest economy, the United States is best suited to lead by example, but it has so far failed to play its part. Treasury Secretary John Snow has spent almost no public time on the budget, but a lot of public time on China. Republican political operatives care far less about national savings than they do about manufacturing-sector job losses.
“So what else is new?” you may ask. The list of issues on which the Bush administration has failed to lead is a long one, so why harp on its poor financial management?
From a purely practical point of view, one reason is that substantial progress on ensuring global financial stability can be made relatively easily. The Bush administration may not care that deficit reduction is the right policy for America, but it might care far more if the issue were framed as a prerequisite for policy changes abroad that diminish pressure from imports on domestic manufacturing employment.
Copyright: Project Syndicate, 2005. |
Posted at 05:24 pm by R7fel
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Friday, July 08, 2005
Dawn of A New Islamic Revolution
America's Follies in Iraq Create Iranian Opportunities
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Fear of repercussions from U.S. occupation has led Iran to strengthen ties with its war-torn neighbor
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ANALYSIS ghassan atiyyah
Commenting on the announcement of his victory, Iranian President-elect Mahmoud Ahmadinejad remarked that, "This is the dawn of a new Islamic revolution in the world."
Ahmadinejad's election ends a period during which the Iranian religious leadership was forced to retreat in the face of the American storm let loose by September 11, 2001, opening a space for a reform movement undertaken by the Mohammad Khatami presidency.
This had helped not only to absorb America's rage, but also to build bridges of cooperation without allowing for genuine change inside Iran.
But with the election of Ahmadinejad, a true revolutionary, the presidency regains it militancy in both form and spirit.
In spite of the Iranian-American antagonism, it was Iran that was the prime beneficiary of America's wars in Kuwait, Afghanistan, and most recently Iraq. These wars rid Iran of its two greatest adversaries - the Taliban and Saddam Hussein - without it having to fire a single bullet.
The American occupation of Iraq, however, brought with it the fear that America's quick victory would succeed in establishing a prosperous democratic system that would return Iraq to its former strength - strength that it might again be able to use against Iran.
The positive change in Iraq also carried with it the possibility that further pressure would emerge from within Iran demanding opening up and democracy. Furthermore, the occupation also gave rise to fears that Iran could be America's next stop after its victory in Iraq. This fear quickly led Tehran to build bridges of cooperation with Sunni and Shiite insurgents in Iraq.
Once the United States became embroiled and bogged down in Iraq with no victory in sight, however, Iran adopted a policy to entrench and broaden its influence in Iraq.
Once entangled in Iraq, America was not in a position to undertake any military action against Iran. Rather, in order to maintain stability and order in Shiite controlled areas, mainly in southern Iraq, it became dependent on Islamist Shiites subordinate to Iran. America needs these Shiite forces, as represented in Iraq's High Council of the Islamic Revolution under the leadership of Abdel-Aziz al-Hakim, even though it knows that the council was founded in Iran in the early 1980s and that, with the cooperation of the Iranian Revolutionary Guard, it has created a militia known by the name of "Badr."
Today Badr has become an effective power in Iraq, such that its numbers have risen to more than 100,000 fighters. At the same time, the decisions made by Paul Bremer and the transitional administrative laws insist on the disbanding of all militias by no later than January 2005. Nevertheless, just a few weeks ago the Badr militias were celebrating their second anniversary in Baghdad with the participation of the president of the republic, the prime minister, and many other members of the Iraqi government.
Rather than serving to help or mediate between the communities constituting the Iraqi people (Shiite, Sunni, Kurd, Turkoman, etc.), America's policy in Iraq has given rise, deliberately or not, to a Shiite-Kurdish alliance.
The decisions that it has taken (such as doing away with the army and de-Baathification) have rendered the Sunni Arabs victims. Thus, in its confrontation with the Sunni Arab insurgency in Iraq, America finds itself more reliant on Shiite Arabs and Kurds. In consequence, it is a prisoner of both rather than the arbiter among different Iraqi factions.Washington was forced to become more and more dependent on the Shiite religious leader Ayatollah Ali al-Sistani and the two Kurdish leaders in order to make last October's elections a success and ensure the participation of the greatest number of voters possible. One of the ironies is that the liberal and secular left in Iraq became a victim of the electoral process, without the elections having achieved the hoped-for stability.It is in these circumstances that "revolutionary" Iran, rather than "reformist" Iran is now engaged in expanding its influence in Iraq, which today remains limited to southern Iraq, especially Basra. With the election of a member of the Revolutionary Guard and someone who fought in the Iran-Iraq war, the margins of Iranian society have been brought together and the competing centers of power have merged in favor of the president of the republic. The game of playing various roles has ended in favor of an extremist Iran that is the carrier of a "message" to the Islamic world and is armed with nuclear power.
The United States' rush to authorize a permanent Iraqi constitution and hold elections in Iraq at the end of the current year will further tempt Iran to expand its influence for the advent of an Iraqi Shiite government that will be its ally if not its subordinate. This it will do before the American efforts to build bridges with the Sunni Arabs succeed.
