Center for a New American Security

There is a good debate underway at the National Journal’s Energy Experts blog this week on economic sanctions against Iranian oil. In particular, there’s an ongoing discussion about the Obama administration’s recent sanctions exemptions to China, Singapore and others and what message it sends to the regime in Tehran and the rest of the world. Tune into the full debate here.

Here’s my take on the issue: “The Art of Sanctions”

Applying economic sanctions to coerce Iran to suspend its nuclear program requires a delicate balancing act. On the one hand, the United States needs to apply enough pressure to compel Iran to come back to the negotiating table (as it has done). On the other hand, the United States needs to avoid applying too much pressure, which might convince officials in Tehran to do something drastic out of the belief that it is the least bad option, like attempt to close the Strait of Hormuz to energy exports from other Persian Gulf petroleum producers.

Granting waivers to China, Singapore and others so that these countries can keep purchasing Iranian oil helps strike this balance. As the pressure on Iran ramps up with the European Union’s sanctions going into full force yesterday, Tehran’s ability to continue to export petroleum to some consumers helps keep Iranian officials from perceiving themselves to be locked in a losing status quo, which could be dangerously counterproductive. Generally speaking, states that frame the status quo as a losing one are more prone to belligerent actions in the hope that they can renegotiate the status quo in their favor.

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A U.S. Air Force C-130 equipped with a Modular Airborne Firefighting System drops fire retardant to help combat the Waldo Canyon fire near Colorado Springs that has burned more than 18,500 acres and displaced more than 30,000 people in the area. U.S. Northern Command has also used its immediate response authorities to provide bulldozers, military fire trucks and soldiers to cut fire breaks.

In our 2010 study, Broadening Horizons: Climate Change and the U.S. Armed Forces, we noted that the Department of Defense may be called on to respond to more frequent and intense wildfires as a consequence of climate-related drought and temperature rise, including in vulnerable areas in the United States.  

Photo: Courtesy of Tech. Sgt. Thomas J. Doscher and the U.S. Air Force. 

Some have suggested recently that renewed Iraqi crude oil production could be a boon to the country’s future, but a closer look shows that oil alone will not rejuvenate the Persian Gulf state.

Iraq has returned to oil production levels it has not experienced since the 1980s, producing 3 million barrels per day in 2012, up from 2 million barrels per day in 2006. Moreover, Baghdad announced a goal of expanding production by 400,000 barrels of oil per day by 2013 and eventually increasing production to a whopping 10 million barrels per day by 2017.  (By comparison, the top three producers, Russia, Saudi Arabia and the United States each produce 9.7, 8.9 and 5.5 million barrels of oil per day, respectively.)  This all sounds positive at face value, but the situation in Iraq is more complicated than observers let on, and the country faces four looming challenges that illustrate why oil may not be its saving grace.

The U.S. Navy, Japan Maritime Self-Defense Force and Republic of Korea Navy conducted trilateral exercises in the East China Sea on June 21, 2012. According to the U.S. Navy, the exercises are intended “to improve interoperability, readiness and the capability to respond quickly to various situations in the region, ranging from disaster relief to maritime security activities.”

Like the neighboring South China Sea, the East China Sea is prone to territorial disputes, including competing claims from China and Japan over the Diaoyu/Senkaku Islands.  

Photo: Courtesy of Lieutenant Commander Denver Applehans and the U.S. Navy.

This post originally appeared on the Choke Points blog at ConsumerEnergyReport.com.

America’s relationship with Middle East energy resources is changing. Technological breakthroughs in hydraulic fracturing (or “fracking”), renewed drilling in ultra-deep waters in the Gulf of Mexico and, soon, drilling in the Arctic Circle are re-energizing U.S. domestic petroleum production and shrinking the demand for foreign petroleum imports. Meanwhile, oil and natural gas production in the Americas — from Canada in the North, to Brazil and Colombia in the South — are beginning to displace U.S. reliance on Middle East oil. These emerging energy trends will affect America’s relationship with the Middle East in important ways. But do not expect a fundamental shift in U.S. foreign policy in the region any time soon.

The Carter Doctrine and U.S. Energy Interests in the Middle East

The United States has had historical concerns about assured access to Middle East petroleum resources that have shaped U.S. involvement in the region. President Jimmy Carter famously declared in his 1980 State of the Union address that the United States reserved the right to use force to protect the flow of petroleum from the Middle East to the United States: “An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.”

