U.S. Agrees to Meeting with Iran and Syria
The Bush administration has agreed to sit around a negotiating table with official representatives of Iran and Syria next month -- as part of a planned regional conference in Baghdad to discuss ways to stabilize Iraq.

In joining the Baghdad conference, the administration is tiptoeing into what has become one of the most contentious issues in the roiling Iraq debate. Critics for months have been urging the administration to end its diplomatic isolation of Iran and Syria and begin a constructive dialogue with them about how to stabilize Iraq. Even former secretary of State Henry Kissinger, who has generally supported administration policy on Iraq, argued in an op-ed piece last weekend that it’s time to end the diplomatic quarantine and convene an international conference on Iraq.

The Iraqi government is expected to announce the regional conference as early as Tuesday. The government will invite representatives of the five permanent members of the U.N. Security Council -- Britain, France, Russia, China and the United States -- in addition to all of its Mideast neighbors.

Though it will bring together American, Syrian and Iranian representatives, the Baghdad meeting doesn’t signal a direct U.S. diplomatic engagement with Iran and Syria. A senior State Department official said Monday night that it wasn’t likely there would be separate bilateral meetings with Iran or Syria. Rather, the planned Baghdad meeting is an extension of the administration’s current policy of using the Iraqi government as the channel for discussions with Iran and Syria about Iraqi security.

The initial meeting, tentatively planned for the first half of March, will be at the ambassadorial level, the State Department official said. The American representative will be Zalmay Khalilzad, the current U.S. ambassador to Iraq, or his successor, Ryan Crocker. Khalilzad has long favored direct meetings with Iran. If the initial meeting goes well, a second meeting at the foreign minister level is planned for April.

The agenda for the March meeting is still vague, but U.S. officials said they hope Iraq’s neighbor countries will discuss how they can support the new Iraqi government diplomatically, politically and in security matters. Iran and Syria haven’t formally agreed to attend the meeting, but “they haven’t said no,” said the State Department official, and the Iraqis expect they will attend.

The trick for the administration has been to gain Iranian and Syrian help in Iraq -- or at least, a cessation of harmful activity -- without conceding ground on the larger issues of paramount importance to those countries. The Baghdad conference appears to offer such a finesse. It begins contact, but leaves diplomatic “grand bargains" -- that would address the Iranian nuclear program or Syria’s role in Lebanon -- for other times and venues.

News of the Baghdad meeting comes as the administration is facing severe pressure from congressional Democrats over its Iraq policy -- especially the planned “surge” or 21,000 additional U.S. troops into the country. The administration surely is hoping that this show of international support for the government of Prime Minister Nouri al-Maliki will quell some of the criticism in Washington. Administration officials are also likely to tout Monday’s plan on a new agreement for sharing Iraqi oil and gas revenues among the different regions and sects as a sign of progress.

But even as these diplomatic and legislative agreements are reached, the bombs continue to explode in Baghdad. And with all the leading Democratic presidential candidates already committed to plans for withdrawing U.S. forces from Iraq even as the Bush administration sends in more troops, there is little ground for bipartisan war policy.

Former Islamic Extremist Speaks on 'Radicalization Process'
By Kevin Mooney
CNSNews.com Staff Writer
February 27, 2007

(CNSNews.com) - Radical Islam has the power to seduce young people who are spiritually unsatisfied, according to a former radical who now cooperates with the FBI and writes on terrorism.

Daveed Gartenstein-Ross chronicles the "process of radicalization" in a new book, "My Year Inside Radical Islam."

He said he's concerned that too few Americans fully grasp the ideological component of the struggle against terrorism in the world today.

Absolutist interpretations of Islam allow no space for adherents to deviate from ideology, Gartenstein-Ross told a book publication party in Arlington, Va., over the weekend.

Although he grew up in a Jewish home in Ashland, Oregon, Gartenstein-Ross's family was not rooted in an organized religion, he explained in an interview. The book chronicles the journey Gartenstein-Ross took from Judaism to Islam and then radical Islam in the 1990s. He ultimately converted to Christianity.

Gartenstein-Ross said he wrote the book to show how alluring and persuasive radical Islam can be for those who are spiritually uncertain.