Meanwhile, the inter-Kurdish competition between Jalal Talabani and Masoud al-Barzani will keep the former in need of Iran. There remain many unresolved issues between Iran and Iraq as, until today, no peace agreement has been signed between the two countries. Iran continues to demand compensation concurrent with UN Security Council Resolution 509, and also to insist that Iraq announce its compliance with the 1975 accord that redrew the borders in Iran's favor.
America's frustrations in Iraq serve Iranian extremism both inside and outside of Iran. Unless there is a reconsideration of American policies in Iraq, the latter could end up as a de-facto partitioned state with southern Iraq under the influence or direct control of Iran.
Ghassan Atiyyah is founder and director of the Iraq Foundation for Development and Democracy, and the editor in chief of Mallaf al-Iraqi (Iraqi File), first published in 1991 from London and recently relaunched from Baghdad. This article first appeared on bitterlemons-international.org, an online newsletter.
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Copyright (c) 2005 The Daily Star |
Posted at 02:29 pm by R7fel
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Russia Set To Build Nuclear
Power Stations In Iran
By Agence France Presse (AFP)
Saturday, July 09, 2005
MOSCOW: Russia is a likely partner in a plan envisaging construction of 20 nuclear power stations in Iran, a senior member of Iran's Parliament announced. "A plan has been approved in Parliament obliging the government to study the possibility of building 20 nuclear power stations ... Various countries, including Russia, can participate and we hope Russia will continue to cooperate with us on this question," Kazem Jalali, head of the Iranian Parliament's foreign affairs committee, said.
Jalali was speaking during a visit by an Iranian delegation to the Russian capital aimed at developing economic ties between the two countries.
Russia is constructing Iran's first nuclear reactor at Bushehr, part of a technological cooperation agreement with Tehran in 2002 that opened the way for construction of up to five reactors over the coming 10 years.
Both the United States and Israel have objected to the building of the Bushehr reactor, which could be turned on next year, as they claim Iran is secretly trying to develop nuclear weapons and that having such a facility will be a proliferation risk. - AFP
Posted at 02:12 pm by R7fel
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Thursday, July 07, 2005
The Twilight of the Petroleum Age
The Saudi Oil Bombshell
By Michael T Klare
For those oil enthusiasts who believe that petroleum will remain abundant for decades to come - among them President George W Bush and Vice President Dick Cheney, and their many friends in the oil industry - any talk of an imminent "peak" in global oil production and an ensuing decline can be easily countered with a  simple mantra: "Saudi Arabia, Saudi Arabia, Saudi Arabia."
Not only will the Saudis pump extra oil now to alleviate global shortages, it is claimed, but they will keep pumping more in the years ahead to quench our insatiable thirst for energy. And when the kingdom's existing fields run dry, lo, they will begin pumping from other fields that are just waiting to be exploited. We ordinary folk need have no worries about oil scarcity, because Saudi Arabia can satisfy our current and future needs. This is, in fact, the basis for the Bush administration's contention that we can continue to increase our yearly consumption of oil, rather than conserve what's left and begin the transition to a post-petroleum economy. Hallelujah for Saudi Arabia!
But now, from an unexpected source, comes a devastating challenge to this powerful dogma: in a newly released book, investment banker Matthew R Simmons convincingly demonstrates that, far from being capable of increasing its output,
Saudi Arabia is about to face the exhaustion of its giant fields and, in the relatively near future, will probably experience a sharp decline in output. "There is only a small probability that Saudi Arabia will ever deliver the quantities of petroleum that are assigned to it in all the major forecasts of world oil production and consumption," Simmons writes in Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. "Saudi Arabian production," he adds, italicizing his claims to drive home his point, "is at or very near its peak sustainable volume ... and it is likely to go into decline in the very foreseeable future."
In addition, there is little chance that Saudi Arabia will ever discover new fields that can take up the slack from those now in decline. "Saudi Arabia's exploration efforts over the last three decades were more intense than most observers have assumed," Simmons asserts. "The results of these efforts were modest at best."
If Simmons is right about Saudi Arabian oil production - and the official dogma is wrong - we can kiss the era of abundant petroleum goodbye forever. This is so for a simple reason: Saudi Arabia is the world's leading oil producer, and there is no other major supplier (or combination of suppliers) capable of making up for the loss in Saudi production if its output falters. This means that if the Saudi Arabia mantra proves deceptive, we will find ourselves in an entirely new world - the "twilight age" of petroleum, as Simmons puts it. It will not be a happy place.
Before taking up the implications of a possible decline in Saudi Arabian oil output, it is important to look more closely at the two sides in this critical debate: the official view, as propagated by the US Department of Energy (DoE), and the contrary view, as represented by Simmons' book.
