Geopolitics of Technology and the Hydrocarbon Status Quo

An Iranian soldier watches as smoke billows from multiple burning oil refineries in Abadan, Iran. Source Henri Bureau/Sygma/Corbis

“No one governs innocently”

– Simone de Beauvoir’s The Ethics of Ambiguity

The unrest in the Arab world, which has continued for over a year now, implies one important conclusion beyond any ongoing regional struggle for democracy. It is a reflection about globally important technologies, and even more about a crucial geopolitical breakthrough – an escape from the logic of a hydrocarbon status quo, which – after Copenhagen 2009 – failed again in Durban 2011.

The Arab uprisings are being fuelled more by firearms than confidence in the Middle East and North Africa (MENA) region, as well as a higher carbon-energy price everywhere else.

Caught in the middle of its indigenous inabilities to produce thoughtful structural change and the global blind obedience to fossil carbon addiction, the Arab world and the wider Middle East theatre remains a hostage of a geopolitical and geo-economic chessboard mega drama.

However, all that appears over-determined now and was not necessarily pre-determined in the beginning.

A Grand Dilemma and the MENA

The MENA theatre is situated in one of the most fascinating locations of the world. It actually represents the only existing land corridor that connects 3 continents.

Contributing some 6% to the total world population, its demographic weight is almost equal to that of the United States (4,5%) and Russia (1,5%) combined. While the US and Russia are single countries, the MENA composite is a puzzle of several dozens of fragile pieces where religious, political, ideological, history-cultural, economic, social and territorial cleavages are entrenched: deep, wide and long.

However, the MENA territory covers only 3% of the Earth’s land surface (in contrast to the US’ 6,5%, coverage and Russia’s 11,5%). Thus, with its high population density and strong demographic growth, this very young median population (on average 23 to 27 years old) dominated by juvenile, mainly unemployed or underemployed, but socially mobilized and often politically radicalized males, competes over finite and scarce resources, be they arable or settlers land, water and other essentials.

Competition in this theatre, which has a long history of external domination and interference, is extensive, unpredictable, and therefore, situations on the ground are more fluid and unsettled.

Interestingly, the political crisis over the past year, pejoratively nicknamed, the Facebook Revolution, has so far ‘knocked down’ only MENA republics (declaratively egalitarian and secular regimes).

For the time being, it has spared the Arab peninsular absolutistic monarchies (highly oppressive theocratic regimes).

The modern-day version of Metternich’s Alliance of the Eastern Conservative Courts, the Gulf Cooperation Council (GCC), has gained considerable leverage from the calamities: (1) strategically – more durable and ideological regimes; (2) institutionally – besides dominating the Organization of the Petroleum Exporting Countries (OPEC), the GCC now practically controls the League of Arab States (LAS), sets its agenda, direction and punitive actions; and (3) geo-economically – huge petro-dollar revenues: enlarged quotas caused by the delivery disruptions and embargoes in Libya and elsewhere, as well as crude price increases due to MENA uncertainties.

The Bahrain’s State Information Agency reports nearly 20% economic growth for 2011.

Hence, if there was any Spring in the Arab world, it was the budding ideological/Wahhabi and hydrocarbon exports of the GCC autocracies in 2011.

Nevertheless, the announced reductions of the U.S. presence in Afghanistan, its limits in Pakistan, massive overextensions suffered on the southwestern flank of the Euro-Asian continent as well as the recent US Army pullout from Iraq, are felt within the GCC (in France, Israel and Turkey too) as dangerous exposure to neighboring Iran, as well as Russia and China behind it.

But it is with Syria that the Middle East is facing its most daunting challenge. This multiethnic country may end up engulfed in a bloody civil war, creating a dangerous security vacuum in the heart of MENA.

Petro-retro Status Quo: Petrodollars and petro-security

The US has a lasting geo-economic interest in the Gulf, which is inevitably coupled with its overarching global security concerns. Oil is the most traded commodity in the world– roughly 12% of overall global trade. By far the largest portion of crude traded on the global market originates from the Gulf.

