With the record high gas prices of this past summer still on the minds of American voters, some in Congress are hoping to revive an old proposal that they claim would help prevent future pain at the pump. Known as the No Oil Producing and Exporting Cartels Act (NOPEC), the measure, if passed, could unfortunately seriously backfire, creating more volatility in the oil market as well as hurting the American economy and international relations.

From my time in Congress, I recall many instances of knee jerk reactions to “do something” legislatively even if the result would have unintended effects of harming American interests. The NOPEC bill fits that example. Both during the lame duck session and in the new Congress come January, this counterproductive policy should be rejected.

While naming a culprit may be easy, the reality is that oil markets are notoriously complicated. At a time when the United States and European Union are tightening sanctions on Russian oil exports in response to the Ukraine conflict, policymakers should be looking to promote stability in oil markets and encourage domestic American production.

Yet despite this reality, some lawmakers are pointing to NOPEC as a possible tool to better control oil markets. Passage of NOPEC would do the opposite, not only creating volatility in oil supplies but also removing a safety net of sorts that prevents prices from dropping precipitously or spiking astronomically. This stability allows for planned investments to be made in future American production capacity, which benefits U.S. energy exporters and our European allies who face an uncertain energy future.

Passage of NOPEC could also further upset already strained U.S.-Saudi relations and create a spiral where American companies doing business in Saudi Arabia are retaliated against and vice versa. In the wake of an awkward diplomatic meeting earlier this year between President Biden and Saudi Prince Mohammed bin Salman and with American and Saudi energy production efforts so closely intertwined, this could jeopardize domestic refining capacity and oil supplies.

Operating U.S. refineries are already running full-out, at about 95% of total capacity and the Motiva refinery in Texas – which is the largest oil refinery in the U.S can process a staggering 607,000 barrels per day (b/d) – is Saudi-owned. Meanwhile, while U.S. crude oil production has risen to 11.9 million b/d, almost back to its pre-pandemic high, Saudi Arabia is still the largest OPEC petroleum exporter to the United States, accounting for 5% of U.S. total petroleum imports.

Additionally, NOPEC’s broad anti-trust mandate could deter foreign investment in the U.S and lead to greater legal liabilities. An initial version of the bill that was introduced in 2000 proposed to strip state immunity from national oil companies of OPEC member countries, a theme that has carried through the no less than 16 iterations of the bill that has been introduced since.

This could also lead to “tit-for-tat” laws or sanctions that target American energy firms. A Rice University Baker Institute report suggests that a retaliatory OPEC “could include avoiding dollar transactions and the American financial system,” creating a strong economic blow. Added to those business concerns are the U.S. Chamber of Commerce’s warning that suing nations over alleged oil market tampering could be met with similar lawsuits against the U.S., its agents, and possibly even the military.

Further efforts that would allow federal prosecutors to sue other nations under the assertion of unfair competition, despite the fact that this action is already allowed under the Sherman Antitrust Act, could also prove problematic. The text of S.977 would “make oil-producing and exporting cartels illegal” which, upon passage, arguably would place OPEC’s twenty-one (21) sovereign nations, including Saudi Arabia, Kuwait and Mexico, in violation of US statutes and complicate international relations.

Would OPEC accept US claims their pre-existing agreements are illegal?  More importantly, is the US willing to go to war against some countries that are considered allies to impose NOPEC law on OPEC nations?  At a minimum, NOPEC would result in market disruptions resulting in higher prices and at worst could result in a second oil embargo.

Solving energy supply and oil prices won’t come from passing NOPEC. In fact, the measure is likely to create more unpredictability and more negative consequences. If lawmakers really want to help, they should pursue efforts that strengthen American energy production and infrastructure, creating more long-term supply and a hedge against OPEC production. It’s time to hang up the idea of NOPEC and focus on more helpful solutions.

Lame Duck Energy Bill Threatens International Relations was originally published on Global Security Review.

He should move forward with the embargo, and every successive administration should reaffirm the policy with its own restrictions on Saudi oil. Such a move, while sudden and seemingly radical, is a practical and pragmatic way of advancing both American economic interests at home and Washington’s geopolitical concerns abroad.

First, we must understand the relationship between Saudi oil and the broader U.S. energy landscape. While gauging the importance of Saudi oil to the American economy may seem straightforward, the history of the U.S.-Saudi relationship, as seen by lawmakers and voters, serves to complicate contemporary sensibilities. The oil shocks of the 1970s, the Carter Doctrine, and U.S. adventurism in Iraq and Afghanistan after the September 11 attacks overinflates the strategic importance of our Saudi counterparts and their natural resource endowment in the minds of the American people. One can forgive the ignorance of this popular sentiment because, for decades, it was reflective of American energy realities: since the mid-1980s, Saudi oil imports to the U.S. grew steadily, peaking at 2.3 million barrels per day (b/d) in 2003.

But a series of technological advancements have brought about unprecedented changes in American energy since the early 2000s. The advent of horizontal drilling has made shale oil a lucrative and reliable source of energy in the United States. And while the U.S. is by no means isolated from global oil markets, net imports of petroleum reached an all-time low of just over half a million b/d in 2019, down from a peak of nearly 13 million b/d in 2006. Saudi oil imports have not been immune to this dramatic reversal, decreasing more than seventy-five percent to little more than half a million b/d—a paltry six percent share of total U.S. petroleum imports last year. This amount is exceptionally minute when comparing it against imports from other major U.S. allies, especially Mexico (holding a seven percent share) and Canada (nearly fifty percent share).

In this context, we can understand Saudi oil not as a pivotal source of energy but as a dribble that has been gradually but consistently thinned by an innovative and resourceful American energy industry.

Of course, cutting permanently any number of barrels from the supply would spook markets and have a dramatic effect on oil and gas prices. But a rise in prices—which have cratered in recent weeks due to concerns regarding oversupply and lack of storage space—would be enormously beneficial for American producers, who have suffered greatly under the pandemic regime of low prices and bottomed-out demand. A modest, sustained price spike caused by a permanent supply cut would enable American shale producers to restart drilling and operate profitably, saving thousands of energy jobs and bridging the supply gap created by missing Saudi barrels. This fact is not lost on American upstream stakeholders, who are increasing pressure on the White House to slap a permanent ban on Saudi imports.

Downstream players, however, feel somewhat differently than their upstream counterparts. Ailing American refiners argue that a ban on Saudi imports would hurt their bottom line by denying access to the crude they are tooled to refine. But a slight retooling of the refineries, says U.S. Senator Kevin Cramer (R-ND), could enable them to refine U.S. crude, saving their business models and giving a boost to domestic producers. Doing so would provide a desperately needed sense of unity within the energy industry, which has been in a constant state of emergency due to foreign competition and deep slumps in demand caused by the coronavirus pandemic.

Favoring American crude over foreign materials could also win refiners a very public pat on the back from the president, who is never shy to trumpet his support for “made in America” products. Indeed, firms such as these are in sore need of a public relations boost, according to a new survey from the Brunswick Group, which details just how disdainfully the American public views the oil industry.

The benefits of blocking Saudi imports are not limited to American oil producers. In forever removing oil as a factor that unduly influences the fundamentals of the U.S.-Saudi relationship, Washington gains a free hand to reassess geopolitical dilemmas that have plagued its long and fraught history with the Kingdom without being restrained by energy concerns.

First and foremost, removing oil from the equation would give the Pentagon and the White House additional leverage over their counterparts in Riyadh. Unable to further enjoy their traditional influence over the American energy supply, Saudi decision-makers could prove to be malleable on a particularly hot point of contention should they wish to continue being a beneficiary of American military support.

Such newfound clout can and should be used to pressure the Saudi government and its de facto leader Crown Prince Mohammed bin Salman (or MbS) into scaling down the Kingdom’s devastating military presence in Yemen, which has caused the deaths of tens of thousands of civilians, displaced nearly two million people and created the most acute humanitarian crisis in the world—all with the logistical support of the United States. In backing such an atrocious Saudi-led campaign, Washington is simultaneously damaging its credibility as a beacon of human rights and enabling the creation of a power vacuum to the advantage of Iran and other regional players like al-Qaeda in the Arabian Peninsula, one of the world’s deadliest terror groups.