Gartenstein-Ross told Cybercast News Service that as a young man he had difficulty accepting the divinity of Jesus Christ and there was an "incoherence" at work that Islam was able to reconcile.

Although Muslims view Jesus as a prophet, they do not believe he is divine, Gartenstein-Ross explained in his book.

The "logic underlying the faith [Islam] appealed to me," he wrote.

The "seduction" of extremist teachings took hold of Gartenstein-Ross when he went to work for Al Haramain Islamic Foundation, a charity that promoted Wahhabism - a strict Sunni sect, founded by an 18th century Saudi theologian. The foundation was later exposed as being a source of terrorist funding.

"Part of Islam's seduction is its otherness - how different it is from anything else," Gartenstein-Ross wrote.

"And it would be a mistake to shortchange how satisfying a life is inside radical Islam. As I descended into radicalism, I had a greater feeling of certainty than I had known before. I felt that for the first time, I could truly comprehend and follow Allah's will and I knew that those who disagreed with me were just following their own desires," he added.

Among the strict guidelines Gartenstein-Ross embraced were a refusal to shake hands with women and a decision to stop listening to music. He grew a full beard and stopped wearing shorts.

But he began to have doubts about the "big picture" after leaving Al Haramain to attend New York University School of Law. It was evident to him that a number of Islamic radicals were working to re-establish the caliphate through jihad.

Although Islam was not an "easy in, easy out" religion, the author came to see that "his goal was to please God, not to cower before Islam's apostasy strictures."

After studying the central tenets of Christianity, the crucifixion and resurrection of Jesus, he eventually converted to Christianity in late 2000.

'Understand the players'

When the FBI raided Al Haramain offices in 2003, Gartenstein-Ross decided he should act and contacted the authorities.

Rather than "wishing away" a former part of his life, he said he decided that the perspective it gave him about Islam could be used to benefit counter-terror efforts and to help educate others.

Gartenstein-Ross said it was critically important for policymakers and the public to understand what motivates converts to radical Islam.

"A lot of people on the right and the left have a cartoonish view of what is going on out there," he said. "We need to move beyond assumptions and understand the relevant actions and players."

The author told Cybercast News Service that policymakers and the public also need to be more discerning in how they identify radicals, and he cautioned about what he said was a tendency to "conflate" conservative Muslims with radicals.

"This is a mistake, because you can be a conservative Muslim and an ally in the war on terror," he said. "In many ways, conservatives are more helpful because they understand the ideology. They are more committed and can make the biggest difference."

Gartenstein-Ross is now a full-time counter-terrorism consultant. His commentaries on the subject have appeared in a number of media publications, and he has testified before the U.S. Senate on the spread of radical Islam in the nation's prison system.

The book event was held at the home of Richard Miniter, also an author and counter-terrorism expert.

"It's a very insightful book about the slow seduction of zealotry and the even harder and longer climb out away from zealotry," Miniter said.

Miniter told Cybercast News Service that young people who grow up in a secular liberal environment are more susceptible to radical teachings, because they "know something is missing."

By contrast, individuals who come from homes with a strong religious background are better prepared to resist extremist ideology, he said.

Assyrian Journalist Receives Death Threats

GMT 2-27-2007 17:50:20
Assyrian International News Agency
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Who is responsible for the security of journalists and freedom of speech?

How many truths about criminal activity are hidden behind self-censorship? I have kept quiet long enough now. It's just gone too far. My family is worried and I am considering more and more whether to quit my work as an investigative journalist.

On the 26th of February, Aftonbladet's debate pages published an article I wrote about the murder of Hrant Dink. I called those persons that incited this killing as murderers.

This triggered a mail attack against me. The majority of the mails were positive. Hundreds of persons, Assyrians (also called Syriacs and Chaldeans), Turks, Kurds, Iranians and other Swedes wrote that that they were glad that someone dared to tell the truth about oppression in Middle Eastern countries. They have followed my reports, for example, the articles I wrote about the ballot rigging in Iraq; about the lives that were lost as a result of the Mohammad cartoons that were published in Jyllands-Posten; about Iran's spies in Sweden and my most recent exposé about the fake passports that have been issued by Iraq's embassy.

