The New Politics of Strategic Resources

Energy and Food Security Challenges in the 21st Century

David Steven, Emily O'Brien, Bruce D. Jones

• Editore: Brookings Institution Press
• Anno: 2014
• ISBN:
  9780815725343
• Argomento: Politica e relazioni internazionali
• Categoria: Politica asiatica

Since 2008, energy and food markets—those most fundamental to human existence—have remained in turmoil. Resource scarcity has had a much bigger global impact in recent years than has been predicted, with ongoing volatility a sign that the world is only part-way through navigating a treacherous transition in the way it uses resources. Scarcity, and perceptions of scarcity, increase political risks, while geopolitical turmoil exacerbates shortages and complicates the search for solutions.

The New Politics of Strategic Resources examines the political dimensions of strategic resource challenges at the domestic and international levels. For better or worse, energy and food markets are shaped by perceptions of national interest and do not behave as traditional market goods. So while markets are an essential part of any response to tighter resource supplies, governments also will play a key role. David Steven, Emily O'Brien, Bruce Jones, and their colleagues discuss what those roles are and what they should be.

The architecture for coordinating multilateral responses to these dynamics has fallen short, raising questions about the effective international management of these issues. Politics impede here too, as the major powers must negotiate political and security trade-offs to cooperate on the design of more robust international regimes and mechanisms for resource security and the provision of global public goods.

This timely volume includes chapters on major powers (United States, India, China) and key suppliers (Russia, Saudi Arabia). The contributors also address thematic topics, such as the interaction between oil and state fragility; the changing political dynamics of climate change; and the politics of resource subsidies.

1

Introduction: Energy Policy on the Edge

BRUCE JONES AND DAVID STEVEN

This book is about the political economy of energy. There are few more consequential topics for understanding today's global economy, for global development, or the very well-being of humankind.

Energy isn't always thought of as being essential to the fabric of the global economy, or to development—but it should be. This can be dramatized by juxtaposing three simple facts.

Energy goods account for almost one out of every five dollars traded in today's global economy. That makes it one of the largest sectors in contemporary globalization. Only finance is in the same league in terms of shares of global economy activity.

Despite the huge volumes of energy being produced and consumed, more is needed: 1.3 billion people live without access to modern energy. This is not a phenomenon primarily of the world's poorest states, but of its most dynamics ones—there are upward of 300 million without access to modern energy in India alone, a state otherwise poised to join the ranks of the top powers. Securing new supplies for the world's energy insecure is going to be among the most critical tasks of development in the coming decades.

Yet, we're already burning more fossil fuels than our climate can handle. The drive to expand energy access and security will complicate and be complicated by the mounting fight and fright over global warming. The vast majority of the world's scientists agree that to stabilize the global climate at a less than 2˚C rise in average global temperatures requires keeping the quantity of carbon and other greenhouse gases in the atmosphere at around 450 parts per million. Right now, we're at 403 ppm and we're on track to hit 650 ppm—and that's if governments meet the climate targets they agreed to in Copenhagen in 2009. Growing demand for energy by the world's rising states and growing middle classes puts that target comprehensively out of reach even if we see something approaching the full-scale decarbonization of the economy in the West—a near-impossible challenge.

The long and the short of it is, energy is emerging as a defining feature of globalization, of global development, and, of course, of climate change. Indeed, if the first phase of modern globalization was about its geographical spread (what's been called extensive globalization), and the second was about the deepening of economic integration between existing markets (intensive globalization), there's a case for arguing that the next phase is going to be heavily about energy—its acquisition, transportation, and, most importantly, the debate over whether to constrain its use. Call it the phase of sustainable globalization.

It's also reshaping geopolitics. In a book published simultaneously with this one, Bruce Jones and David Steven examine the geopolitical consequences of the changing global energy landscape. The Risk Pivot: Great Powers, International Security, and the Energy Revolution focuses on the way energy is amplifying three already complicated problems: geopolitical competition between the great powers; the struggle over global development in the new middle powers, as well as in fragile states; and global climate change negotiations. The book highlights the critical choices facing the top powers. As we see it, these are three: whether to allow energy to continue to be a source of geopolitical tension for globalization; whether to choose deliberately to use energy as a source of additional tension, that is, to use energy as a political and economic weapon against one another; or whether to forge a “governance” approach, that is, to build the relationships, rules, and mechanisms to limit the way energy amplifies tensions and, by contrast, to find areas—and important ones do exist—where energy is a source of win-win outcomes and thus of potential cooperation.