If MbS wishes to continue protecting his nation’s most crucial resource using nearly three thousand American servicemembers (as he has since a drone knocked out Saudi Arabia’s largest and most strategically significant oil fields last September), he will be particularly receptive to bipartisan American demands that he work to limit Yemeni casualties and ultimately scale down his presence there. There is encouraging precedent for tying U.S. military support to most any demand: in a successful effort to end the oil wars last month, Trump himself ordered the Crown Prince to cut the Kingdom’s oil production or risk losing American military aid. And while MbS has yet to acquiesce to demands that he end his useless adventurism in Yemen, a U.S. that is not materially affected by Saudi oil—Riyadh’s one trump card—would have the best chance at convincing the strongman to think differently.

While Saudi crude makes up much less of our energy supplies than it used to, importing any barrels from the Kingdom gives the false impression to Beltway policymakers and the broader public that the American economy relies on the graces of the Al Saud family to function. It is in this way that divorcing from Saudi oil—and thus disentangling from the fiction that the U.S. relies on a young prince—that the United States can work to establish a foreign policy consensus that privileges long-term strategic interests over rabble-rousing in the Middle East on behalf of an inexperienced ruler who ordered the death of an American journalist and has repeatedly shown disdain for American values of freedom of expression and due process.

If the United States aspires to lead the charge against this century’s most significant geopolitical challenges—great power competition with China and Russia, eradicating infectious diseases, and climate change—it must work to separate itself from those whose actions hurt both its standing on the world stage and credibility with sorely-needed allies. Washington cannot afford to continue to serve the interests of unreliable allies in the Middle East if it wishes to reclaim its place as leader of the free world. By refusing Saudi imports and further disengaging from Saudi recklessness, the United States would take a small but necessary step to strengthen both its domestic front and position in the world.

The United States Should Block Saudi Oil Imports—For Good was originally published on Global Security Review.

Currently, Russia holds a third of Europe’s gas imports and imports 140 billion cubic meters (bcm) of natural gas annually through Ukrainian pipelines. The two most important reasons for Russia’s gas monopoly are economical and practical: distance and cost. Geographic proximity makes Russian gas not only more reliable than other competitors but also cheaper and closer.

Why Build Nord Stream 2 and TurkStream?

The pre-existing monopoly begs the question of why build two new pipelines, both of which have attracted ardent criticism from the United States and certain European countries. Many critics claim, for example, that Russia has the potential to exploit that energy dominance for political gain. Others argue that Nord Stream 2 would supply gas to Germany first, effectively removing other EU nations from the decision-making process and exacerbate inter-EU tensions.

However, building two new pipelines broadly serves Russian interests. Both projects not only cement Russia’s monopoly on gas but also open the door towards Russian gas exports reaching China as well as seize a share of the liquefied natural gas (LNG) market. Nord Stream 2 mainly helps Russia export gas to the northern European market and bypass Ukraine and the corresponding political situation there. TurkStream also plays a role in circumventing Ukraine, carrying gas to south and southern Europe and Turkey.

To answer critics’ concerns about energy security, many European politicians point to proposed legislation that aims to prevent Russian market manipulation, long-term goals to address the security of supply challenges, and diversification away from fossil fuels. The Third Energy Package, for example, aims to liberalize and integrate natural gas markets—ultimately aiming to break up the Russian-state own monopoly (i.e., Gazprom and Rosneft).

The EU’s Energy Union strategy further commits to ensuring that every EU state has access to at least three different sources of gas. Additionally, many EU states are moving away from fossil fuels. Some Baltic states, for example, are developing LNG terminals (ex: the Klaipeda LNG terminal) to diversify their gas imports and supporting low-carbon energy sources.

Despite these attempts to become more energy-dependent, Europe truly does not have a leg to stand on. Up until 2030, Russian pipeline gas and global LNG will remain the two main sources of gas for the EU. Further, no significant pipeline gas that does not already originate in Russia will be available in the EU before 2025.

TurkStream

After the cancellation of Russia’s South Stream project in 2014, Russia quickly moved to replace one pipeline project with another. The South Stream project was led by Gazprom and aimed to transport Russian gas across the Black Sea to Bulgaria and, from there, disperse within Europe. However, in the wake of Russia’s annexation of Crimea and subsequent invasion of Eastern Ukraine, along with a regulatory dispute between Gazprom and the EU, the project was canceled.

In response, Gazprom signed a Memorandum of Understanding with BOTAS Petroleum Pipeline Corporation (Turkish state-owned gas company) to construct TurkStream in December 2014. In 2019, TurkStream was officially completed and on January 8, 2020, Russian President Putin and Turkish President Erdogan inaugurated TurkStream and certified it ready for use.

Nord Stream 2

In 2012, after the successful construction of the initial Nord Stream pipeline, Gazprom also moved to expand to additional lines (later named Nord Stream 2). In 2015, Gazprom signed an agreement with Royal Dutch Shell, E.On, OMV, and Engie to build Nord Stream 2. Poland blocked this plan in 2017—leading Gazprom to develop a financing plan with Wintershall, Engie, OMV, Royal Dutch Shell, and Uniper instead.

In 2018, Germany approved Nord Stream 2’s construction permits in German waters. Although the U.S. has threatened sanctions on companies that work with Gazprom—causing Allseas to pull its support—Gazprom has claimed that it would complete construction alone and would finish by 2020.

Many observers note that TurkStream is likely a counter to the original U.S. backed Southern Gas project, which was developing a pipeline from Azerbaijan to Europe and that Nord Stream 2 is a bid to replace Ukraine as a transit state. Not surprisingly, members of the U.S. government have expressed concern over TurkStream and Nord Stream 2—claiming that it threatens European energy independence and security.

Many Central and Eastern European states see the pipeline as an attempt to undermine European unity and bypass transit states such as Poland and Ukraine—also depriving those countries of transit fees. However, Germany has argued that the pipeline was purely market-driven. In response to threatened U.S. sanctions, Germany warned the U.S. to “mind its own business.”

Together, TurkStream and Nord Stream 2 provide Russia with over 140 bcm in capacity—amounting to almost the same as Ukraine’s total transit capacity. TurkStream not only provides Russia with a stronger monopoly on gas in southern and southeastern Europe but also strengthens an already-strong Turkish-Russian relationship. Given the financial incentives to be Europe’s new gas hub, it is no wonder that Nord Stream 2 has also led to a stronger German-Russian relationship.

Russia’s Energy Dominance: Reinforced

The construction of TurkStream and Nord Stream 2 reinforce Russia’s dominance of the energy market, even though it may not lead to the political leverage that many critics expect. With one pipeline already completed and another expected in 2020, both TurkStream and Nord Stream 2 illustrate Russia solidifying its grip on the European market while also expanding its reach to other markets. This monopoly on gas is strengthened by Europe’s gas market—where demand is only growing.

In 2019, Europe imported 123 bcm of gas last year, nearly twice as much as 2017. Further, critics who point to energy security and independence, such as the U.S. do not affect policy in practice. While sanctions against working with Gazprom have somewhat of an effect in cooling interest, in this case, economic interests trump security interests. Russia’s geographic proximity to Europe means that Russian gas will be closer and cheaper than other competitors for the foreseeable future.

However, while Europe’s gas markets may be inherently dependent on Russian gas, Russia is similarly reliant on the European market as a buyer for its gas. In short, Europe is Russia’s most important market for Russian natural gas exports. This limits Russia’s ability to manipulate energy politically without severely compromising its economic relations with Europe. Therefore, Russian renewed energy dominance in Europe is certainly on the horizon with the imminent arrival of Nord Stream 2 and preexisting TurkStream. However, it is not nearly as concerning as Russophobic critics would have the public believe.

Russia’s Renewed Energy Dominance in Europe was originally published on Global Security Review.

“We have already drilled two wells in waters to the east and west of the island of Cyprus, and the [ship] Yavuz will be drilling our third well. Such activities will continue with determination,” Turkish Energy Minister Fatih Donmez recently said at the Turkey Energy Summit.

