Our Best New Foreign Policy Tool: Energy

By Alexander Mirtchev

To date, the extensive policy debate over production of non-traditional fossil fuels, such as shale gas, and the resulting possibility for the use of those resources by the United States has not adequately focused on an important consideration: the geo-economic and foreign policy implications and advantages to the United States, its allies, and global economic security overall, stemming from these new fossil fuel resources.

Our Best New Foreign Policy Tool: Energy

By Alexander Mirtchev 
From site: http://www.emergingmarketsnews.com/archive/Our-Best-New-Foreign-Policy-Tool-Energy

To date, the extensive policy debate over production of non-traditional fossil fuels, such as shale gas, and the resulting possibility for the use of those resources by the United States has not adequately focused on an important consideration: the geo-economic and foreign policy implications and advantages to the United States, its allies, and global economic security overall, stemming from these new fossil fuel resources.

New gas resources and exports of liquefied natural gas (LNG) from the U.S. are an added economic resource, which can allow the U.S. to mitigate its own and the reliance of many of its allies in Europe on external sources of fossil fuels. Europe is extensively dependent on gas imports, especially from Russia, as well as Algeria, Qatar and others. According to the International Energy Agency, Europe depended on oil and gas imports for over 60% of its demand in 2010, and this dependence is set to increase to over 80% by 2035. At the same time, the external energy suppliers to the EU have demonstrated their willingness to use the leverage of European energy dependence for foreign policy purposes. Several times in recent history, Russian disputes with countries through which those pipelines transit – most notably disputes with the Ukraine in 2006 and 2009 – have caused either actual supply shortages or fear of supply shortages to Europe, which was sufficient to roil the local markets. The simple knowledge that Europe depends on foreign gas has allowed exporters to use producer power as a foreign policy leverage.

The preferred manner of transporting gas to European markets has been pipelines, but currently only one meaningful alternative pipeline route is being developed – from Azerbaijan to Europe – to provide a check on Russian natural gas power. This raises the importance of LNG, the other alternative form of supplying distant markets. Because LNG is transported in vessels, supply is not limited by pipeline infrastructure but instead can be delivered to various markets so long as LNG regasification facilities exist. European countries such as Belgium, France, Italy, the Netherlands, Portugal, and Spain currently import LNG. Additional LNG regasification facilities and increased supplies of LNG on the world market will increase European energy security. This is where the U.S. is in position to become an adequate optional source of energy and energy security for its European allies.

With huge supplies of natural gas and the technical capability to produce large quantities of gas on a steady basis for years to come, the introduction of meaningful volumes of U.S. LNG into world markets will disrupt the current market, threaten the incumbents and ultimately lead to the creation of a liquid global spot market for LNG. It will not require duplicative infrastructure, only sufficient adjustments and adaptation to ensure that loss of other suppliers will not constrain consumers. Once European buyers are able to tap into liquid global markets rather than long-term contracts with one or two suppliers, they will be less intimidated by prospects of shutdown or other forms of manipulation of gas deliveries. The mere availability of adequate LNG regasification infrastructure and supply may be all that is necessary to prevent gas exporters from using natural gas supply as geopolitical leverage, nudge them to take diversification seriously and spur a wave of market reforms, contributing to the improvement of global economic security.

The geopolitical opportunities presented by the shale revolution and the prospect of LNG exports cannot be underestimated, and yet these considerations seem to rarely factor into the current debate in the US about LNG exports. The economic rationale for increased LNG exports from the US have been well documented. A recent IHS study puts the increase in US industrial production at $252 billion by 2020, thanks to lower energy prices in the US and other economic ‘spillovers’ from unconventional oil and gas. The objections fall into two categories: (i) those large US industrial consumers that benefit from low natural gas prices and thus for parochial reasons want to limit demand by closing off export markets in order to keep an imbalance between supply and demand that results in artificially low prices; and (ii) environmental interests opposed to hydraulic fracturing used to produce much US natural gas and who therefore want to close off export markets in order to try to limit natural gas production. While the economic case alone outweighs these objections, the case for US LNG exports becomes even stronger when one further takes into account how US LNG exports stand to advance US foreign policy, geo-economic and geopolitical interests.