While those outward themes echo through this book as well, our concentration here is inward—on the way energy plays into the internal political economy of major states, and on their search for internal and human security (though not neglecting regional security). Geopolitics and international war get a prominent mention herein too, because they cannot be wished away even from the search for more basic forms of security, like food security and internal political stability. But our emphasis here is on the search by major states for secure national “control” (if that word meaningfully applies to global energy dynamics) over the sources of their internal growth and social well-being. Energy plays vitally into that search, especially for the rapidly growing powers.

This book proceeds as follows. We look first precisely to those rapidly growing powers, to examine how it is that energy is literally fueling and simultaneously complicating their rise. These chapters cover the three most important rising powers—China, India, and Brazil. But we also include an analysis of a rising state often overlooked, Nigeria—the seventh most populous state in the world, larger than both Russia and Japan. Then we turn to various dimensions of security, between states to be sure but primarily within states—incorporating key dynamics of human security in our analysis. We examine regional security (between Asia's two giants and in Europe's backyard); the way energy-producing regimes often use energy as a weapon in regional or even global political struggles; and internal security. These chapters incorporate what we might consider status quo actors, like the European Union (EU) and Saudi Arabia—though as the chapters make clear, even these countries face serious challenges to their own status quo. This part also incorporates Russia—often considered to be a “rising” power, but for all intents and purposes really a slumping one.

Then, finally, we look at both the internal and international dimensions of the one state whose energy developments will most shape and constrain global ones: the United States. It may seem odd to treat the United States this way, given the mostly dominant narrative that it is a declining and retreating power. The realities are different. Seen through the lens of energy, the United States is part way through a stunning renaissance. These do not eradicate other sources of U.S. challenge or constraint, but they do substantially offset them. And the energy revolution in the United States is a function first and foremost of the dynamism of the American market model—a fact that has not gone unnoticed in Mumbai or Shanghai, even if it's not yet fully acknowledged in New Delhi or Beijing. Important questions remain for the United States. These are first of all internal—how will it respond to a series of U.S. political economy challenges? But they are also external—will it use its new-found energy strength to attempt to shield itself from international dynamics, retreating into a more isolationist stance? Will it seek to use its energy endowment as a “weapon” of foreign policy? Or will it use its energy strength as a lever to push for more stable markets?

Unsustainable Developments: Energy and the Rising Powers

We start by looking in depth at the internal challenges of energy in the world's most dynamic markets. China and India are obvious targets of that analysis, as the world's two most populous states, and the core of the Brazil, Russia, India, China, and South Africa, or BRICS, grouping. Brazil is not as populous as either state, but it's richer, and so has already thrust its way into the ranks of the top six economies, topping Britain; and it's done so in substantial part because of its ability to harness its own vast energy and food resources. And Nigeria: the world's seventh most populous state doesn't show up on everyone's account of rising state dynamics of the past decade, but it will in the next. At least, it will if it can overcome some deep internal challenges—Nigeria is both a rising state, and a fragile one, a dichotomy that increasingly will characterize the next set of rising states.

If one theme connects the dots between this otherwise disparate set of countries, it is energy insecurity. This is true even of the largest and most successful of them to date, China.

The simple fact is that as China grows, its demand for oil and other forms of energy grows, and so too does the complexity of its search for energy security. In “China's Search for Oil Security: A Critique,” Andrew B. Kennedy analyzes the ways in which the Chinese government has sought to enhance its access to oil supplies, focusing on four policies that aim to improve access to oil supplies.

For more than a decade, the Chinese government has encouraged its national oil companies (NOCs) and other state-owned enterprises to “go out”—to invest overseas and gain greater access to foreign resources. However, the results of going out have been limited. While the Chinese NOCs’ overseas equity production surpassed 1.5 million barrels a day in 2011, that's only a fraction of global crude oil production at 84.5 million barrels a day. Furthermore, the NOCs do not necessarily send the oil they produce back to China, and it is not necessarily cheaper or more available to China in a supply crisis. Lastly, there is concern that the NOCs’ international expansion may actually detract from China's overall welfare and security as the expansion brings China into relationships with isolated states like Iran. (This theme of political risk increasingly flowing to the emerging Asian giants is a central theme of Risk Pivot.)

In addition to encouraging its own NOCs to go abroad, China has sought to diversify its energy import mix through “loan-for-oil” and “loan-for-gas” deals, as well as try to diversify the routes that its oil shipments follow. Yet, though the loan-for-oil deals will improve China's overall energy security by reducing its reliance on imports from the Middle East and Africa, the effects will likely not be large.