Current drilling by Turkish President Recep Tayyip Erdoğan’s government has provoked a wide array of actors in the Eastern Mediterranean including Israel and Egypt, both U.S. allies. Illegal Turkish drilling vessels in Cyprus’ Exclusive Economic Zone (EEZ) are even accompanied by military vessels. The activity has many in Nicosia and abroad worried as international oil companies have major stakes in the region since the discoveries of hydrocarbons off of the Cypriot coast several years ago.

Why is the Eastern Mediterranean so vital to the world economy? The U.S. Geological Survey believes 122 trillion cubic feet of gas is in the area, however, the exact potential for gargantuan wealth to be found is yet to be confirmed. The area contains a vast amount of potential energy for Europe, which is heavily reliant on imported gas. This is especially true for the EU’s dependence on imported gas from Russia, the world’s second-largest exporter with a roughly 18.6% share of global production. European energy needs are extremely crucial for the global economy, and, of course, the President of the United States, as he is using the message of U.S. economic growth and record-level fossil fuel production as a foundation for his 2020 campaign.

Meanwhile, since the discovery of hydrocarbon reserves in the Eastern Mediterranean, states that once held no close ties with one another are now actively working together to maintain regional security. For the past decade, Greece, Cyprus, and Israel engaged in trilateral talks on energy cooperation for electricity and oil (catching the attention of communities at home, an inspiration for the creation of a “Hellenic-Israeli Alliance” in the U.S. Congress). Gas pipelines are currently under development and will reach into Europe via the Greek mainland.

The “Energy Triad” made progress with neighboring Egypt as well. In fact, Israel has begun exporting gas to Egypt as obstacles impeding cooperation are removed while Cyprus announced a strengthening of ties with Egypt through economy and tourism. Egyptian President Abdel Fattah Al-Sisi also seeks to strengthen and modernize Egypt’s navy in response to the threat posed by Turkey in the region to protect the country’s growing Mediterranean and Red Sea oil and natural gas interests.

“Countries that were once not talking are now coming together”, said Georgios Lakkotrypis, Cypriot Minister of Energy and Commerce in a recent interview. Talks between the four have brought Italy, Jordan, and even the Palestinian Authority to the table.

The restructuring of alliances to hedge against Turkey is similar to the unofficial anti-China coalition forming in the South China Sea, as powers are converging against Beijing—so are Mediterranean powers against Ankara. Yet Moscow has emerged as another major player in the Mediterranean. Russian President Vladimir Putin has not only been instrumental in the aid of Syrian President Bashir Al Assad’s government but also recently sold the S-400 missile system to America’s NATO ally, Turkey. Congress then barred Turkey from acquiring the American F-35 fighter as punishment—further straining Turkey’s relations with the West and undermining its reliability as an ardent partner in the Middle East.

Meanwhile, since the Greek-led 1974 coup d’état in Cyprus and subsequent Turkish invasion, the island has been divided, with Turkish forces illegally occupying the north while the internationally recognized government of Cyprus controls the south. With no military except for a small defense force, outfitted with small patrol boats and anti-tank weapons from the former Soviet Union and Yugoslavia, the Cypriot government is essentially defenseless. But Russian influence in the region is further complicated by Cyprus’ decision to actively hold Russian money, leading to skepticism regarding the inclusion of Cyprus into the American sphere. However, a recent U.S. Congressional delegation announced that the Cypriot government is working to terminate the laundering boogeyman head-on.

What are the options for President Trump with an increasingly aggressive Turkey and a resurgent Russia in the region—as an entente of economic and military cooperation forms in the Eastern Mediterranean?

John Gay, Executive Director of the John Quincy Adams Society, a nonpartisan Washington, D.C. based organization whose stated aim is to steer foreign policy conversation in direction of “More strategy. Less war”, takes the issue of Turkish self-interest back to the President’s administration:

“Trump has rightly pointed out that many U.S. allies do not do much to defend themselves, instead preferring to rely on the United States to defend them. The best way out of this is for those allies to become more capable of defending themselves. This has a twofold benefit for the United States: first, they do more (or all) of the fighting; second, they have a stronger interest in their own survival and well-being than we do, so they can make more credible commitments and threats against those that endanger them than we can make on their behalf. That’s especially true with a state like Cyprus since we don’t have a formal alliance commitment to them. If we believe a strong, independent Cyprus offers benefits to U.S. security, letting them buy our weapons is a way to get that on the cheap.”

The first option for the President is to make arms and modern radar systems available for Cypriot purchase to improve the country’s defensive capabilities, including but not limited to: short- and medium-range artillery, guided anti-tank missiles, and surface-to-air missile technology. At present, Cyprus remains barred from purchasing weapons from the U.S. A bipartisan bill to lift the Cyprus arms prohibition, co-sponsored by U.S. Senators Bob Menendez (D-NJ) and Marco Rubio (R-FL), failed to make it out of the Senate.

However, within the new National Defense Authorization Act for Fiscal Year 2020, Section 1270I, the prohibition can be lifted so long as one major obstacle is overcome: Russia (See: Section 1270I, e, 1, a and b). For Cyprus to receive arms from the U.S., it must first cooperate with Washington to counter Russian money laundering in Cypriot banks and terminate any refueling of Russian naval vessels that frequent the island on Eastern Mediterranean patrols.

The President may waive these requirements for one year if he chooses (See: Section 1270I e, 2). Arming Cyprus could be an effective way to apply pressure to a NATO ally pursuing objectives contrary to the interests of the United States.

Another option for President Trump is to reduce, block, or obfuscate Turkey’s role in NATO. Erdoğan values its membership in NATO, but Turkey’s membership is only one means to arm and defend itself (as the case was made when they purchased weapons from Russia). President Emmanuel Macron of France has already vehemently condemned Ankara’s actions in the Cypriot EEZ and recently dispatched French naval forces to deter further Turkish actions in the area.

While European Council President Donald Tusk recently affirmed that “the European Union stands united behind the Republic of Cyprus and expects Turkey to respect sovereign rights of the member states,” the situation is further complicated by Erdoğan’s cooperation in certain areas, such as participating in the Defeat ISIS Coalition. “Turkey opened its military bases to the United States and Coalition partners in July 2015. Since that time, Incirlik Air Base has been critical in the effort to degrade and ultimately destroy ISIS in Syria and Iraq,” the U.S. State Department said earlier this year.

However, taking action against Ankara may backfire, Turkey could pivot even further towards Moscow and Tehran. The three have already met to discuss the future of Syria without the consultation of the United States. Estranging Turkey from NATO cooperation could ultimately backfire as the U.S. could lose an ally for its future Eurasian interests.

The final, most immediate, and detrimental action against Turkey is economic sanctions—a move that may further exacerbate the state of Western-Turkish relations. Turkey is very dependent on foreign investor influence, especially Germany. Trade between the EU and Turkey is valued at approximately $220 billion. U.S. trade with Turkey is worth some $24 billion. While European and American political parties may be easy to jump to economic retaliatory means, they must also remember Erdoğan’s trump card.

The Turkish president has publicly stated that if Western powers take action against him, he will retaliate by sending over 3.6 million Syrian refugees to Europe. The Turkish economy has already felt a considerable impact with the recent devaluation of the Lira and, theoretically could save a significant amount of money by sending refugees to Europe if hit by further economic hardship (although Europe, and possibly the U.S., would almost certainly retaliate to impose further economic costs on Turkey).

President Trump must make a decision along with the support of lawmakers and the Pentagon that will uphold international law and standards on illegal economic activities by entities of one state in the EEZ of another sovereign state. Turkey’s illegal oil drilling shows no signs of abating in a region vital to the global economy and crucial to U.S. geopolitical interests.

Turkish Oil Drilling in Cyprus’ EEZ Threatens to Destabilize the Eastern Mediterranean was originally published on Global Security Review.

Yet, even a cursory glance at the project’s participants unveils the complex, if not confounding, geopolitical, and security ramifications that await the pipeline. Negotiations over the Afghan portion have been particularly contentious, with the Taliban taking a capricious approach toward the initiative, vowing once to defend, and once to destroy, the integral project.