The prevailing view goes like this: according to the DoE, Saudi Arabia possesses approximately one-fourth of the world's proven oil reserves, an estimated 264 billion barrels. In addition, the Saudis are believed to harbor additional, possible reserves containing another few hundred billion barrels. On this basis, the DoE asserts, "Saudi Arabia is likely to remain the world's largest oil producer for the foreseeable future."
To fully grasp Saudi Arabia's vital importance to the global energy equation, it is necessary to consider the DoE's projections of future world oil demand and supply. Because of the rapidly growing international thirst for petroleum - much of it coming from the United States and Europe, but an increasing share from China, India and other developing nations - the world's expected requirement for petroleum is projected to jump from 77 million barrels per day in 2001 to 121 million barrels by 2025, a net increase of 44 million barrels. Fortunately, says the DoE, global oil output will also rise by this amount in the years ahead, and so there will be no significant oil shortage to worry about. But over one-fourth of this additional oil - some 12.3 million barrels per day - will have to come from Saudi Arabia, the only country capable of increasing its output by this amount. Take away Saudi Arabia's added 12.3 million barrels, and there is no possibility of satisfying anticipated world demand in 2025.
One could, of course, suggest that some other oil producers will step in to provide the additional supplies needed, notably Iraq, Nigeria and Russia. But these countries together would have to increase their own output by more than 100% simply to play their already assigned part in the DoE's anticipated global supply gain over the next two decades. This in itself may exceed their production capacities. To suggest that they could also make up for the shortfall in Saudi production stretches credulity to the breaking point.
It is not surprising, then, that the DoE and the Saudi government have been very nervous about the recent expressions of doubt about the Saudi capacity to boost its future oil output. These doubts were first aired in a front-page story by Jeff Gerth in the New York Times on February 25, 2004. Relying, to some degree, on information provided by Simmons, Gerth reported that Saudi Arabia's oilfields "are in decline, prompting industry and government officials to raise serious questions about whether the kingdom will be able to satisfy the world's thirst for oil in coming years".
Gerth's report provoked a barrage of counter-claims by the Saudi government. Their country, Saudi officials insisted, could increase its production and satisfy future world demand. "[Saudi Arabia] has immense proven reserves of oil with substantial upside potential," Abdallah S Jum'ah, the president of Saudi Aramco, declared in April 2004. "We are capable of expanding capacity to high levels rapidly, and of maintaining those levels for long periods of time."
This exchange prompted the DoE to insert a sidebar on this topic in its International Energy Outlook for 2004. "In an emphatic rebuttal to the New York Times article [of February 24]," the DoE noted, "Saudi Arabia maintained that its oil producers are confident in their ability to sustain significantly higher levels of production capacity well into the middle of this century." This being the case, we ordinary folks need not worry about future shortages. Given Saudi abundance, the DoE wrote, we "would expect conventional oil to peak closer to the middle than to the beginning of the 21st century."
In these, and other such assertions, US oil experts always come back to the same point: Saudi oil managers "are confident in their ability" to achieve significantly higher levels of output well into the future. In no instance, however, have they provided independent verification of this capacity; they simply rely on the word of those oil officials who have every incentive to assure us of their future reliability as suppliers. In the end, therefore, it comes down to this: America's entire energy strategy, with its commitment to an increased reliance on petroleum as the major source of our energy, rests on the unproven claims of Saudi oil producers that they can, in fact, continuously increase Saudi output in accordance with the DoE's predictions.
And this is where Simmons enters the picture, with his meticulously documented book showing that Saudi producers cannot be trusted to tell the truth about future Saudi oil output.
First, a few words about the author of Twilight in the Desert. Matthew ("Matt") Simmons is not a militant environmentalist or anti-oil partisan; he is chairman and chief executive officer of one of the nation's leading oil-industry investment banks, Simmons & Company International. For decades, Simmons has been pouring billions of dollars into the energy business, financing the exploration and development of new oil reservoirs. In the process, he has become a friend and associate of many of the top figures in the oil industry, including Bush and Cheney. He has also accumulated a vast storehouse of information about the world's major oilfields, the prospects for new discoveries, and the techniques for extracting and marketing petroleum. There is virtually no figure better equipped than Simmons to assess the state of the world's oil supply. And this is why his assessment of Saudi Arabia's oil production capacity is so devastating.
Essentially, Simmons' argument boils down to four major points:
Most of Saudi Arabia's oil output is generated by a few giant fields, of which Ghawar - the world's largest - is the most prolific.
These giant fields were first developed 40 to 50 years ago, and have since given up much of their easily extracted petroleum.
To maintain high levels of production in these fields, the Saudis have come to rely increasingly on the use of water injection and other secondary recovery methods to compensate for the drop in natural field pressure.
As time goes on, the ratio of water to oil in these underground fields rises to the point where further oil extraction becomes difficult, if not impossible. To top it all off, there is very little reason to assume that future Saudi exploration will result in the discovery of new fields to replace those now in decline.