Although U.S. interests in the Middle East have become more complex since the Carter administration – to include concerns about violent extremism, human rights abuse and nuclear proliferation – it has become almost axiomatic to say that U.S. involvement in the Middle East has been tied solely to concerns about securing access to the region’s petroleum resources. Whether or not one buys that, the perception that U.S. interests in the Middle East are tied solely to concerns about energy supplies raises some questions about whether the United States will lose interest in the Middle East as it becomes less reliant on energy imports from the region.

Continue reading the post at ConsumerEnergyReport.com.

Iran has renewed negotiations with other world powers in Moscow over its nuclear ambitions after recent talks in Baghdad failed to produce any significant progress. The negotiations, which began today, include the five permanent members of the United Nations Security Council – the United States, Russia, China, Britain and France – Germany, the European Union and Iran.

The Moscow talks come on the heels of poor economic news for Iran and just two weeks before European sanctions against Iranian oil exports go into full force on July 1. According to The Washington Post, Iran’s currency – the rial – has lost 50 percent of its value in just 10 months; oil exports have declined by 40 percent from a year ago, contributing to a loss of about $4.5 billion a month in revenue; and targeted financial sanctions against Iranian banks and industries are constricting economic flow.

Meanwhile, Iran’s oil production is outpacing the available storage, which could force the industry to scale back production. “A report last week by the International Energy Agency said Iran was storing tens of millions of barrels of unsold oil in offshore tankers and would probably soon run out of space, forcing it to drastically cut production,” The Washington Post reported.  

Burma, also known as Myanmar, was ruled for decades by a military junta until reversion to nominal civilian control in 2011. President Thein Sein’s openness and reform agenda has led Europe, the United States and others to ease or suspend sanctions.  Recent months have seen the election of Aung San Suu Kyi and members of her National League for Democracy (NLD) in April 2012 parliamentary by-elections as well as the nomination of Derek Mitchell in May to become the first U.S. ambassador to Burma since 1990. Our very own Dr. Patrick M. Cronin, Senior Advisor and Senior Director of the Asia-Pacific Security Program at CNAS, had the opportunity to travel to the country recently. He offered his thoughts on a broad range of issues, including natural resources and the environment.

Daniel Katz (DK): Burma has been touted by some as the potential energy crossroads of Southeast Asia, with plans for pipelines and offshore oil and natural gas development that could contribute to strong economic growth over the next decade. What do you see as the most important political, social and environmental challenges to robust energy development in the near term?

Patrick Cronin (PC): Well, Burma or Myanmar, is rich with resources, not just hydrocarbons but obviously jade, gold, timber and other resources and it is certainly being eyed not just by China but by the entire world potentially to tap its oil and gas reserves.  First, from China’s perspective, completing the oil pipeline by next year in 2013 is seen as critical for redrawing the map of Asia and providing China some relief from its so-called Malacca Dilemma, under which all of its trade and resources must go through a narrow choke point in the Strait of Malacca.  This will allow major oil and gas to flow from the Persian Gulf and Africa as well as out of Myanmar itself to China.  This is very important.  Now, as for extractive industries being open to the international market as sanctions are lifted or suspended, there’s a great deal  of interest in this, but unfortunately some of the early bids have been coming from countries that have companies that may not be the most high-standard, not exactly the gold standard of transparency.  I know there was one deal just made with Thailand.  Thailand may be better than most.  I’m talking about some other countries where these companies will only contribute to the so-called “resource curse” that so many developing countries with resources have faced in the past, especially when they have a couple commodities that are extracted.  It’s so easy for those resources to leave the country for good and for all of the profits to go into the hands of a very small group of people.  Hitherto, this has been the military top leadership and they’re still sitting on treasure troves of money from their rich resources.  So one of the big political challenges on development is to ensure that they build institutions in Myanmar going forward that have much more transparency over extractive industries overall, including oil and gas, and that outside companies that come in to develop it must try to build a much more transparent system for the good of Myanmar.  I think they can.  I think this will be a big boon to Myanmar’s development and to regional development.  But we’ve seen so many horror stories in the developing world and they’re trying to do so much so quickly in Myanmar that this is a big challenge.