Transnational efforts, led by the Asian Development Bank, the project’s promoter and adviser, renewed the dormant dream, pushing forth a narrative that ancillary benefits await each of the stakeholders involved.

For Turkmenistan, TAPI offers an opportunity to diversify the country’s export markets for its’ natural gas. Although global demand for natural gas persists, particularly in neighboring South Asia, the number of customers able to tap into the abundant supply in landlocked Turkmenistan has been limited due to a shortage of supply routes.

Sales to Russia, once the biggest customer of Turkmen gas, have waned due to pricing disputes, making China the current top importer. Nevertheless, as lucrative as the Chinese markets are, fear of overdependence on a handful of powerful hegemons has compelled Ashgabat to make pipeline projects like TAPI a foreign policy priority.

However, perhaps no country stands to gain, or lose, more from TAPI than Afghanistan. As a necessary transit point, initiatives like TAPI demonstrate Afghanistan’s potential to boost badly needed government revenues as a regional energy transit hub. With nearly $400 million (USD) in transit fees at stake, Afghanistan simultaneously serves as the project’s greatest benefactor and its’s biggest bottleneck as fears mount regarding the Afghan government’s ability to protect the pipeline.

For both India and Pakistan, participation in TAPI is driven by a need to satiate local demand for natural gas. Both countries are expected to purchase over 40% of the gas pumped through TAPI. Such access would likely alleviate acute supply shortages in Pakistan. Shortages have spurred a major energy crisis in the volatile southern provinces of Balochistan and Sindh, where chronic power outages have decimated local industry and hindered the growth outlook for both provinces.

In response to security risks, observers have suggested that Pakistan’s dire energy crisis would dissuade temptation to “weaponize” the pipeline in the event of armed conflict with India, as well as ensure that the Taliban, which Pakistan retains a considerable amount of influence over, not interfere in the operation of the pipeline.

Yet, it is this very concern that has informed India’s stance on the viability of the project, which has been idyllically dubbed the ‘peace pipeline.’ Estimates suggest that India could satisfy up to one-third of its gas needs via TAPI, but such exposure would likely foster dependence on dangerous overland routes in Afghanistan and Pakistan. Hence, ambivalence on the part of the Modi government has generated speculation that India prefers Turkmen gas to be routed via Iran. Although this route would likely incur a higher cost than present estimate for the TAPI pipeline of $10 billion, India’s justification of any premium would be reflected in the reliability of such a pipeline.

Thus, New Delhi’s lack of confidence in Islamabad to securitize TAPI remains an impediment, if not a deal-breaker. Threats emanating from within Pakistan and from the Taliban have coerced India to seek insurance by forging regional projects with neighboring Bhutan, Myanmar, Nepal, and Bangladesh for its’ energy needs.

Furthermore, current events in the region have complicated the pipeline’s progression. Tensions in the region have seldom been higher with India’s repeal of Kashmir’s autonomous status, followed by the abrupt cancellation of U.S.-Taliban peace talks. Both events could forestall any concrete steps toward operationalizing the TAPI pipeline.

Construction, which first commenced on the Turkmenistan portion in 2015, has been relatively opaque, with little information regarding progress on the Afghan or Pakistani sections of the pipeline. Several delays have imperiled earlier estimates that suggested the pipeline could be operational by 2020.

With an estimated 12,000 jobs and lucrative transit fees for Afghanistan, and energy access on the line for India and Pakistan, TAPI, in theory, could have satiated each stakeholder’s needs. Such conditions suggest that before its’ lofty ambitions can be realized, TAPI will have to contend with the inconvenient whims of mistrust and suspicion in the neighborhood of South Asia.

TAPI Pipeline Puts South Asia’s Prosperity in Peril was originally published on Global Security Review.

The secretary’s statements came after Houthi rebels in neighboring Yemen took credit for the strikes. The U.S. rejected this claim, citing intelligence that the attacks did not originate within Houthi-controlled territory. On the sidelines of the 2019 UN General Assembly, the leaders of the U.K., France, and Germany backed the U.S. position that Iran was behind the attacks. “It is clear for us that Iran bears responsibility for this attack. There is no other explanation,” U.K. Prime Minister Boris Johnson, French President Emmanuel Macron, and German Chancellor Angela Merkel said in a joint statement. However, the three European leaders stopped short of labeling the incident an “act of war.”

This is not to say that the strikes were in any way inconsequential. The two fields—located in the eastern part of the Kingdom—are by themselves responsible for half of the country’s total oil production and around five percent of all oil production globally, approximately 5.7 million barrels a day. Taking into account the nearby supergiant Ghawar field, eastern Arabia is the largest and most concentrated oil production site in the world.

Oil markets responded appropriately: Brent futures spiked almost fifteen percent to $69.02 (USD), the most significant jump in more than a decade. Gas futures skyrocketed more than thirteen percent, and consumers have been feeling the effects at the pump. For just the third time in its history, authorization was given to draw from the Strategic Petroleum Reserve as a means to mitigate worries about supply and assuage markets.

More than a week after the attack, prices stabilized: Brent prices have settled at just over $63 and WTI at $58 (USD). For now, the worst economic effects of the incident seem to have petered out before any last damage could be done.

But this episode serves as a stark warning and reminder to American policymakers and energy stakeholders: modern global energy infrastructure is exceptionally centralized and situated in the most geopolitically sensitive areas in the world, which makes the highly integrated system susceptible to the numerous and ever-changing risks associated with such geographies. Those seemingly abstract hazards can translate into real crises, which can have considerable implications for American economic and security interests at home and abroad.

The United States is certainly no stranger to energy concerns stemming from insecurities in the Middle East. Indeed, such fears were the very foundation of the Carter Doctrine and, more recently, was a driving force behind the 2003 invasion of Iraq. And the Abqaiq oil field itself has been a target in the years since then; the most high-profile incident has been an unsuccessful attempt by al Qaeda to disrupt production using suicide bombers in trucks. Prices only increased moderately after that episode, which occurred in 2006.

Why, then, has the United States continued to subject itself to the risks of relying on such a fragile and insecure part of the world for price assurance and supply security?

Rather than go through great pains and international embarrassment to arm the Kingdom to the teeth with advanced weapons systems (which has only served to encourage and exacerbate the very reckless adventurism that produces events like those that occurred last month), the United States should do all it can to reduce its exposure to the price instabilities wrought by Middle Eastern conflicts, thereby hedging against further unrest.

This means doubling down on existing trends: capitalizing on innovations in drilling technologies to continue the shale revolution and increase crude oil production capacity, utilizing the nation’s genuinely mammoth natural gas endowment, taking advantage of both developments to increase our exports of both oil and natural gas, and continuing to shift the share of energy imports away from OPEC—whose output is greatly affected by the political turmoil that grips its members—and toward more reliable neighbors like Canada and Mexico.

But ensuring protection from global energy shocks means more than relying on what’s beneath our feet. Renewables are inexhaustible, emissions-free, and an increasingly economically competitive source of energy. Here too, the United States is trending in the right direction: electricity generation from renewable resources has doubled since 2008 and is now responsible for nearly eighteen percent of total electricity supply.

This change has come in spite of the deep-seated antipathy the Trump administration has towards the renewable sector, despite the current political climate and economic inclinations of significant industry players. To promote energy diversification and thus an insurance policy against price spikes, the White House should reexamine its policy of propagating political fantasies like “clean coal” at the expense of market forces, which are pushing the American energy portfolio toward embracing renewables.

This sort of diversification and due diligence will prevent something like what occurred in Abqaiq and Khurais last month into “an act of war.” In short, if the security of American energy supply—the foundation of economic growth and national security—no longer hinges on a few oil fields across the pond, there would be no need to sacrifice more blood and treasure on another unpopular war in the Middle East.

Moreover, if security concerns did arise there or in another energy chokepoint—Venezuela, the Steppes, or Russia, for example—Washington could launch a strategic offensive without concern for the effect such a war would have on gas prices or general energy supply. Top military and political brass could make decisions without the fear of energy insecurity weighing on their every move.