Twilight in the Desert
is not an easy book to read. Most of it consists of a detailed account of Saudi Arabia's vast oil infrastructure, relying on technical papers written by Saudi geologists and oil engineers on various aspects of production in particular fields. Much of this has to do with the aging of Saudi fields and the use of water injection to maintain high levels of pressure in their giant underground reservoirs.
As Simmons explains, when an underground reservoir is first developed, oil gushes out of the ground under its own pressure; as the field is drained of easily extracted petroleum, however, Saudi oil engineers often force water into the ground on the circumference of the reservoir in order to drive the remaining oil into the operating well. By drawing on these technical studies - cited here for the first time in a systematic, public manner - Simmons is able to show that Ghawar and other large fields are rapidly approaching the end of their productive lives.
Simmons' conclusion from all this is unmistakably pessimistic: "The 'twilight' of Saudi Arabian oil envisioned in this book is not a remote fantasy. Ninety percent of all the oil that Saudi Arabia has ever produced has come from seven giant fields. All have now matured and grown old, but they still continue to provide around 90 percent of current Saudi oil output ... High-volume production at these key fields ... has been maintained for decades by injecting massive amounts of water that serves to keep pressures high in the huge underground reservoirs ... When these water projection programs end in each field, steep production declines are almost inevitable."
This being the case, it would be the height of folly to assume that the Saudis are capable of doubling their petroleum output in the years ahead, as projected by the DoE. Indeed, it will be a minor miracle if they raise their output by a million or two barrels per day and sustain that level for more than a year or so. Eventually, in the not-too-distant future, Saudi production will begin a sharp decline from which there is no escape. And when that happens, the world will face an energy crisis of unprecedented scale.
The moment that Saudi production goes into permanent decline, the Petroleum Age as we know it will draw to a close. Oil will still be available on international markets, but not in the abundance to which we have become accustomed and not at a price that many of us will be able to afford. Transportation, and everything it effects - which is to say, virtually the entire world economy - will be much, much more costly. The cost of food will also rise, as modern agriculture relies to an extraordinary extent on petroleum products for tilling, harvesting, pest protection, processing and delivery. Many other products made with petroleum - paints, plastics, lubricants, pharmaceuticals, cosmetics and so forth will also prove far more costly. Under these circumstances, a global economic contraction - with all the individual pain and hardship that would surely produce - appears nearly inevitable.
If Simmons is right, it is only a matter of time before this scenario comes to pass. If we act now to limit our consumption of oil and develop non-petroleum energy alternatives, we can face the "twilight" of the Petroleum Age with some degree of hope; if we fail to do so, we are in for a very grim time indeed. And the longer we cling to the belief that Saudi Arabia will save us, the more painful will be our inevitable fall.
Given the high stakes involved, there is no doubt that intense efforts will be made to refute Simmons' findings. With the publication of his book, however, it will no longer be possible for oil aficionados simply to chant "Saudi Arabia, Saudi Arabia, Saudi Arabia" and convince us that everything is all right in the oil world. Through his scrupulous research, Simmons has convincingly demonstrated that - because all is not well with Saudi Arabia's giant oilfields - the global energy situation can only go downhill from here. From now on, those who believe that oil will remain abundant indefinitely are the ones who must produce irrefutable evidence that Saudi Arabia's fields are, in fact, capable of achieving higher levels of output.
Michael T Klare is a professor of peace and world security studies at Hampshire College and the author of Blood and Oil: The Dangers and Consequences of America's Growing Petroleum Dependency (Metropolitan Books).
(Copyright 2005 Michael T Klare)
(Published with permission of TomDisptach.com)
Posted at 09:41 pm by R7fel
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US misses the next wave: China
Beijing is making the running in Asia, leaving America well behind
By Peter Hartcher.
07/07/05 "SMH" - - WHEN Jimmy Carter was in the White House in 1978, he decided to finish the task of normalising relations with China. It was something that Richard Nixon had started six years earlier, but the Watergate scandal got in the way and the US still did not recognise Beijing as the capital of the one and only China.
So Carter sent his national security adviser, Zbigniew Brzezinski, to Beijing, and a year later China's Deng Xiaoping was trying on 10-gallon hats in Texas and being feted in the White House.
Today Brzezinski, 77, one of the more important thinkers on US foreign policy, remains a close student of China. This is what he sees: "There is no doubt that China is quietly creating a very successful Chinese co-prosperity sphere in East Asia. The countries of the region increasingly are paying China due deference, something to which the Chinese graciously respond."
The term "co-prosperity sphere", of course, carries a dark connotation. It was the euphemism Imperial Japan used for its plan to dominate Asia.
There is a gathering sense in Washington that while China continues to build its power and wealth in the Asia-Pacific region, the US has been falling behind in a contest for influence in the region that is home to half the world's population.
The critique is that the US, preoccupied with Iraq, has failed to tend to its role as the leading power in the region. The potential superpower China, which has been assiduous in cultivating the region, has stolen a march on the reigning superpower.