American imperatives in the Gulf are very daunting: (1) support friendly regimes, with their present socio-political and ideological setups; (2) to get, in return, their continued approval for the massive U.S. military presence in the region, Bahrain and Saudi Arabian bases being two examples; (3) to maintain its decisive force in the region, securing unhindered oil flows from the Gulf; (4) to remain the principal security guarantor in the region; and (5) closely monitor money flows within the Gulf and to recycle huge petro-dollar revenues, usually through lucrative arms sales and other security deals with GCC regimes.

Iran’s Unique Position

On the other side of Hormuz, Iran is a unique country that connects the Euro-Med/MENA with Central and South, including the East Asia region. Geographically, Iran bridges the two key Euro-Asian energy plateaus: the Gulf and Caspian.

This gives Iran a pivotal geopolitical and geo-economic posture over the region. An opportunity but it also exposes Iran on a number of fronts.

It is no wonder that the US military presence in the Gulf represents a double threat to Iran – geopolitically and geoeconomically. Nearly all White House administrations from the early 1980s to now have formally advocated regime change in Teheran. On the international oil market, Iran has no room to maneuver, neither on price nor on quotas. Within OPEC, Iran is frequently silenced by cordial GCC voting.

US hegemony in the Gulf, a combination of monetary control (crude is traded exclusively in US dollars, predominantly via the New York-based NYMEX and London-based IPE) and physical control (the US Navy controls all transoceanic oil transports), is the essential confirmation as well as the crucial spring of overall US global posture.

As long as oil is priced in USD, it will represent the prime foreign reserve currency throughout the world. Some 68 percent of global reserves are held in USD.

This hegemony is not only based on the exclusivity of oil currency, but also on the exceptionality of the policy of pricing.

Throughout most of oil’s short history, the price for ‘black gold’ was high enough to yield profits. Still, without pricing it overly high, this discouraged investments in green and renewable energies.

The main problem with green and renewable (de-carbonized) energy is not the complexity, expense, or the lengthy time-line for fundamental technological breakthrough; the central issue is that it calls for a major geopolitical breakthrough.

Oil and gas are convenient for monopolization (of extraction and international flows, of pricing and consumption modes) – it is a physical commodity of specific locality.

Any green technology (not necessarily of particular locality or currency) sooner or later will be de-monopolized, and thereby made available to most, if not to all.

Therefore, the overall geopolitical imperative for the US remains preservation – not change – of the hydrocarbon status quo.

Ergo, oil (and gas) represents far more than energy. Petroleum is a socio, economic, cultural, financial and politico-military construct, a phenomenon of civilization that architectures the world of horizontalities which is currently known to, possible and permitted, therefore acceptable for us.

In a broader historical, more vertical or philosophical sense, hydrocarbons monetization (and related weaponization) is to be seen as serving rather a coercive and restrictive status quo than a developmental incentive. That essentially calls not for engagement but compliance.

Fossil fuels’ consumption (along with the policy of prizing it) not only triggers one CC – Climate Change (repeated failure in Durban), but it also perpetuates another global CC – planetary Competition and Confrontation (over finite resources) – to which the MENA calamities are only a tip of an iceberg.

Therefore, this construct logically permits only a (technological) modernization which is defensive, restrictive and reactive.

Anything terrific between Arctic and Pacific?

“…bold Russian Arctic policy is (yet) another signal that the Federation… will increase its (non territorial leverage and geopolitical) projection as a major energy supplier of the world throughout the 21st century…”

– This author observed in 2009.

Neither Russian territorial size and historical passions, nor pride and socio-economic necessity will cause Moscow to sink down to second-rank power status. How will the Federation meet its strategic imperative?

We have already discussed the two important pillars of the US strength (the so-called ‘East Coast twin might’: the Pentagon and Wall Street). Well, there is the ‘Pacific Coast twin might’ as well.

Post-Soviet Russia has neither the ideology – global soft power appeal of the US entertainment industry and its ravenous (Hollywood), nor does Russia posses the vibrant, world-leading and highly lucrative High-Tech and IT sector (Silicon Valley).