As tensions between the regional powers of the Middle East—Saudi Arabia, Iran, and Israel—heat up, the possibility of war is the highest it’s been in a decade. As war rages in Yemen and Iran continues breaching the limits outlined by the nuclear deal, the long-lasting proxy fight that has decimated the region could transform into an all-out war between nations. If the Israelis feel emboldened to fight back against Iranian aggression (as recent news reports suggest), a cataclysmic conflict could decommission more than sixty percent of the world’s crude oil supply and send markets into a tailspin.

Americans no longer have the patience nor tolerance for U.S. interventionism in the Middle East. Significant fuel price increases have severe short- and long-term economic consequences for low- and middle-income earners. Furthermore, the Middle East is no longer as strategically important for U.S. national security interests in light of shifting power dynamics in the Indo-Pacific. The future of U.S. national security and economic prosperity depends on the Trump administration (and future administrations) pursuing a policy of energy diversification while exercising restraint in Middle Eastern affairs.

Rethinking U.S. Energy Security to Hedge Against Heightened Instability in the Middle East was originally published on Global Security Review.

The 2016 presidential election was historic not just for the outcome, but for the circumstances that contributed to that outcome, most notably Russian efforts to mislead the American public using fake news articles, fake Facebook accounts and fake Twitter accounts to disseminate all manner of misinformation.

It looks like Russia may be at it again — this time with a different target in mind. Russia is now using some of the same tools and tactics to spur opposition to hydraulic fracturing, or “fracking,” a controversial technology used in the production of natural gas.

Russia has run anti-fracking stories on its state-funded news outlet and possibly has purchased anti-fracking online ads. Russia’s efforts have earned the attention of Texas Republican Lamar Smith, who found it necessary to launch a probe into the matter, even though he dismissed Russia’s influence on last year’s election.

Here’s why Russia, a natural-gas superpower, is spreading anti-fracking messages, and why Smith, who has largely kept mum on Russia, wants to investigate.

Fracking allowed the United States to overtake Russia as the world’s largest producer of natural gas.

Russia enjoys the largest reserves of natural gas, and for years it reigned as the world’s top producer. That was until the U.S. natural gas boom. In 2005, natural gas production took off in the United States, thanks to improvements in hydraulic fracturing and horizontal drilling that allowed producers to access previously inaccessible stores of shale gas at low cost. Gas output surged and prices fell. Over the next few years, gas overtook coal as the largest source of electricity in the country, and the United States surpassed Russia as the world’s most prolific producer of natural gas.

Russia still ranks as the world’s top gas exporter, supplying around one-third of the gas consumed by the European Union. The United States lags behind in exports, trading largely with Mexico and Canada. Because gas must be conveyed by pipeline, both the United States and Russia do most of their business with neighboring countries. Until recently, there was little risk of a turf war.

U.S. producers now want to sell gas in Russia’s backyard.

Now, however, the United States is trying to break into the European market by upping exports of liquefied natural gas (LNG), which can be shipped overseas. European countries would certainly welcome another supplier of natural gas, given their history with Russia, which cut exports to Europe amid a 2008 dispute with Ukraine. In a speech given in Europe earlier this year, Trump said, “The United States will never use energy to coerce your nations, and we cannot allow others to do so.”

For now, the United States doesn’t pose a serious threat to Russian dominance in Europe, and it faces several hurdles to becoming a real competitor. It is costly to both cool natural gas to the point where it becomes a liquid and to heat it back up again. And liquefaction facilities are sparse on both sides of the Atlantic. Russia could always cut prices to ward off overseas competitors.

That doesn’t mean Russia is happy to sit back while U.S. producers gain a toehold in Europe. Russia’s economy is dependent on fossil fuel exports. So, in an effort to undercut U.S. producers, Russia has sought to raise concerns about hydraulic fracking, the technology that made American gas so cheap.

Russia is pursuing an anti-fracking campaign in an effort to undercut U.S. gas production.

There are plenty of reasons to oppose hydraulic fracturing. The chemicals used in fracking have been linked to infertility, miscarriage and birth defects. Fracking also has been shown to cause earthquakes. And drilling sites leak methane, a potent heat-trapping gas that contributes to climate change.

Russia has pursued a multi-pronged campaign to draw attention to these risks to stir public opposition to fracking within the United States. RT, Russia’s state-funded news agency, has published articles and aired TV segments that question the safety of fracking. In a report on Russian interference in the 2016 presidential election, U.S. intelligence officials said RT’s anti-fracking programming likely reflects “the Russian Government’s concern about the impact of fracking and U.S. natural gas production on the global energy market.”

The House Science and Technology Committee is now investigating whether Russian entities bought anti-fracking ads on Facebook, Twitter, and Google. In letters to the CEOs of those companies, chairman Lamar Smith wrote that the committee is concerned that anti-fracking ads “have negatively affected certain energy sectors,” including natural gas.

In recent months, Smith suggested that Russia is bankrolling U.S. anti-fracking campaigns and called on Treasury Secretary Steven Mnuchin to investigate possible ties between environmental groups and the Kremlin. Although, there is little evidence to suggest this is the case.

Russia doesn’t care about the environment. Its goal is to undermine the United States.

Russia isn’t concerned about the environmental impact of fracking. It recently issued tax breaks to incentivize fracking. It isn’t concerned about climate change either. Russian president Vladimir Putin is notoriously skeptical of the carbon crisis. He has said that rising temperatures “wouldn’t be so bad for a northern country like Russia.” In its pledge under the Paris Agreement, Russia gave itself room to increase emissions between now and 2030. The goal of its anti-fracking campaign is to undermine the United States.

This, notably, was also its goal in the 2016 presidential election. Intelligence officials say that Russia deliberately attempted to influence the election, having “a clear preference for President-elect Trump.” Russia infiltrated the Democratic National Committee, hacked into voter databases, and shared anti-Clinton messages on Facebook and Twitter. Experts say that Putin is determined to destabilize Western democracies.

Lamar Smith doubts Russia’s influence on the 2016 election.

Smith, who is working hard to expose Russia’s anti-fracking efforts, told the Texas Standard that he doesn’t believe Russia’s efforts to influence the outcome of the 2016 presidential election had any tangible effect. “I’ve heard the accusations. I’ve heard the assertions. I haven’t seen any hard evidence,” he said.

Smith’s dismissal of Russia’s role in the elections suggests a willingness to discount the meddling of a foreign power when it’s politically convenient. Last year, Putin supported Donald Trump, Smith’s preferred candidate. (The Texas Republican said he was the “first member of Congress to contribute to Donald Trump.”) Now that Russia is going after the oil and gas industry, a major donor to Smith’s campaign committee, the Texas Republican is taking a decidedly different stance.

Lawmakers have a duty to protect the sovereignty of the United States, both by warding off foreign interference in policymaking and by guarding the integrity of elections. Smith holds a more cynical view, dismissing Russian meddling on behalf of Donald Trump, and then lambasting Russia when its activities threaten his biggest donor.

The Fake News About Natural Gas was originally published on Global Security Review.

Poland, Estonia, Latvia, and Lithuania have all expressed concerns that their dependence on the Russian power grid network increases their exposure to Russian interference in their internal affairs and presents a grave threat to their sovereignty and national security.

As Lithuanian President Dalia Grybauskaite noted, “that tool of blackmail, which was used [by Russia] to buy our politicians and meddle in our politics, will no longer exist,” should Lithuania acquire energy independence.

On June 28, 2018, Poland, the three Baltic States, and the European Union signed a deal in which all Baltic electricity systems will be connected to the Continental European Network (CEN) via Poland by 2025. The agreement is a significant step towards eliminating the Baltic states’ dependence on Russian energy, further bolstering their sovereignty as well as security.

The Polish-Lithuanian link will integrate the various power systems.

The Polish-Lithuanian interconnection, in particular, will serve to improve supply reliability for Baltic consumers, as well as open up new opportunities for energy trade and competition. The LitPol Link was set up to facilitate this integration. LitPol Link is co-owned by Polish and Lithuanian system operators.

In total, the project cost 494.4 million euros, with 244.5 million of those euros coming from the E.U.’s European Regional Development Fund. Using this system, Lithuania, as well as other Baltic countries, will be able to cultivate more diversity amongst their suppliers.