Also, recognizing the great percentage of its energy that travels through open waters, China has been working to improve its blue-water navy. In theory, a stronger navy would improve China's leverage in its territorial disputes in the East China and South China Seas, helping it to gain control over energy resources there. However, it remains unclear how extensive the energy resources are, and in any case it is unlikely they would dramatically reduce China's dependence on oil imports.

Last, China has been building its own strategic petroleum reserve to strengthen its energy security. This investment has the potential to make a significant contribution to the country's energy security, as it provides Beijing with new policy options in the event of a disruption to oil imports. However, it would be more effective if it were used in coordination with the reserve systems of other countries.

While Beijing has been trying to build up domestic capabilities and bilateral deals with oil-producing states, the payoff for China's energy security has been limited. Going forward, Kennedy argues, China will need to invest in stronger multilateral cooperation to truly enhance its energy security.

If anything, India faces starker challenges still. As India's economy and population grow, so too does its resources challenge. Energy, water, food, and environmental challenges will continue to present themselves globally, but India provides a powerful illustration of how complex and deep these challenges are. Domestically, inadequate infrastructure, intense political pressures, and the need to tackle poverty all constrain India's options with regard to resources.

Thus, in “Materials, Markets, Multilateralism: A Strategic Approach to India's Resource Challenges,” David Steven and Arunabha Ghosh argue that while resource scarcity will play an important role in shaping India's future, it is unclear that India will be able to change the game domestically. More likely, global drivers will help frame what is possible within India's domestic policy environment: India's exposure to the breakdown in global energy markets could grow; the country's size does give it considerable power in the food market; transnational water stress issues may prove unmanageable in the medium term; the intersection between maritime and energy security could become a source of international friction; and climate change politics will become increasingly challenging.

However, the global governance regimes that deal with the issues that India most cares about are both weak and contested, and India often lacks a clear strategy for its international engagement. Both India and its allies, therefore, have an incentive to look for opportunities for international cooperation on resource and environmental issues. Greater international engagement can help increase understanding of the risks that India faces, provide India with a platform to share potential solutions with its partners, provide a basis for Indian leadership in the G-20, and help India influence the post-2015 development agenda. But to take full advantage of more decisive international engagement on resource issues, India will need to increase its capacity to engage internationally.

Brazil has had an easier time so far, as it is well endowed with domestic resources. Of the emerging powers, it's the country that most resembles the United States in terms of its providence and commitment to global norms. No surprise, then, that as energy insecurity has receded as an internal challenge for Brazil, it has turned its gaze outward. As Antonio Jorge Ramalho argues in “Brazil's Principled Pragmatism: A Viable Response to the New Geopolitics of Resource Competition?,” Brazil's concern increasingly is not its internal energy issues, but its external ones. As the world population and developing economies expand, Brazil is preparing for a world with increased demand for resources and attempting to position itself to take advantage of the opportunities such a world offers.

Brazil sees a strong link between development and security. As resource scarcity grows, it sees a greater potential for international conflicts. To cope with this possibility, governments need a legitimate global response that will allow countries like Brazil to enlarge their supply of biofuels. Brazilian policy emphasizes the argument that to sustainably grow, these governments must respect both human rights and the environment, suggesting that sustainable development and social inclusion need to be part of the response. Brazil, which is already in the process of reducing subsidies to Petrobras and relies on small farms to provide more than 40 percent of the country's total agriculture, believes that it can become a model of sustainable development for other developing countries, and that it can lead on the articulation of multilateral frameworks to advance these goals.

Nigeria has no such luck. Domestic demand in Nigeria is shaped primarily by two forces—a growing, urbanizing, and slowly aging population, and a growing but unstable economy. Nigeria's population has more than quadrupled since 1950, and most of the population is now adult and increasingly urban, creating significant demand for food, water, land, power, and other resources. Further increasing resource demand is Nigeria's oil-dependent economy, an economy that is large for the region but still does not provide jobs for its population. Overall, consumption exceeds production, with natural resource revenues, debt, remittances from overseas, and development assistance filling the gap.

These factors combined create the possibility of a demographic disaster, coupled with a steep growth in domestic resource demand. Nigeria—Africa's biggest oil producer—has already failed to meet domestic energy requirements, and the gap between supply and domestic demand will continue to grow without major reforms. In addition, a growing population will put increased stress on Nigeria's land, food, and water resources, and this stress will likely be exacerbated by climate change.