One development has sharpened this general US unease to a specific point of alarm. It is the East Asia Summit. This summit will convene in Kuala Lumpur in December. One of its explicit purposes is to exclude the US.
A White House official remarked privately that it was destined to become "a plaything of the Chinese".
The summit's advent is a case of delayed gratification for the former Malaysian prime minister, Mahathir Mohamad, who first advocated such a grouping nearly 20 years ago. He called the idea the East Asian Caucus; it was quickly nicknamed the Caucus without caucasians. It would have excluded Australia, New Zealand and the US. It was an outgrowth of Mahathir's race-based view of the world, but masquerading as a high-minded pan-Asianism.
But Mahathir was outmanoeuvred. Bill Clinton, in conjunction with Paul Keating and Indonesia's Soeharto, countered by channelling the drive for more regional integration into the Asia-Pacific Economic Co-operation group. To keep it as politically neutral as possible in a region rife with mutual suspicions and unfamiliar with close co-operation, APEC kept to trade. It had no political, diplomatic or strategic agenda. And when its trade agenda stalled, APEC lost its purpose.
It is now a useful chance for regional leaders to meet - for example, it is the only scheduled annual event where the leaders of China and Japan come face to face. But that's about all it is.
And still Asia, the region with most of the world's military flashpoints, has no real venue where its leaders can discuss the big issues of war and peace, and, in particular, how to avoid the former and extend the latter.
Who has stepped in to fill this void? The 10-country Association of South-East Asian Nations (ASEAN), with the strong encouragement of the Chinese, proposed the East Asia Summit.
It is not to be the racial enclave that Mahathir wanted - New Zealand will be an inaugural member, and Australia will be, too, when the Howard Government gets around to signing ASEAN's tokenistic Treaty of Amity and Co-operation. But the summit will satisfy Mahathir's aim of shutting the US out.
Alarmed, the Bush Administration is on the point of acting to try to counter this development. "The East Asia Summit has concentrated the mind of this Administration," says Jim Steinberg, a scholar at the Brookings Institution and former deputy national security adviser to Clinton.
The US Deputy Secretary of State, Bob Zoellick, is working to develop a US proposal for some other form of discussion about security issues in Asia - one that includes the US. He explains his thinking: "I was frequently asked, you know, does the United States want to try to stop China's inroads in South-East Asia? And my answer was, you know, that would be both foolish and impossible. The US response should not be to try to stop someone, it should be to be active in our own right. Our response to others' activism should be activism, not negativism."
In short, the US must enter the new contest over the future shape of Asia if it wants to win it.
Steinberg, a Democrat, concurs with this thinking by Zoellick, a Republican: "It's to Bob's credit that he's understood the US has to have its own proposals as an alternative if we are going to have any chance of influencing the evolution of the security architecture in Asia."
And what sort of influence does the US hope to exert? Zoellick says the aim of US policy is to commit a rising China to preserving the existing rules and norms for the behaviour of nation states: "For 20 years, we've been pursuing a policy of how do we integrate China into the global system. Well, as events in oil markets to soybean markets to currency markets suggest, that integration has occurred. The challenge now is how to encourage responsible stakeholding in those systems, whether they be WTO, whether they be security issues or others."
The US, in other words, wants China to be bound by the structures of global rules of responsible behaviour.
There is irony here. The US wants China to accept the status quo of world affairs at a time when the US is discontented. Zoellick again: "Normally, when you are a dominant power, you try to preserve the status quo. This is one of those rare times in history that a dominant power [the US] is actually trying to transform the status quo" with, for instance, its revolutionary plans for the democratisation of the Middle East.
So the world now sees an ambitious rising power competing for influence in the Asia-Pacific region with a restless superpower. The real trick is to prevent the competition from getting ugly. These are the choppy seas that Australia and all the other countries of the region must navigate. Says Brzezinski: "I don't predict a collision. It's not inevitable. But we have to avoid taking positions that make collision a self-fulfilling prophecy."
Copyright © 2005. The Sydney Morning Herald.
http://www.smh.com.au/news/opinion/us-misses-the-next-wave-china/2005/07/07/1120704490598.html
Posted at 04:49 pm by R7fel
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Wednesday, July 06, 2005
Should We Bomb Iran?
Israeli military blow would not annihilate Iran’s nuclear capability
By Alon Pinkas
We can talk and fantasize about annihilating Iran’s nuclear capability with one bold IDF thrust, similar to the destruction of Iraq’s nuclear reactor in 1981. The truth is that it is much more complicated, perhaps even impossible.
As opposed to the Iraqi nuclear reactor, the Iranian nuclear program is decentralized, departmentalized, underground and clandestine.
The U.S. and Israel believe efforts, including the European initiative to link economic incentives with the eradication of Iran’s nuclear program and the U.S.’s threats of sanctions, to prevent Iran from stockpiling nuclear weapons, will prove futile.
In other words, Iran will hold nuclear weapons within three to seven years (according to intelligence estimates).