Russian actions spurred this move towards Baltic energy independence.

There is always a motivating factor, domestically or internationally, when there is a significant shift in global energy politics. In this instance, the motivator is Russian expansionism and aggression.

When Russia cut off gas flow to Ukraine in response to late payments from Ukrainian gas company Naftogaz in 2015, it was a warning signal to other states that were reliant on Russian gas. If it could happen to Ukraine, what was to say it wouldn’t happen to Lithuania or Latvia?

Since 2015, both Lithuania and Poland have worked to construct liquefied natural gas (LNG) terminals to import such gas from other countries like the United States and atar. However, even with LNG terminals, much of these countries remained heavily reliant on Russian energy.

The deal struck in late June 2018 took nine years to negotiate, revealing not only the complexity of the negotiations but the involved states’ dedication to this shift in policy, as well. One of the reasons for the deal’s timing was impending E.U. funding deadlines, in addition to potential Russian upgrades which would allow Russia to decouple from the Baltics unilaterally.

Russia remains Europe’s largest supplier of natural gas.

Interestingly, Russia has never threatened to cut off power to the Baltic states. As these negotiations have entered into their final phases, Russia has neglected to speak out against this shift aggressively. Why? Perhaps the main reason is that while Russia does face being kicked out of the Baltic states, Gazprom, Russia’s top gas producer, is still Europe’s largest supplier.

In the first half of 2018, Gazprom increased gas production by 8.7 percent, with exports to Europe rising by 5.8 percent. Gazprom’s President, Aleksey Miller, reported that gas exports to Europe could reach a record high of 200 billion cubic meters. Why worry about three small states when you already supply most of the European continent?

While Baltic states may be excited about a move towards more energy independence in Europe, the Russian share of the European gas market increased to 34 percent last year. It may seem more reasonable for these countries to see this new opportunity as an option to diversify amongst suppliers, but Europe is caught between a rock and a hard place when it comes to gas diversification.

Russian gas will always be cheaper and more reliable than LNG from other countries such as the United States and Qatar. As such, are the Baltic states moving away from Russian reliance, or are they just shifting towards a new political reality where a wall of European bureaucracy serves to mitigate the immediate threat of Russian influence?

Poland and Baltic States Reduce Reliance on Russian Energy was originally published on Global Security Review.

It is often said, perhaps with some hyperbole, that Iran’s nuclear deal with world powers was the best hope for conflict resolution in the Middle East. Its architect John Kerry argues instead that the 2015 deal’s limited parameter of closing Iran’s pathway to a nuclear weapon is sufficient on the merits. The Trump administration is taking a different view, focusing on Iran’s escalating threats to U.S. allies Israel, Saudi Arabia, and the United Arab Emirates. Those threats, which have included missile, drone, and cyberattacks on Saudi oil facilities, are looming large over the global economy because they are squarely influencing the volatility of the price of oil. One could argue that the U.S. decision to withdraw from the Iranian deal, referred to as the Joint Comprehensive Plan of Action (JCPOA), has injected an even higher degree of risk into oil markets, where traders now feel that the chances of Mideast conflict resolution are lower.

But, the Trump administration could argue otherwise. From its perspective, the United States extended to Iran $6 billion in frozen funds, opened the door for a flood of spare parts to be shipped into Iran’s suffering oil and petrochemical sector, and looked the other way while European companies rushed in for commercial deals. In exchange, it’s true, Iran began to implement the terms of JCPOA, but as Secretary of State Pompeo laid out in a major speech on the subject, the nuclear deal has failed to turn down the heat on the wide range of conflicts plaguing the Mideast region.

Rather, Secretary Pompeo explained, Iran’s proxies have raised the stakes for U.S. allies, and regional conflicts have been dangerously escalating. U.S.-Iranian exchanges in Syria are also on the rise. The deal could still move forward, according to Secretary Pompeo, but not until Tehran addresses a laundry list of U.S. demands. Washington expects its action and rhetoric to spur more productive negotiations that would allow the United States to link restoring the nuclear deal with political negotiations to de-escalate conflicts. Since re-imposition of renewed oil sanctions doesn’t take hold for several months, wiggle room still exists for such diplomacy. But markets reflect doubt about those chances, reflecting the view of many respected commentators. Oil prices hit $80 a barrel and even the five-year forward oil price rose above $60 for the first time since the end of 2015. Speculators are still holding substantial long positions and industry has been slower to hedge, lest oil prices go higher still.

In the world of oil, it’s hard to compartmentalize complex geopolitical conflicts. In condemning the Trump administration’s move, Iran’s hardliners actually accused the United States of withdrawing from the JCPOA to raise the price of oil and called on the Organization of Petroleum Exporting Countries (OPEC) to raise its production to resist the United States. In a tweet from the Iranian Oil ministry via @VezaratNaft on May 11, Iranian oil minister Bijan Namdar Zangemeh is quoted as saying “President Trump playing double game in oil market. Some OPEC members playing into U.S. hands. U.S. seeking to boost shale oil production.” Simultaneously, Iranian media promulgated a spurious rumor that Saudi leader Crown Prince Mohammed bin Salman had been assassinated. The context for both was dialogue between the United States and its regional Arab allies (kicked off by a Trumpian tweet on OPEC) on the need to cool off the overheated oil market with higher oil production to ensure that the re-imposition of sanctions did not destabilize markets further.

In seeking “better terms” for the Iranian nuclear deal, the Trump administration is counting on the fact that the Iranian government faces more internal opposition from its population than it did when the deal was negotiated back in 2015. That popular discontent is palpable and explains why the Iranian rhetorical response to the U.S. withdrawal announcement has been relatively mild compared to historical precedents. But this is no cakewalk, since Iran is counting on Europe and other major trading partners to resist U.S. sanction efforts.

In recent years, China has established its own networks of financial channels and institutions that could be used to allow Chinese companies to pay Iran in its currency, the yuan, in a manner that avoids the Brussels-based SWIFT financial messaging system, which can be subject to U.S. tracking and intervention. China has already tested using the yuan to pay for imports from Russia and Iran via China National Petroleum Corporation’s Bank of Kunlun. The Tehran-based business daily The Financial Tribune suggested that other countries, including Europe, could tap “alternative Chinese financial networks.” But the practicalities of China taking the lead on behalf of Tehran when other U.S.-China bilateral trade issues loom large is more complicated now than it was back in 2012. In 2012, China agreed to meet the Obama administration’s request that it cut its Iranian imports by the minimum 20 percent. As robust a response as the United States may now say it wants from Beijing on Iran, Washington similarly has to consider other priorities on the table with China right now, including negotiations regarding North Korea.

Iran has been exporting roughly two million barrels a day (b/d) of crude oil. Europe purchases over a quarter of that volume and is—if push comes to shove—likely to go along with U.S. policy if no diplomatic progress can be made. For now, European leaders are trying diplomacy to keep the nuclear deal alive separately from the United States and to press Iran to address some of the common concerns on Secretary Pompeo’s list. Back in 2012, Europe cut virtually all of its oil imports from Iran. Japan had already conservatively lowered its purchases from Iran in March and even India’s oil giant IOC is now saying publicly that it is looking for alternative barrels to replace its 140,000 b/d of purchases from Iran, suggesting the oil will be made available to India from Saudi Arabia. South Korea is also expected to wind down its purchases from Iran given the imperative to display common ground with the United States; Seoul has already reduced purchases from 360,000 b/d last year to 300,000 b/d more recently. In sum, although Iran can conduct oil for goods barters with Russia and Turkey, it could potentially lose one million b/d of sales or more, if it the current geopolitical stalemate stands.