Unfortunately, among the many mails I received are also those that contain hate and, in certain cases, direct or indirect threats. Islamists have sent me lines from the Koran that Mohammed is the only true prophet and ultra nationalists have sent me distortions of history. I can handle these, it's their opinion and they have a right to this.

Other mail I received contains such sentences as "You'll end up the same way as your filthy blood brother Hrant Dink.

Maybe I should throw them into the waste paper basket, not take them seriously and continue as I have done in the past. It's certainly not the first time I've received threatening mail. Police, pedophiles, Nazis, Islamists and criminal financiers have all taken the opportunity to threaten me and I am not alone. Sometimes they do it in disguised words and sometimes openly.

Now, certain of my colleagues, especially ethnic Swedes who don't have the slightest idea how we whose origins are from abroad, have it, laugh and tell me that I am over-dramatizing.

But it's just that my world doesn't look like theirs. It is to a large extent due to my background that I get tips about irregularities more than most of the others. But is it worth it? Shall I, we, expose ourselves to danger to reveal unpleasant truths to the public.

Journalists, researchers, historians and others who want to bring forth the truth are constantly threatened.

"I got up in the middle of the night and searched for a weapon but discovered that I was sleeping at a friend's home and it was his child that woke up", said a good friend who is a historian to me on the phone several days ago.

A few nights ago one of my cousins slept at our home. At about four in the morning he heard a car drive up the hill on the street where I live. He got up, took a baseball bat and stood next to the front door. He had read some of the 56 pages of hate and threatening mail that have been sent to me and thought that the man who had sent these, the man who has stalked me for the past three years had come to assault me. It wasn't anything, just someone who took a wrong turn.

But another time those who had threatened me had driven to the right address. They lit up our kitchen with their headlights as we sat and ate dinner. Right after that I received a sms (textmessage): "Now you know that we know".

So, how shall we have it? Shall we stop checking suspicious stories? The police can hardly protect us. What's going to happen?

Perhaps I shouldn't tell about the threats but then it would be like trying to hide another truth. This I have already done for many years and it is what the majority of my colleagues choose to do.

No, now its time to discuss self-censorship. Freedom of speech will soon become a thing of the past, a non-reality. Only too many of my colleagues no longer dare to do their job and check the stories that are offered to them by their sources.

I am sad, angry and frightened. Not for my own sake, but for my family and my friends. Two of my friends, a journalist who had been active in the Middle East and a researcher, Sabri Atman, live in secrecy and cannot enjoy a normal life. Every time I meet them I have to look over my shoulder.

Who shall take responsibility to set a stop for the threats against journalists and thereby, democracy? The parliament? The embassies in Sweden? The police? The Journalist Club? The Journalist Union? The Swedish Secret Service (Säpo)?

Or, perhaps the question should be phrased differently: Who will take any responsibility at all?

By Nuri Kino
EasternStar News Agency

Copyright (C) 2007, Assyrian International News Agency. All Rights Reserved. Terms of Use.

Middle East Economic Survey

VOL. XLIX
No 9
26-Feb-2007

SUPPLY/DEMAND/OPEC

Need For A Balancing Act: Reducing Oil Dependence Without Triggering A Global Crisis

By Gavin Longmuir and AF Alhajji

This article was written for MEES. Dr Longmuir is a Stanley, NM-based consulting petroleum engineer, affiliated with International Petroleum Consultants Association Inc of Evergreen, Colorado (LongmuirG@aol.com). Dr Alhajji is an Energy Economist and Associate Professor at Ohio Northern University, Ada, Ohio (a@aalhajji.com).

Introduction1
Three facts underscore the importance of the debate about the future of oil: oil is a finite resource; oil is one of the major anthropogenic sources of carbon dioxide; and the world economy is heavily dependent on oil, especially in the transportation sector. The most important questions are: How do we balance depletion, the environment, and economic growth – remembering that “we” includes human beings in oil-exporting countries as well as those in oil-consuming countries? Will the transition to new energy sources be seamless and easy, for oil-exporters as well as for oil-importers? How will oil-producing countries react to the non-market based efforts of oil-consuming countries to reduce their dependence on oil? Should oil-producing and oil-consuming countries cooperate to make the transition to new energy sources as painless as possible for all parties? Will these efforts at cooperation succeed in the long run if they are not market-based efforts?