Furthermore, Iran has a national and strategic interest in becoming a nuclear force, and even the collapse of the ayatollahs' regime would not change this.
If Iran has made "good" use of the information and material it had apparently purchased from the “father of the Pakistani bomb,” it may currently possess material for the creation of some 20 nuclear bombs. Without significant interference, the uranium enrichment will continue until a bomb is built and ready for launching on a Shihab-3 missile.
Israel would then have to entirely rethink the nature of its deterrence.
The significance of Mahmoud Ahmadinejad’s election cannot be determined as of yet. Some say Iran’s shift toward a more radical and extremist direction would actually facilitate democratization and eventually result in the toppling of the ayatollahs within a few years.
High price of oil good for Iran
According to Stanford University in California, the best-selling book in Tehran these days is the bootleg edition of Bill Clinton’s “My Life.”
Modern-day Iranians hate Israel and the Bush administration, but there is also growing generational disappointment from the Islamic revolution, which has failed in every aspect and has not lived up to any of its promises.
The problem is that it is difficult to translate subversive currents in Iranian society into efficient pressure on the regime to halt the nuclear project.
The election of an extremist president should make it easy for U.S. President George W. Bush to claim at the G-8 summit in Scotland that the European diplomatic initiative, which is based on tempting Iran with numerous incentives, is not working.
Tehran has an incentive not to succumb to economic pressure: The high price of oil is good for the Iranian economy, and the regime has a clear interest in defying the West, as long as Russia does not stand by Washington’s side. Perhaps it is time for the stick, but the war in Iraq is depriving Bush of his ability to maneuver against Iran.
Political damage
So how should Israel act? In 2000 an Israeli-American Strategic Policy Planning Group discussed the option of forming a “defense alliance” between the countries.
One of the issues examined at the time was the importing of cruise missiles to Israel. During one of the preliminary deliberations in Israel, a senior American official who supported the establishment of an alliance said to his Israeli counterparts, “It is evident to us why you are interested in the ‘Tomahawk’ missiles; Syria is definitely not reason enough - you believe it will add to your deterrence against Iran.”
This is not the sole reason, Israel said at the time.
“This position is not a realistic one,” the American official replied. “Iran is not 1980’s Iraq, and in any case you will never be permitted to use this weapon without American authorization. If a “defense alliance” were to exist, an immediate Iranian threat would mean that the U.S., and not Israel, would apply military force against Iran.”
“Furthermore,” the American added, “our intelligence sources say that an Israeli attack on Iran would not necessarily be effective, and it is almost certain such an attack would not produce a decisive outcome. The political damage from such an attack would undoubtedly outweigh its military effectiveness.”
One can be skeptical of these intelligence reports, as three years later the U.S erroneously convinced itself that Iraq possessed weapons of mass destruction that threaten the world.
But it remains highly unlikely that the American assessment regarding the effectiveness of a military blow against Iran has significantly changed.
If anything, the failure in Iraq has only strengthened the claim.
Politically-speaking, Israel adopted the American position: its policy revolves around the claim that the Iranian nuclear threat is not Israel’s concern alone - it is a real danger to the region and the entire free world.
The thing is, Iran may eventually realize its nuclear aspirations without mass U.S military intervention, but this sort of intervention is not probable.
Posted at 09:34 pm by R7fel
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Tuesday, July 05, 2005
Russia Will Equip Iranian Subs with Missiles
 // Arms Export
Yesterday the Second International Naval Show (IMDS-2005) finished its work in St. Petersburg. During its course there were negotiations about new shipments of naval military equipment to China and Mexico, and about the refurbishing Iranian submarines.
On the show about 300 Russian defense companies demonstrated their production ready for export. In the Sea Station pier, the visitors were able to examine ships from the Russian Navy. For a first time on the show was a demonstration of the Russian submarine of new generation “Sankt-Petersburg” Project 677 “Lada”, which the state company Admiralty Shipyards finishing for Russian Navy. The export version of this sub –Project 1650 “Amur”- the Admiralty Shipyards was offering to India for sale. However, Indian Navy preferred to buy six French subs Scorpene and currently finalizing the negotiations of the deal that amounts to $1.8-2 billion.
However, Admiralty Shipyards signed contracts with India and China to supply parts for the diesel-electric submarines of Project 877EKM and their modernized version of Project 636 that were sold to these countries earlier. Each contract is appraised at about $1 million. The Indian Navel force has 10 submarines of Project 877EKM and two more would be shipped this year directly from the Russian navy. China has two subs of Project 877EKM and two of Project 636. From last year, the Chinese navy also started to receive new subs of Project 636 that according to a contract from 2002 will amount to eight submarines worth $1.4 billion.