But more is at stake for Iran than short run oil sales since Tehran has learned it can get those back eventually if the political will towards sanctions wears off over time. The curtailment again of international investment in its natural gas industry is a bigger setback for Tehran, which needs natural gas not only to inject into its oil fields to drive production but also for residential and commercial use. If the United States manages to drive French firm Total back out of the important South Pars natural gas venture, the chances of Iran reestablishing itself as a major liquefied natural gas (LNG) exporter dissipates once again, possibly this time for decades given potential U.S. exports and other market conditions. China, which is also an investor in South Pars, does not have experience developing LNG exporting projects. Unfortunately, the global natural gas stakes could make it harder to draw Russia along with any U.S.-led conflict resolution effort. Even if Tehran was willing to cooperate in Syria or Yemen, Russia—a major natural gas exporter to Europe and Asia—benefits from U.S. sanctions that block competition from Iranian exports. Motivating the Kremlin into any diplomatic deal that restores U.S.-Iranian cooperation could be a heavy lift.

Russia is expected to begin supplying natural gas by pipeline to China via the Power of Siberia pipeline by late 2019 but Russia’s Gazprom has had difficulty locking down sales to China from additional pipeline routes. Successful negotiations on the Korean peninsula could help in that regard, since one potential fix to North Korea’s energy needs could be a Russian gas peace pipe. But the availability of direct natural gas exports to China and South Korea from the United States muddies the waters further.

Beyond holding Iran out of the long run natural gas market, Russia could similarly be unwilling to agree to conflict resolution in Yemen and Syria because of the benefit it enjoys from keeping Saudi Arabia under financial and political pressure. Riyadh’s economic pressures, driven in part from its high military spending in Yemen, have made Saudi Arabia all the more willing to collaborate with Moscow on managing oil markets—a geopolitical reality that has strengthened Russia’s global standing significantly. It’s hard to see what would motivate the Kremlin to let Saudi Arabia off the hook given that a resumption of a tight alliance with Washington and Qatar is a material danger to Russia’s geopolitical and economic well-being, as demonstrated when the three countries collaborated in the early 2010s to weaken Moscow’s grip on European energy markets.

Russia’s posture is not the only barrier, however, to conditions that would allow progress on U.S.-Iranian conflict resolution. Even if the economic penalty of the re-imposition of U.S. sanctions were sufficient to motivate Iran back to the negotiating table, it remains unclear to what extent Tehran can influence its own proxies who have independent goals that could not align fully with any conflict resolution deal Iran could strike with the United States and its allies. Moreover, it is similarly unclear whether the United States could draw Saudi Arabia into a workable political settlement for Yemen. Thus, while the United States could have a strategy in mind that could improve upon the status quo in the Middle East, a deeper dive into the energy realpolitik of the matter shows the complexities that stand in the way of progress. With so much at stake, an incredibly disciplined and patient hand will be necessary to work through the wide host of internecine, interconnected issues.

The Complicated Geopolitics of U.S. Oil Sanctions on Iran was originally published on Global Security Review.

On one level this is a story about changes in relative costs. The costs of solar and wind have plunged while nuclear has become almost astoundingly expensive. But this raises the question of why this came about. As I argue in my new book, Low Carbon Politics, it helps to dip into cultural theory.

Culture wars

The seminal text in this field, Risk and Culture (1982), by the British anthropologist Mary Douglas and American political scientist Aaron Wildavsky, argues the behavior of individuals and institutions can be explained by four different biases:

1. Individualists: people biased towards outcomes that result from competitive arrangements;
2. Hierarchists: those who prefer ordered decisions being made by leaders and followed by others;
3. Egalitarians: people who favor equality and grassroots decision-making and pursue a common cause;
4. Fatalists: those who see decision-making as capricious and feel unable to influence outcomes.

The first three categories help explain different actors in the electricity industry. For governments and centralized monopolies often owned by the state, read hierarchists. For green campaigning organizations, read egalitarians, while free-market-minded private companies fit the individualist bias.

The priorities of these groups have not greatly changed in recent years. Hierarchists tend to favor nuclear power, since big power stations make for more straightforward grid planning, and nuclear power complements nuclear weapons capabilities considered important for national security.

Egalitarians like Greenpeace and Friends of the Earth usually oppose new nuclear power plant and favor renewables. Traditionally they have worried about radioactive environmental damage and nuclear proliferation. Individualists, meanwhile, favor whichever technologies reduce costs.

These cultural realities lie behind the problems experienced by nuclear power. To compound green opposition, many of nuclear power’s strongest supporters are conservative hierarchists who are either skeptical about the need to reduce carbon emissions or treat it as a low priority. Hence they are often unable or unwilling to mobilize climate change arguments to support nuclear, which has made it harder to persuade egalitarians to get on board.

This has had several consequences. Green groups won subsidies for renewable technologies by persuading more liberal hierarchists that they had to address climate change – witness the big push by Greenpeace and Friends of the Earth for the feed-in tariffs that drove solar uptake in the late 2000s, for example. In turn, both wind and solar have been optimized, and their costs have come down.

Nuclear largely missed out on these carbon-reducing subsidies. Worse, greens groups persuaded governments as far back as the 1970s that safety standards around nuclear power stations needed to improve. This more than anything drove up costs.

As for the individualists, they used to be generally unconvinced by renewable energy and skeptical of environmental opposition to nuclear. But as relative costs have changed, they have increasingly switched positions.

The hierarchists are still able to use monopoly electricity organizations to support nuclear power, but individualists are increasingly pressuring them to make these markets more competitive so that they can invest in renewables more easily. In effect, we are now seeing an egalitarian-individualist alliance against the conservative hierarchists.

Both sides of the pond

Donald Trump’s administration in the US, for example, has sought subsidies to keep existing coal and nuclear power stations running. This is both out of concern for national security and to support traditional centralized industrial corporations – classic hierarchist thinking.

Yet this has played out badly with individualist corporations pushing renewables. Trump’s plans have even been rejected by some of his own appointments on the Federal Energy Regulatory Commission.

In similarly hierarchist fashion, electricity supply monopolies in Georgia and South Carolina started building new nuclear power stations after regulatory agencies allowed them to collect mandatory payments from electricity consumers to cover costs at the same time.

Yet even hierarchists cannot ignore economic reality entirely. The South Carolina project has been abandoned, and the Georgia project only survives through a very large federal loan bailout.

Contrast this with casino complexes in Nevada like MGM Resorts not only installing their own solar photovoltaic arrays but paying many millions of dollars to opt out from the local monopoly electricity supplier. They have campaigned successfully to win a state referendum supporting electricity liberalization.

The UK, meanwhile, is an example of how different biases can compete. Policy has traditionally been formed in hierarchical style, with big companies producing policy proposals which go out to wider consultation. It’s a cultural bias that favors nuclear power, but this conflicts with a key priority dating back to Thatcher that technological winners are chosen by the market.

This has led policymakers in Whitehall to favor both renewables and nuclear, but the private electricity companies have mostly refused to invest in nuclear, seeing it as too risky and expensive. The only companies prepared to plug the gap have been more hierarchists – EDF, which is majority-owned by France, and Chinese state nuclear corporations.

Even then, getting Hinkley C in south-west England underway – the first new nuclear plant since the 1990s – required an extensive commitment by the UK Treasury to underwrite bank loans. There is also an embarrassingly high price to be paid for the electricity over a very long 35-year period. Such has been the bad publicity that it’s hard to imagine a politician agreeing to more plant on such terms.

Where does this reality leave hierarchists? Increasingly having to explain prohibitive nuclear costs to their electorates – at least in democracies. The alternative, as renewable energy becomes the new orthodoxy, is to embrace it.

In Australia, for example, a big utility company called AGL is trying to seduce homeowners to agree to link their solar panels to the company’s systems to centralize power dispatch in a so-called a “virtual power plant.”

When the facts change, to misquote John Maynard Keynes, you can always change your mind.

The Unholy Alliance That Explains Why Renewable Energy is Trouncing Nuclear was originally published on Global Security Review.

As Germany and Russia begin construction phases for the Nord Stream 2 pipeline underneath the Baltic Sea, Polish lawmakers echoed by U.S. Secretary of State Rex Tillerson continue to oppose its construction. Polish Prime Minister Mateusz Morawiecki asked the United States to consider extending sanctions that would hamper its development. Secretary Tillerson has stated that he sees the Nord Stream 2 pipeline as a threat to European energy security.