Looking forward, then, Mark Weston in “The Big Squeeze: Nigeria on the Brink” sees three broad scenarios ahead: the good, the bad, and the ugly. The good—Nigeria begins by reforming oil and gas production, reducing waste, and taking much stronger measures to limit damage to the local environment. The Nigerian government has already taken two important steps toward this outcome: investing excess profits in three funds (one for the long term, one for shorter-term investments, and one for stabilization) managed by the Nigerian Sovereign Investment Authority; and becoming more involved with the Extractive Industries Transparency Initiative. In this scenario, Nigeria's international partners play a key role by allowing more Nigerians to migrate legally to find work, reducing transnational crime by legalizing narcotics, and holding their businesses in Nigeria accountable. The bad—If Nigeria continues with business as usual, its prospects of meeting domestic and international demand for resources will be bleak, with problems beginning at a local level likely to spread to the whole country and perhaps to the wider West Africa region. And the ugly—In this scenario, the country reverts to the military dictatorships of its past or descends into civil war. This would in part be caused by increased difficulty in investing in the impoverished, troubled north of the country.

The effects of the country's failure to capitalize on its human and natural resources have so far been limited to widespread and growing poverty and intermittent localized unrest, but the consequences of continued failure over the next two decades are likely to be much more serious. Nigeria does not lack resources or the human capital required to make use of them. Until now, however, it has lacked the leadership and the vision to realize its potential, and this has left it delicately balanced between feast and famine as it prepares for a more crowded, more demanding future.

Perhaps even more than India, Nigeria illustrates what's ahead as we grapple with (un)sustainable globalization.

International, Regional, and Human Insecurity: The Modern Dynamics of Energy

Nigeria and other developing states may face the toughest challenges, but even today's most established energy players can't escape the consequences of turbulent global realities. That's true for Europe, exposed to serious energy security risks through its reliance on Russian imports—a reality that Europe was exploring, but not really grappling with, before the Ukraine crisis. Energy complicates regional security, as India and China—potential partners, practical rivals—are discovering. It also complicates internal stability, as Saudi Arabia is discovering. Saudi Arabia is still the country whose oil exports will do most to affect the global price of oil, but it is now a country facing serious internal political economy constraints around energy use and domestic instability. And all developing states confront both short-term food insecurity and long-term water insecurity as a consequence of global energy and climate patterns. Most states have to tackle these issues internally; some, notably petrostates, sometimes try to export them, including by financing revolutionary politics overseas, or, in the case of Russia, positioning itself to profit from instability in global markets.

Europe's search for greater energy security has, until now, largely been a story about pipelines. As Angel Saz-Carranza and Marie Vandendriessche outline in “Routes to Energy Security: The Geopolitics of Gas Pipelines between the EU and Its Southeastern Neighbors,” Europe was engaged in an exploration of alternatives to relying on Russian pipelines well before the Ukraine crisis. As the world's energy flows evolve, Europe is scrambling to respond to the new energy outlook while simultaneously confronting classical geopolitical issues with Russia.

The European Union is highly reliant on imports for energy (it imports 54 percent of its energy needs), and although Europe is working toward a low-carbon economy, it will likely remain so. The European Commission has identified three main policy tracks to improve its security of supply. First, continue exploiting and increasing indigenous energy sources such as renewable energy, domestic reserves of conventional and unconventional fossil fuels, and nuclear energy. Second, improve energy efficiency, including deploying smart grids and having all member states meet the previously agreed objective of ensuring electricity interconnections equivalent to 10 percent of their installed production capacity. Third, and most difficult, diversify supply countries and routes for imported fossil fuels. Natural gas is increasing its share of the EU's energy mix—currently at 24 percent—and forms the centerpiece of an intricate geopolitical competition to the EU's east. There is no such thing as a global natural gas market: natural gas is produced, transported, and traded through regional, fragmented markets. Its pricing also displays regional differentiation. A further particularity of natural gas as an energy source is the importance of transit countries. As demand for gas increases and production from landlocked countries grows, supply arrangements increasingly operate through transit countries. Of course, arrangements through transit countries are more prone to disruption than direct exporter-importer relations. In addition, the more intermediaries there are in the equation, the larger the set of diverging economic interests. The EU's...

Indice dei contenuti

• Cover Page
• Title Page
• Copyright Page
• Contents
• Acknowledgments
• 1 - Introduction: Energy Policy on the Edge
• Part I. The Rising Actors
• Part II. Facets of Resource Security
• Part III. The Critical Actor
• Contributors
• Index
• Back Cover