Dr. Mirtchev is an economist who frequently writes on global economic security and energy issues.

How the Alternative Energy Megatrend will impact global geopolitical relations

The Greening of Geopolitics.

The advent of renewable energies is generally regarded from a fairly narrow perspective: whether – and to what extent – they are able to replace fossil fuels and what this would mean for the energy system and the economy. Such a perspective profoundly underestimates the potential consequences of what is in fact a revolutionary global development: a socio-political and techno-economic megatrend that has the ability to become a global societal game-changer, writes Alexander Mirtchev, Vice-President of the Royal United Services Institute for Defence and Security Studies (RUSI). According to Mirtchev, the ‘Alternative Energy Megatrend’ will have far-reaching effects on global geopolitical relations and security concerns – effects that have yet to be fully grasped by most observers. This article is adapted from his upcoming book: “The Alternative Energy Megatrend: A Global Security Discourse in the Universally-Securitized World”.

Our Best New Foreign Policy Tool: Energy

By Alexanser Mirtchev

To date, the extensive policy debate over production of non-traditional fossil fuels, such as shale gas, and the resulting possibility for the use of those resources by the United States  has not adequately focused on an important consideration: the geo-economic and foreign policy implications and advantages to the United States, its allies, and global economic security overall, stemming from these new fossil fuel resources.

New gas resources and exports of liquefied natural gas (LNG) from the U.S. are an added economic resource, which can allow the U.S. to mitigate its own and the reliance of many of its allies in Europe on external sources of fossil fuels. Europe is extensively dependent on gas imports, especially from Russia, as well as  Algeria, Qatar and others. According to the International Energy Agency, Europe depended on oil and gas imports for over 60% of its demand in 2010, and this dependence is set to increase to over 80% by 2035. At the same time, the external energy suppliers to the EU have demonstrated their willingness to use the leverage of European energy dependence for foreign policy purposes. Several times in recent history, Russian disputes with countries through which those pipelines transit – most notably disputes with the Ukraine in 2006 and 2009 – have caused either actual supply shortages or fear of supply shortages to Europe, which was sufficient to roil the local markets. The simple knowledge that Europe depends on foreign gas has allowed exporters to use producer power as a foreign policy leverage.

The preferred manner of transporting gas to European markets has been pipelines, but currently only one meaningful alternative pipeline route is being developed – from Azerbaijan to Europe – to provide a check on Russian natural gas power. This raises the importance of LNG, the other alternative form of supplying distant markets. Because LNG is transported in vessels, supply is not limited by pipeline infrastructure but instead can be delivered to various markets so long as LNG regasification facilities exist. European countries such as Belgium, France, Italy, the Netherlands, Portugal, and Spain currently import LNG. Additional LNG regasification facilities and increased supplies of LNG on the world market will increase European energy security. This is where the U.S. is in position to become an adequate optional source of energy and energy security for its European allies.

With huge supplies of natural gas and the technical capability to produce large quantities of gas on a steady basis for years to come, the introduction of meaningful volumes of U.S. LNG into world markets will disrupt the current market, threaten the incumbents and ultimately lead to the creation of a liquid global spot market for LNG. It will not require duplicative infrastructure, only sufficient adjustments and adaptation to ensure that loss of other suppliers will not constrain consumers. Once European buyers are able to tap into liquid global markets rather than long-term contracts with one or two suppliers, they will be less intimidated by prospects of shutdown or other forms of manipulation of gas deliveries. The mere availability of adequate LNG regasification infrastructure and supply may be all that is necessary to prevent gas exporters from using natural gas supply as geopolitical leverage, nudge them to take diversification seriously and spur a wave of market reforms, contributing to the improvement of global economic security.