What do gas pipelines and security have to do with one another? The United States and Poland both consider the Nord Stream 2 pipeline to be a potential political tool for Russia. Both countries have raised the frightening possibility that Russia could use the flow of gas as geopolitical leverage in Europe. In other words, if political tensions escalated significantly to Russia’s detriment, the Kremlin could just turn off the tap.

What is Nord Stream 2?

The Nord Stream 2 pipeline will link Germany and Russia, bypassing several Eastern European states. Once constructed, it will be one of the world’s longest offshore pipelines measuring at over 745 miles (1,200 kilometers). Once it makes landfall, natural gas from Russia will flow through to access European energy markets.

Permits were granted to begin construction on the Nord Stream 2 pipeline in the landfall area in Lubmin, near Greifswald, Germany on January 31, 218. The Stralsund Mining Authority issued the permits. Other countries that will need to also provide licenses to Nord Stream 2 are Russia, Finland, Sweden, and Denmark. The scheduled completion of the pipelines is marked for the end of 2019.

Europe will face a deficit of 120 billion cubic meters of gas over the next two years. Nord Stream 2 and LNG aim to mitigate that gap. In response to claims that Nord Stream 2 is will place Europe under Russian influence, the gas company claims that Russian gas makes up approximately thirty percent share of EU energy consumption. Even with the construction of Nord Stream 2, Russian gas exports to Europe are not expected to increase or decrease drastically.

Energy diversification as a tool of political power.

Energy diversification has long been the desired policy of European states. However, with the expansion of Russian natural gas pipelines across Europe and Eurasia – that possibility grows smaller. Smaller countries like Poland are naturally worried about the intentions that a monopoly on gas could cost Europe. Poland has started imported liquid natural gas (LNG) from the United States, but overall – the majority of energy comes directly from Russia.

One of the more significant questions is whether or not this is a situation that requires a negotiation mandate from the European Commission. Does Germany need permission from the EU for this project? Countries like Poland would say yes. However, Germany doesn’t believe there is a need for it. With that comes a degree of regulatory uncertainty. Furthermore, the question of how seriously Bulgaria will take energy diversification when it takes up the EU Council presidency remains unanswered.

Another issue that arises is that Ukraine makes around 1 billion USD annually from transport costs of Russia using their territory to access Europe. With the Nord Stream 2 in place, that will no longer be the case. Bulgaria, like Ukraine, is also highly dependent on Russian gas. On the security front, how will Nordic countries handle construction preparation with a more aggressive Russia on their literal sea borders?

Taking all of this into account, however, Nord Stream 2 will translate more gas and in turn more competitive pricing for European consumers. As a political tool, though, the Nord Stream 2 pipeline is a potentially useful way for Russia to increase its influence in the European Union, which has restricted Russia’s economic activities through sanctions that were levied in the aftermath of Russia’s annexation of Crimea. It remains to be seen, at present, whether or not the Nord Stream 2 pipeline is a vehicle for Russian foreign policy and political influence.

The Nord Stream 2 Pipeline Threatens European Energy Security was originally published on Global Security Review.

Over the last couple of weeks, the Gulf region has been on a rollercoaster ride. Risk analysts are struggling to deal with the dramatically changing geopolitical and financial environment while a direct military confrontation between the Saudi-led alliance and Iran’s proxies is around the corner.

The signals coming from the Saudi capital Riyadh are still the same; Saudi Vision 2030 and the Aramco IPO are on track. The media remains skeptical about the unforeseen crackdown on corruption, a week after the so-called “Davos in the Desert” financial get-together in Riyadh (October 24-26), where 3,500 CEOs and financial wizards convened.

The fallout of the direct attack on Saudi Arabia’s financial moguls and construction giants, such as Prince Al-Waleed bin Talal and the Binladin Group, would put fear in the heads of investors in New York, London, Beijing, and Moscow.

Most agreed that bin Salman overplayed his hand, causing instability in the country and the region.The reality for insiders, however, looks different.

The anti-corruption crackdown by MBS is part of his overall strategy to implement Vision 2030. First of all, the Davos in the Desert meeting showed the financial world’s immense interest in investment opportunities in the kingdom. Considering that 99 percent of the attendees had never visited Saudi Arabia before, while only the speakers already represented a $22 trillion value of assets under management, MBS could tick off another box on his long list to make Vision 2030 a success.

At the same time, the Trump Administration and the UK government tried to woo MBS to list the Aramco IPO on their stock exchanges. Some would have become more lenient towards a flexible approach when looking at the amount of interest, but MBS upped the ante and pushed for new hard-needed changes. The anti-corruption crackdown was carefully considered and timely and served not only to remove corruption in the kingdom but can also be seen as a way to remove remaining opposition to MBS’s future reign.With military precision, MBS removed most of the obstacles still blocking a possible MSCI Emerging Markets Index listing in 2018.

By taking out high-profile businessmen that were already convicted several times for corruption and removing princes that held commanding positions within the armed forces, MBS moved the kingdom towards a more modern economy while consolidating his own power. The inclusion of the kingdom in the MSCI index will bring a multitude of FDI, much larger than the Aramco IPO. The MSCI Emerging Markets Index, for example, gives European pension and investment funds the possibility to invest in the kingdom and trade on its stock exchange. The Saudis have reportedly already attracted $9 billion in recent weeks. Some analysts are much more optimistic when looking at the long range of IPOs planned on the Tadawul (Saudi stock exchange).

MBS’s domestic popularity has increased in recent months. The Crown Prince has great support among the youth and has shown to be listening to the majority of his people while being unafraid to make dramatic changes to outdated social structures within the kingdom. Still, MBS understands internal Saudi politics and will try not to completely upset the establishment.

At the same time, regional instability and unrest complicate MBS’s agenda.

The confrontation between Arab nations and Iran has reached a tipping point. And looking at the statements made by UAE’s minister of foreign affairs on November 12 during the Emirates Policy Center’s Abu Dhabi Strategic Debates (ADSD2017) on Sky Arabia shocked the audience. The direct attack and accusations vented towards Iran and Qatar, both accused of promoting instability, financing terrorism, and extremism, were of an unprecedented tone. Gargash also accused both of committing “acts of war”, especially via arming Houthis in Yemen and Hezbollah. These accusations are openly supported and repeated by a long list of Arab politicians and leaders.

The war drums are being banged—and this time not as an empty threat, but as a precursor to real military action. Most analysts are looking to Riyadh, as they expect MBS to lead this operation against Lebanon’s Hezbollah and the Iranian IRGC; most likely the lead will be taken by the UAE.

Expect military action in the coming weeks, with—or without Washington’s support.

The political show around Lebanese PM Hariri is only part of this. Analysts tend to forget that Hariri’s real power is in Saudi Arabia, where he is the owner of construction giant OGER, currently under investigation as it is in financial trouble. MBS has taken the opportunity to kill two birds with one stone and remove OGER out of the picture in Saudi Arabia while destabilizing Lebanon. This was organized in close cooperation with other Arab leaders. Sheikh Mohammed Bin Zayed, a close friend of MBS, will head the anti-IRGC venture, as Abu Dhabi has been doing for years under the radar in Yemen, Syria and especially Libya.

Military action can be expected, with or without the support of Washington. As several Arab ministers and advisors have stated in recent days, it’s time for Arabs to take the future into their own hands. Washington can support, but not lead. If no American assistance is given, others will undoubtedly fill the gap. Moscow has been extremely quiet the last weeks, not indicating any support for Tehran nor trying to mitigate between the Riyadh-Abu Dhabi axis and Iran-Hezbollah. These plans seem to have already been discussed in the respective capitals, as ministers of the said countries have convened in several places.

If action is taken against Iran and its proxies, OPEC and oil prices will be impacted immediately. Oil price increases of $5-10 per barrel a day could be a distinct possibility. An escalation in Lebanon, due to the inclusion of Israel in the action, or maritime traffic attacks in the Gulf, would only push prices up further. After years of low geopolitical risk premiums, risk has returned to the market. This time, however, they are new players, unknown to the majority of risk analysts. MBS and Iran will put volatility back on the market where it belongs.

Saudi Corruption Crackdown Could Permanently Boost Oil Prices was originally published on Global Security Review.