The St. Petersburg shipbuilding company Almaz was negotiating with representatives of the Chinese defense ministry. Before the end of the year, they hoped to sign a contract for the building of two Zubr Class Air Cushioned Landing Craft (CMSTS) of Project 1232.2 with options for several more such ships. Each craft costs more than $60 million. And the corporation Concern of Middle and Small Tonnage Shipbuilding until the end of the year plans to strike an agreement with Mexico for not less than two patrol cutters of Project 14310 Mirage. “Cameroon is also interested to buy Cutter of the Project 12150 Mongoose. Within several months they are ready to sign a contract for up to 10 Mongooses,” Valentine Lyashenko, deputy director of CMSTS told Kommersant.
Moreover, Kommersant found out that Rosoboronexport is negotiating with Iran about repair and modernization of Iranian submarines. Iran has three submarines of Project 877EKM that were supplied by Russia in 1992 (Russian name of the sub B-219, Iranian—901 Tareq), in June 1993 (B-224, 902 Noor) and in November 1996 (B-175, 903 Yunes). It was expected that all the major components that already exceeded their life expectancy will be replaced. Also, the new anti-ship missile complex Club-S with the target distance of 200 km will be installed on these subs. The refurbishing of each sub would be done under the contract which costs anywhere from $80 to $90 million. Originally it was expected that the refurbishing will be done in Zvezdochka Co (Severo-Dvinsk) but Admiralty Shipyards are also fighting for the contract.
Vladimir Pakhomov, deputy director general of Rosoboronexport, stated in the IMDS-2005 show that naval ships and systems this year will take first place among all Russian weapons exports and according to him the company is planning to export production of the military use for $5.1 billion from which 51 percent will be military naval equipment. Last year, Rosoboronexport exported weapons valued at $5.12 billion, from which only 24 percent were represented by naval production.
by Alexandra Gritskova, St. Petersburg; Konstantin Lantratov
Posted at 03:04 pm by R7fel
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Oil ' will hit $100 by winter'
Worst-ever crisis looms, says analyst · Surging demand to keep prices high
Heather Stewart, economics correspondent
07/03/05 "The Observer" - - Oil prices could rocket to $100 within six months, plunging the world into an unprecedented fuel crisis, controversial Texan oil analyst Matt Simmons has warned.
After crude surged through $60 a barrel last week, nervous investors were pinning their hopes on a build-up in US oil-stocks to depress prices in the coming months.
But Simmons believes surging demand will keep prices bubbling well above $50. 'We could be at $100 by this winter. We have the biggest risk we have ever had of demand exceeding supply. We are now just about to face up to the biggest crisis we have ever had,' he said.
Opec producers held emergency talks last week to consider making their second 500,000 a barrel increase in production quotas in a fortnight: but the discussions were suspended last Thursday after prices dipped back below $60.
The looming oil crisis is not high up the agenda at this week's G8 meeting, although the heads of state are expected to repeat their finance ministers' call for greater transparency from Opec and other oil-producing nations about their reserves.
However, global warming is one of Britain's two major priorities, and Tony Blair hopes to secure a pledge to pour more cash into developing alternatives to the oil-intensive technologies that cause climate change.
Simmons believes such moves will be too little, too late. He will publish a hard-hitting book this week in which he argues that Saudi Arabia, the world's largest producer, is running out of oil, and further price rises are inevitable as supplies decline. He warns that the scramble for resources could eventually descend into war.
Many analysts expect extra production over the next year, as high prices boost investment by energy firms. But Simmons says after many years of underinvestment, there is even a shortage of drilling rigs.
'Many of these projects are aspirations; many of them won't create peak production in the first year, and many of them within five years will be in decline,' he said.
However, the Economist Intelligence Unit predicts that oil prices will peak by the end of this year, and decline by 10 per cent in 2006 as the Chinese economy slows, reducing demand. Chinese imports have been crucial to propping up the oil price in the last two years.
But the EIU warned that its forecasts - which show a 30 per cent increase in oil prices for 2005 - could prove too conservative if there are further wobbles in supply. 'The narrow margin of spare production capacity has made prices vulnerable to unforeseen reductions in supply or rises in demand,' it said.
Paul Horsnell, head of commodities analysis at Barclays Capital, said supply constraints would continue to bite for the rest of the year. 'It's all getting a bit tight'
Brent crude closed almost $2 a barrel higher in New York on Friday night, while futures contracts for heating oil, widely used in the US, hit a record high, which analysts said was unusual for summer.
'It's fear,' said Kyle Cooper, an analyst at Citigroup. 'It's not based on what is happening now. It's based on fear of what could happen.'
© Guardian Newspapers Limited 2005
Posted at 02:56 pm by R7fel
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Monday, July 04, 2005
US Senate Votes To Revive Nuclear Weapon Program
The "bunker-buster" program enjoys thestrong support of Defense Secretary Donald Rumsfeld, who has been personally lobbying for funds for the penetrator and wrote to the energy secretary early this year about the need "to revitalize the nuclear weapons infrastructure." |
Washington (AFP) Jul 02, 2005
The US Senate has moved to revive a controversial weapons research program aimed at enabling the US military to conduct precision nuclear strikes against hardened underground facilities, including those suspected of storing weapons of mass destruction.