Let us generously assume the quantitative and qualitative parity between US and Russian armed forces. Importantly, military modernization requires constant cash injections. How to maintain that?

Moscow holds a big advantage: the US imports hydrocarbons while Russia exports them. Nevertheless, Wall Street controls the international (petrodollar) monetary flow – even post-Soviet republics are not trading oil in Rubles (RUB), but in US dollars.

Hence, to meet and finance its strategic imperatives as well as to respond to the growing international energy demands and to the domestic pressures, Moscow has only non-high tech exports – fossil fuels – at convenient disposal (no Silicon Valley, no Hollywood). Ergo, Russia is more exposed and vulnerable than the US, and therefore it is an even stronger supporter of both current international market conditions and the hydrocarbon status quo.

On the eastern, ascendant flank of Eurasian continent, the Chinese vertigo economy is overheated and too well integrated in the petrodollar system. Presently, Beijing cannot contemplate or afford to allocate any resources in a search for an alternative.

The Sino economy is predominantly low-wage and labor intensive. Chinese revenues are heavily dependent on exports and Chinese reserves are predominantly a mix of USD and US Treasury bonds.

To sustain itself as a single socio-political and economic entity, the People’s Republic requires more energy and less external dependency. Domestically, the demographic-migratory pressures are huge, regional demands are high, and expectations are brewing.

Considering its best external energy dependency equalizer (and inner cohesion solidifier), China seems to be turning to its military upgrade rather than towards resolute alternative energy/green tech investments. China has no time, plan and resources to do both at once.

Beijing (probably falsely) believes that lasting containment, especially in the South China Sea, is unbearable, and that – at the same time – fossil fuels are available (e.g., in Africa and the Gulf), and even cheaper with the help of warships.

At this point, any eventual accelerated armament in the Asia-Pacific theatre would only strengthen the hydrocarbon status quo. With its present configuration, it is hard to imagine that anybody can outplay the US in the petro-security, petro-financial and petro-military global playground in the following few decades. Given the planetary petro-financial-tech-military causal constellations, this type of confrontation is so well mastered by, and would further only benefit, the US and its allies.

To complete the picture, both Russia and China are supporting the hydrocarbon status quo. Other major theaters are all too dependent geo-economically; on a supply end (Central Asia, Brazil, Canada, Mexico, Norway, Venezuela, etc.) and on a receiving end (India, Australia, South Africa, etc.) – none is geopolitically emancipated enough to seriously consider any significant tilt towards de-carbonization.

EU-genic or Dynamic?

Less explicitly, the EU will turn consensual to the hydrocarbon status quo, too. If taking a closer look at any of the previous and current Brussels’ transportation and energy policy initiatives, it would clearly show that the notion was primarily driven by the closest common security consideration denominator – as an attempt to decrease the external vulnerabilities, that includes those of an energy dependency (e.g. energy efficiency initiatives: EEP, Europe 2020, EUFORES, etc.).

The European Union is first and foremost a peace treaty for post-Second World War European recovery. Therefore, both settings (ECSC and EuroAtom) served the confidence building purpose, not as the energy-related clearinghouses.

European energy policy (suppliers for and composition of the primary energy mix, taxation, etc.) as well as the transportation (means and modes) strictly resides in the individual competence of the Block’s Member States (MS). Any change in the present status quo would assume the common platform of the MS via the Council of the EU (and the subsequent formalization of such a position, at least through the EU Parliament’s promulgation). The absence of such a commonly agreed policy means more of the hydrocarbon status quo.

Lastly, it is not only that Atlantic Europe and Central Europe manage their respective energy inflow, its composition and external dependences differently (and selectively).

The issue of the hydrocarbon status quo is closely related to the very question of the Euro (and the US dollar-alternate: the British Pound).

For the severely exposed Euro-zone (unsettled global financial crisis), it is a bitter choice between a petrol-pampered dollar (as a stability pillar) and the return to the gold standard. Meaning to the pre-Nixon Shock times, before the Bretton Woods consensus was renounced.

