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1. A Concert in Energy Security: Building Trans-Atlantic Cooperation to Confront a Growing Threat

Author:
Richard G. Lugar
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Journal of Diplomacy and International Relations
Institution:
School of Diplomacy and International Relations, Seton Hall University
Abstract:
It is a pleasure to be here today at the American Council on Germany. As a member of the Council’s Congressional Advisory Committee, I applaud the effort that brought this group of leaders together to discuss the challenges that we face and the need for a unified response. In today’s geo-strategic environment, few threats are more perilous than the potential cutoff of energy supplies. The use of energy as a weapon is not a theoretical threat of the future; it is a current reality. Those who possess energy are using it as leverage against their neighbors. In the years ahead, the most likely source of armed conflict in the European theater and the surrounding regions will be energy scarcity and manipulation. We all hope that the economics of supply and pricing in the energy market will be rational and transparent. We hope that nations with abundant oil and natural gas will reliably supply these resources in normal market transactions to those who need them. We hope that pipelines, sea lanes, and other means of transmission will be safe. We hope that energy cartels will not be formed to limit available supplies and manipulate markets. We hope that energy-rich nations will not exclude or confiscate productive foreign energy investments in the name of nationalism. And we hope that vast energy wealth will not be a source of corruption within nations whose people desperately ask their governments to develop and deliver the benefits of this wealth broadly to society. Unfortunately, our experiences provide little reason to be confident that market rationality will be the governing force behind energy policy and transactions. The majority of oil and natural gas supplies and reserves in the world are not controlled by efficient, privately owned companies. Geology and politics have created oil and natural gas superpowers. According to PFC Energy, foreign governments control up to 79 percent of the world’s oil reserves through their national oil companies. These governments set prices through their investment and production decisions, and they have wide latitude to shut off the taps for reasons of politics and power.
Topic:
International Cooperation, Transatlantic Relations, and Energy Security
Political Geography:
Europe and United States of America

2. The North Atlantic Treaty Organization’s Future Role in Energy Security

Author:
Thierry Legendre
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Journal of Diplomacy and International Relations
Institution:
School of Diplomacy and International Relations, Seton Hall University
Abstract:
Energy security is a broad and evolving concept. In the seventies, it was primarily linked to enhancing conservation and developing political strategies to secure guaranteed Western energy supplies in the Middle East. Today the term has widened to include risks such as underinvestment in infrastructure, which can lead to massive power outages, and poorly designed markets, as well as disruption to energy supplies due to natural disasters, accidents, and international terrorism. Unlike thirty years ago, there is a much greater number of suppliers and consumers in play on all five continents, whose interests must be balanced. The issue has become truly globalized. With the North Atlantic Treaty Oraganization’s (NATO) November 2006 summit in Riga behind us, there is no question as to whether or not energy security is a relevant topic for NATO. Indeed, during the Riga summit, the NATO heads of state all agreed that energy security was an issue of critical importance that NATO should address.
Topic:
NATO, Infrastructure, and Energy Security
Political Geography:
Europe and North America

3. Energy Security: Meeting the Growing Challenge of National Oil Companies

Author:
Matthew E. Chen and Amy Myers Jaffe
Publication Date:
09-2007
Content Type:
Journal Article
Journal:
The Journal of Diplomacy and International Relations
Institution:
School of Diplomacy and International Relations, Seton Hall University
Abstract:
Last February, Hugo Chavez decreed a staged nationalization in a drive to take over large segments of the Venezuelan economy as part of his revolutionary vision for the country. Specifically, the Chavez government set its sights on the oil industry, giving notice to foreign oil companies—including US firms—that they had until June 26 to reduce their ownership in Venezuelan Orinoco Belt heavy oil field projects so that the state could take at least a 60 percent share. This year alone, the Venezuelan government has already formed the Venezuelan Electricity Corporation, comprised of all state electricity utilities, to ensure state control of the electricity sector. It has also initiated the takeover of CANTV, the country’s biggest telecommunications operator. Chavez also has threatened to nationalize Venezuela’s banking sector unless banks “give priority to financing [the country’s] industrial sectors.”1 Commenting on his drive for “21st century socialism,” the president said that “I’m not deceiving anyone. I’m only governing the country, and the country has elected me various times. ...All of those who voted for me backed socialism, and that is where we are heading.”2 Venezuelan Oil Minister Rafael Ramirez threatened in early May that US oil giant ConocoPhillips would be kicked out of Venezuela altogether if it tried to drive a hard bargain for turning over shares in its fields in the Orinoco Belt. The official US reaction has been muted. On May 1, 2007, US State Department spokesman Sean McCormack said Venezuela’s negotiations with oil companies “will proceed as they will,” but that Chavez’s broader actions, including withdrawing from the World Bank and International Monetary Fund, were “digging a hole for the Venezuelan people.”3 The US has a long tradition of circumspect responses to the moves of national oil companies. The US has responded tepidly to many moves since the 1930s when Mexico nationalized the oil field holdings of US oil companies. In the case of Mexico, the US had other foreign policy priorities at the time of these nationalizations, first the fight against Nazism and then the struggle to keep communism out of the hemisphere. Thus, despite lodging diplomatic protests and rebuking Mexico with mild economic penalties, the US did not allow the incident to damage bilateral relations in the face of greater strategic challenges.4 Similarly, the US government did not interfere with Venezuela’s 1976 nationalization, for which the international oil companies received compensation.5 The United States was even passive as recently as the 1980s, when Saudi Arabia implemented the gradual nationalization of the American oil company stakes in the Aramco Oil concession. US-Saudi relations were relatively strong in the 1980s and into the 1990s, and the US government made no objections whatsoever to Saudi Arabia’s nationalization of Aramco’s oil assets.
Topic:
Foreign Policy, Oil, Nationalization, and Energy Security
Political Geography:
South America and Venezuela