By a vote of 53-43, senators defeated Friday an amendment sponsored by California Democrat Dianne Feinstein that would have prohibited use of government funds to study the feasibility of the so-called Robust Nuclear Earth Penetrator, also known as the "bunker-buster" bomb.
The failure of the measure means leading US nuclear research laboratories will in all likelihood receive in fiscal 2006 four million dollars for continued work on the bomb that was interrupted last year under intense international and domestic criticism.
The action came ahead of a Group of Eight industrial nations summit in Scotland, where nuclear proliferation issues are expected to dominate the security agenda.
Senator Feinstein insisted expert data available to her indicated that there could be no such thing as a "clean" nuclear strike and any use of a "bunker buster" would result in massive radioactive contamination and substantial loss of life.
On top of that, she argued, the program will make it harder for the United States to persuade other countries like Iran or North Korea to foreswear their nuclear ambitions.
"In essence, these policies encourage other nations to develop their own nuclear weapons thereby putting American lives and our national security interests at risk," the senator said. "We are telling the world, when it comes to nuclear weapons, do as we say, not as we do."
But the "bunker-buster" program enjoys thestrong support of Defense Secretary Donald Rumsfeld, who has been personally lobbying for funds for the penetrator and wrote to the energy secretary early this year about the need "to revitalize the nuclear weapons infrastructure."
The four million unsuccessfully targeted by the amendment are contained in a spending bill covering water and energy programs for the fiscal year that begins October 1.
The House of Representatives signaled its intention to restore "bunker-buster" research when it voted in late May to approve a 491-billion-dollar defense authorization bill that includes money for the program.
The study explores the possibility of converting into "bunker busters" two existing warheads - the B61 and B83, according to administration officials.
The B61 is a tactical thermonuclear gravity bomb that can be delivered by strategic as well as tactical aircraft - from B-52 and B-2 bombers to F-16 fighter jets.
The B83 is designed for precision delivery from very low altitudes, most likely by B-2 stealth bombers, military experts said.
Prior to the program's suspension, scientists were working on finding ways to harden the bombs' shells so they can survive penetration through layers of rock, steel and concrete before detonating, the experts said.
However, a study released by the National Academies of Sciences in April said it would take a 300-kiloton bomb to destroy targets buried 200 meters (650 feet) deep underground.
The explosion, the report warned, would have practically the same effects as a surface blast and could kill more than a million people, if it occurs in a densely populated area.
All rights reserved. © 2005 Agence France-Presse.
Posted at 10:06 pm by R7fel
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A Solid Foundation for Friendship
Russia, China give U.S. veiled rebuke
By Vladimir Isachenkov
Associated Press
07/02/05 "AP" - - MOSCOW -- Russia and China warned other nations Friday against attempts to dominate global affairs and interfere in the domestic issues of sovereign nations in what appeared to be a veiled expression of their irritation with U.S. policy.
Presidents Vladimir Putin and Hu Jintao signed a joint declaration after two days of talks calling for a stronger United Nations role in global affairs and opposing attempts "to impose models of social and political development from outside."
The two leaders also urged other states to renounce "striving for monopoly and domination in international affairs and attempts to divide nations into leaders and those being led."
While the declaration did not identify any specific country, it echoed similar veiled hints by Moscow and Beijing about U.S. policy in global affairs.
Moscow and Beijing have developed what they call a strategic partnership since the 1991 Soviet collapse, pledging their adherence to a "multipolar world," a term that refers to their opposition to U.S. domination.
China and Russia share a concern about increased U.S. influence in Central Asia since the Sept. 11, 2001, attacks, which led to American troop deployments in Uzbekistan and Kyrgyzstan for operations in neighboring Afghanistan.
While Russia remains a U.S. ally in fighting terrorism, relations often have been strained by U.S. concerns about backtracking on democracy under Putin and Moscow's worries about what it sees as U.S. meddling in former Soviet republics.
Beijing is unhappy about U.S. ties with Taiwan. Beijing claims Taiwan as part of its territory and says the island has no right to conduct foreign relations.
"We reinforced our mutual support on key issues like Taiwan and Chechnya, which concern our vital interests," Hu said after the talks.
The two leaders gave an upbeat assessment on Russian-Chinese relations, which have flourished in recent years and were cemented in a border treaty ratified this year.
"We have set a solid foundation for friendship, trust and cooperation for Russia and China for a long time to come," Putin said Friday.
Moscow and Beijing dominate the Shanghai Cooperation Organization, a regional security grouping that also includes the ex-Soviet Central Asian nations of Uzbekistan, Kazakhstan, Kyrgyzstan and Tajikistan.
Uzbekistan's President Islam Karimov, facing Western criticism for his government's bloody suppression of a May uprising, has found staunch support in Moscow and Beijing.
Copyright © 2005, Chicago Tribune
Posted at 12:06 pm by R7fel
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