Brussels and the European Central Bank (ECB) believe they can exercise an influence on the American dollar, via the US Federal Reserves, while nowadays gold resides everywhere – least of all in the US or EU reserves or their mines.

Simply put, the post-Nixon currency/ies is/are negotiable; gold is a solid, non-corrosive metal. Also, one should never forget that the politically most influential segment of the Union – Atlantic Europe – shares the same ocean with the US, and all that comes with it.

However, besides Japan, Brussels will remain a main promoter of “Kyoto II” mechanisms.

The UN Framework Convention on Climate Change (UNFCCC) with its protocol from Kyoto of 1997 placed China and India in the “emissions tolerant” Annex II, so both subsequently ratified the Instrument. The US and Russia were situated in the much less forgiving Annex I.

Past the collapse of the Soviet Union and contraction of the post-Soviet economy and demographics, the Kremlin knew it could easily meet pre-1990 emissions targets.

Still, Russia was bargaining until the end of 2004. With the 17% pollution allocation, Russia’s ratification was sufficient enough to activate Kyoto, which eventually entered into force shortly after 2005.

The EU’s loyal support to the Kyoto protocol and “spirit of UNFCCC/IPCC” has several levels. Without ambition to elaborate it all in detail, let us just note that the Union’s reasons are of political (declared principles) and economic (pragmatic) nature. As the conglomerate of states committed to the supranational principle, it is natural for the Block to (at least declaratively) support any multilateral endorsement which assumes the supranational notion as well as the full horizontality of implementation and monitoring of compliance mechanism.

The Kyoto provisions of the late 1990s were in perfect harmony with the two grand strategy roadmaps of the EU: the Lisbon (2000) and Goteborg (2001). This virtue out of necessity was clear.

In a globalized competitive world, the Union’s modest economic and lack of demo-graphic growth only option was to become a knowledge based economy, re-architectured as a fair and balanced post-Industrial society. Both strategies were gradually abandoned. The Block enlarged (to Eastern Europe, mostly the states whose economies also contracted past the breakup of the Warsaw Pact lager countries – meaning, who are able to meet the Kyoto targets), and the Union’s post-industrial Green-tech renewal waits for better days.

How swift is the shift?

Brussels is well positioned but it will not be a global frontrunner in any technology shift. For such a turn, it has neither an inner coherence, visionary strength, nor an external posture. The EU’s economic growth is very symbolic, despite all the huge territorial enlargements of the past decade.

Actually, the Union’s growth could be portrayed as negative in many categories. It always served as a good reminder that a Europe of (economic and demographic) growth was a Europe of might. Europe without growth is a Europe of principles – the Eastern enlargement of the EU was this virtue out of necessity: a last territorial expansion, exceptionally based not on coercion but on an ‘attraction’ of the EU’s transformative power.

Within the OECD/IEA grouping, or closely; the G-8 (the states with resources, infrastructure, tradition of and know-how to advance the fundamental technological breakthroughs), it is only Japan that may seriously consider a green/renewable-tech U-turn.

Tokyo’s external energy dependencies are stark and long lasting. After the recent nuclear trauma, Japan will need a few years to (psychologically and economically) absorb the shock – but it will learn a lesson.

For such a huge economy and considerable demography, situated on a small land-mass which is repeatedly brutalized by devastating natural catastrophes (and dependent on yet another disruptive external influence – Arab oil), it might be that a decisive shift towards green energy is the only way to survive, revive, and eventually to emancipate.

An important part of the US–Japan security treaty is the US energy supply lines security guaranty given to the post-Second World War demilitarized Tokyo.

After the recent earthquake-tsunami-radiation Armageddon, as well as witnessing the current Chinese military/naval noise, Japan will inevitably rethink and revisit its energy policy, as well as the composition of its primary energy mix.

That indicates the Far East as a probable zone of the green-tech excellence and a place of attraction for many Asians in the decade to come.