Japan’s Prime Minister Yoshihiko Noda cautioned on Friday that Japan could not afford to keep its nuclear reactors offline. “Cheap and stable electricity is vital. If all the reactors that previously provided 30% of Japan's electricity supply are halted, or kept idle, Japanese society cannot survive,” Noda said in a televised address.

During the 10-minute speech, Prime Minister Noda emphasized the national security concerns of relying more on imported energy to compensate for the decline of domestic power generated from its nuclear reactors. Noda said that, “Japan needed nuclear power to avoid relying too heavily on oil and natural gas from the politically volatile Middle East,” The New York Times reported.

Since last year’s Fukushima Dai-ichi nuclear accident, Japan has burned about 135.5 percent more oil, the International Energy Agency reports. The increased oil consumption has likely contributed to a greater dependence on Middle East petroleum – although imports may also be coming from Southeast Asia neighbors, like Brunei.

The U.S. Department of Defense @DeptofDefense: “@CommerceSec John Bryson blogged about #LawoftheSea after his speech on the oceans today.ow.ly/bnuos.”

DOD’s Twitter feed linked to a blog post by Secretary of Commerce John Bryson on the Commerce Department’s website where Secretary Bryson argues the business case for ratifying the Law of the Sea Convention. Secretary Bryson notes that acceding to the convention enables the United States to promote energy security efforts by securing sovereign claims to oil and natural gas on the extended continental shelf.

Countries are increasingly investing in new energy projects to boost domestic energy production and shrink the demand for foreign energy imports. However, climate change may undermine efforts by countries to promote assured access to energy, including with nuclear power, hydroelectric dams and other energy projects that are tied to water resources.

A new study by the journal Nature Climate Change cautions that energy production from thermoelectric power plants could become increasingly constrained as a result of climate change. On the one hand, climate change is expected to warm river and other water resources generally used by thermoelectric power stations (such as nuclear and fossil-fuelled plants) for cooling. According to the study, the United States relies on thermoelectric power stations for about 91 percent of total energy generation (compared to 78 percent in Europe). “During recent warm, dry summers in 2003, 2006 and 2009 several thermoelectric power plants in Europe were forced to reduce production, because of restricted availability of cooling water,” the study found. “In the US a similar event in 2007–2008 caused several power plants to reduce production, or shut down for several days owing to a lack of surface water for cooling and environmental restrictions on thermal discharges.”

The United States is participating in an annual bilateral exercise in Southeast Asia, Cooperation Afloat Readiness and Training, intended to build the capacity of partners to respond to a range of challenges, including humanitarian assistance and disaster relief and other missions critical to the region. In this photo, Indonesian Boy Scouts and Girl Scouts complete a tour of the guided missile frigate USS Vandegrift and USCGC Waesche in Surabaya, Indonesia.

Photo: Courtesy of Chief Mass Communication Specialist Aaron Glover and the Department of Defense.

The National Intelligence Council (NIC) recently launched a new blog in advance of Global Trends 2030, which is expected to be published in November just after the presidential election. (The NIC releases a new edition of Global Trends after every presidential election in part to inform the incoming administration about what the world could look like in the future.) The new blog features experts’ commentary on a range of global trends that are expected to shape the future security environment, such as the rise of major non-western economies and the competition over natural resources, trends that readers are likely to read about in the new edition this fall.

A blog post by Myron Brilliant, a senior vice president for international affairs at the U.S. Chamber of Commerce, offers some insights into how the NIC’s study will frame the discussion of natural resources, security and foreign policy by grounding that discussion in the context of other developing trends, such as emerging economic powers. In his post, Brilliant explores how rising economies such as China, India, Russia and Turkey will affect competition over resources. “[W]ill the growth of these economies put an inevitable strain on global resources and increase competition for water, oil and other commodities, culminating in a zero-sum race for resources — or is a collaborative approach possible?” Brilliant asks. “In India and China natural energy and water resources are scarce. Food wastage is a growing problem and developing a farm-to-market supply chain is evolving. Pressure is rising as we see increasing competition for resources (e.g., China’s appetite for securing resources in Africa). Global challenges require global solutions. We need to find ways to address these issues now before they become even more significant.”