We suggest that politicians, environmentalists, and the public in oil-consuming countries do not ignore the valid interests of the oil-exporters on whom they depend. They should not ignore the fact that the market has chosen a fuel – oil – that differs from some governments’ current fuel preferences. In a recent editorial, the Oil and Gas Journal summed it up nicely by stating “The new energy vision clashes with fuel choice by the market.”2

Oil Independence And Sustainability Of Energy Supplies
The main threat to sustainability of energy supplies is not a terrorist attack on energy facilities or the imposition of an oil embargo by an oil producing country. These are short-term events that can be dealt with quickly and effectively through various measures that include the use of the Strategic Petroleum Reserve, increase in production, and diversion of oil shipments.

The main threat to sustainability of energy supplies in the medium term is the mismatch between investment in additional capacity and energy infrastructure on one hand and the growth in demand for energy on the other. One of the most plausible scenarios is a relative decline in investment in additional production capacity in the oil-producing countries in response to calls by governments and politicians around the world to reduce or even eliminate dependence on oil. An energy crisis in this case is unavoidable if those who call for eliminating dependence on oil fail to provide a replacement in a timely manner. Most of the efforts to replace oil are not market driven and heavily subsidized. Most likely such efforts will fail to replace oil within a reasonable time. They cannot sustain the pressure of markets in the long run.

Finland recently announced its intention to eliminate oil as an energy source by 2030. Earlier Sweden announced plans to become a carbon-free zone.3 There is a rising tide of announcements from European countries on their aims to boost the use of non-fossil sources of power. India is talking about increasing gas and LNG imports and is pursuing a nuclear power cycle based on indigenous thorium supplies. China has said it plans to build more nuclear plants.

The US has joined the chorus of countries that want to reduce or eliminate dependence on oil. President George W Bush has spoken about elimination of dependence on oil,4 while encouraging clean-coal technology, hydrogen, and biofuels. Some members of his administration have echoed his call for lowering dependence on foreign oil. Others have called for a complete elimination of dependence on oil as a source of energy. In a strange twist of history, environmentalists and neoconservatives, socialists and capitalists, Westerners and Easterners have a unified goal: eliminate or sharply reduce dependence on oil. It is time to give some thought to the possible impact of these proposals on major oil-exporting countries.

Oil is still abundant. A recent report by CERA estimates, perhaps optimistically, remaining global oil resources at 3.74 trillion barrels.5 Even the more pessimistic proponents of Peak Oil assert that about half the planet’s endowment of recoverable conventional oil is still in the ground, waiting to be recovered – approximately 1 trillion barrels, with a gross value about twice the entire world’s current annual GDP. Much of the remaining conventional oil is in the hands of a very small number of governments, primarily in the Middle East. Will all the talk about reducing dependence on oil have an impact on their behavior?

“Security of Demand” is becoming a more common expression in comments by major oil exporters such as OPEC and Russia. Developing major oil fields involves huge long-term commitments, which producers undertake because they expect long-term demand for their oil. Major oil exporters have tended to view their remaining oil in the ground as an appreciating asset, to be exploited at a measured pace so that some is left for future generations. Even in straightforward political terms, the call for “Security of Demand” becomes very attractive when the other side is exerting pressure on the producing countries to insure “Security of Supply.” Such pressure was on display in 2005 when King ?Abd Allah, then Crown Prince, brought a team of experts to President Bush’s ranch in Crawford, Texas, to explain the Saudi plans to increase oil production capacity.6 On 21 April, Saudi Oil Minister Ali Naimi presented the plan to the 6th International Oil Summit in Paris.7 Under pressure for “Security of Supply” from consumers, “Security of Demand” became a valuable political tool for oil producers.