The geopolitical opportunities presented by the shale revolution and the prospect of LNG exports cannot be underestimated, and yet these considerations seem to rarely factor into the current debate in the US about LNG exports. The economic rationale for increased LNG exports from the US have been well documented. A recent IHS study puts the increase in US industrial production at $252 billion by 2020, thanks to lower energy prices in the US and other economic ‘spillovers’ from unconventional oil and gas. The objections fall into two categories: (i) those large US industrial consumers that benefit from low natural gas prices and thus for parochial reasons want to limit demand by closing off export markets in order to keep an imbalance between supply and demand that results in artificially low prices; and (ii) environmental interests opposed to hydraulic fracturing used to produce much US natural gas and who therefore want to close off export markets in order to try to limit natural gas production. While the economic case alone outweighs these objections, the case for US LNG exports becomes even stronger when one further takes into account how US LNG exports stand to advance US foreign policy, geo-economic and geopolitical interests.

Dr. Mirtchev is an economist who frequently writes on global economic security and energy issues.

Deep Thoughts by Alexander Mirtchev

Ashby Monk

For a variety of reasons, SWF employees are typically quite reserved and guarded when speaking to the press. Not so for Dr. Alexander Mirtchev, who is the Independent Director and a member of the Board of Directors of Kazakhstan’s $30 billion National Welfare Fund Samruk-Kazyna.

 

Alexander Mirtchev

The Economist: “The Fed's have-it-both-ways policy”

R.A., regarding Bernanke’s Jackson Hole speech, your column notes that you “found the tone on monetary policy to be confusing and timid.” Expectations now turn to what President Obama will say next week and what the Fed will do (or not do) when they next meet. Uncertainty again prevails.

Alexander Mirtchev

Will Financial Regulation Trash Global Economic Security?

Alexander Mirtchev, Contributor

 

Under the auspices of the Financial Stability Board, more than 30 recommendations have been set out as part of a massive and far-reaching G-20 financial regulatory reform package to ostensibly minimize risk in the financial system and maximize consumer protection.

How the Alternative Energy Megatrend will impact global geopolitical relations

The Greening of Geopolitics

By Dr Alexander Mirtchev

The advent of renewable energies is generally regarded from a fairly narrow perspective: whether – and to what extent – they are able to replace fossil fuels and what this would mean for the energy system and the economy. Such a perspective profoundly underestimates the potential consequences of what is in fact a revolutionary global development: a socio-political and techno-economic megatrend that has the ability to become a global societal game-changer, writes Alexander Mirtchev, Vice-President of the Royal United Services Institute for Defence and Security Studies (RUSI). According to Mirtchev, the ‘Alternative Energy Megatrend’ will have far-reaching effects on global geopolitical relations and security concerns – effects that have yet to be fully grasped by most observers. This article is adapted from his upcoming book: “The Alternative Energy Megatrend: A Global Security Discourse in the Universally-Securitized World”.

Alternative Energy And Global Energy Security In Aftermath Of Rio+20

“Life always gets harder toward the summit–the cold increases, the responsibility increases.” These words by Friedrich Nietzsche aptly characterize the atmosphere among global leaders at June’s international summits.

Alternative Energy And Global Energy Security In Aftermath Of Rio+20

By Alexander Mirtchev, Contributor

 

“Life always gets harder toward the summit–the cold increases, the responsibility increases.” These words by Friedrich Nietzsche aptly characterize the atmosphere among global leaders at June’s international summits.

Gold Prices Struggle to Stay Near $1, 700

Gold prices fell Wednesday on negative economic news from China and Europe plus concerns that the world's No. 1 economy is barely advancing.

Dr. Alexander Mirtchev Discusses the U.S. Government's Measures to Deal With the Global Economic Crisis and Stresses the Imperative for Viable Exit Strategy on the Riz Khan Show

Dr. Alexander Mirtchev, founder and president of Krull Corporation, discussed the U.S. government's actions in response to the crisis in the economy on Al-Jazeera's Riz Khan Show. The complexities created by the precarious economic and financial situation are exacerbated by what is perceived as a "failure of the reigning 'social contract'" between Main Street, Wall Street and the U.S. government. "To put it simply, Main Street was relying on Wall Street to go about its business, with the government perceived as the arbiter and even guarantor of sure returns. Presently, the collapse of this 'contract' is giving rise to calls from different quarters for overhauling the whole system," according to Dr. Mirtchev.

Securing global economic security

Inflation is a significant factor of global economic security and has the innate capacity to upend carefully laid plans