Talk about moving away from oil through non-market-based coercive policies thus provides a serious challenge to the sustainability of oil producers’ societies. To add insult to injury (or injury to insult), much of this talk comes from European governments which are taking a large share of the economic rent on the exporters’ oil through extremely high taxes on end-consumers. Those consumer-country governments are thus hogging much of the current revenue stream from the oil producers’ major asset, while simultaneously planning to eliminate the demand for it.

Even hopes for a peaceful democratic Iraq cannot materialize without oil revenues. Major oil exporters might be forgiven for treating talk of eliminating dependence on fossil fuels as an existential threat to their societies, especially when such talk is based on hostile ideological agendas rather than market principles.

How Might Major Oil Exporters React?
Activists and politicians in oil-consuming industrialized countries may not intend their remarks to be seen as hostile by oil exporters. The sad reality is that Western advocates have likely not given even a moment’s thought to the implications of their anti-oil stance for oil exporters. Nevertheless, oil exporters can be forgiven for finding such statements quite threatening. In the face of such apparently hostile statements from across the political spectrum in oil-consuming countries, oil producers might react in a number of ways - depending on their perception of the seriousness of the threat.
Their simplest response would be to ignore escalating Western claims about weaning themselves off oil as some bizarre form of Liar’s Poker among Western political classes. Oil exporters might look at the actual continuing growth in oil demand and conclude that consumers do not intend to follow through with the necessary hard choices. Additionally, oil exporters could sit and watch Western developments, comfortable in the knowledge that currently-popular Carbon Capture & Storage (CO2 sequestration) is very energy intensive and (if implemented) will substantially increase the demand for fossil fuels, thus rendering their oil resources even more valuable.

Oil exporters could take Western commentators seriously and assume that oil importers will indeed reduce their demand for oil, leaving them with then-unmarketable oil sitting in the ground. Their logical response to this threat would be to accelerate production of their oil resources while they still have some value. This would of course drive down the price of oil and undermine the economic feasibility of alternative sources of energy. A collapse in the price of oil would be a death sentence for several new energy technologies, which would consequently increase the demand for oil. In fact, the oil-producing countries might view increasing oil production and lowering prices as a logical interventionist policy to counter the anti-oil interventionist policies of the governments of the consuming countries. Historical data from periods of oil price collapses support this point: low oil prices increase oil demand, decrease efficiency improvements, choke alternative energy resources, and increase wastage.8

Alternatively, expecting a decline in demand for their oil, producing countries might decide to reduce planned investments in production capacity expansion and maintenance and mothball some planned projects, which would quickly lead to declining oil supplies. If new technologies do not come on-line by the time oil production starts declining, the world will face a serious energy crisis, probably unparalleled in history. Reversing such a trend of declining investments would take years, despite a massive increase in oil prices. This alternative is not a mere possibility: several major projects have been mothballed in the past when the oil producing governments deemed these as not needed, given perceived future demand and prices.

As yet another alternative, if oil-consuming countries begin to reduce their dependence on oil, major oil exporters could seek to use their now less-valuable oil within their own borders as cheap fuel for a greatly expanded heavy industrial sector. Instead of exporting oil directly, they could export the energy from it embedded in metals, chemicals, and manufactured products at prices that far undercut anything Western producers could match, constrained as they would be by using higher-cost alternative energy sources. In fact, cheap energy in those countries might make their new industries completive with cheap labor industries in China, India, and south Asia. The net result would be a loss of jobs and economic strength, by West and East, without having any impact on the overall global consumption of fossil fuels.
Thus, Western posturing over reducing the demand for oil could cause major oil exporters to react in a variety of ways, most of which would exacerbate rather than help the global energy situation. Even in a scenario where Western countries successfully replaced their demand for oil from alternative indigenous energy sources, they would still have to live on the same planet as former major oil-exporting countries whose fragile societies would then be faced with the additional economic strain of the loss of their main current source of revenue. Energy independence for current oil-importers may carry a high moral price. If a sharp decline in oil revenues leads to instability in the oil producing areas, the West will not be able to turn a blind eye to such conflicts. In the age of globalization, these countries are economic and political partners of the West. Political instability that results from declining oil revenues must be added as a potential cost of oil independence. In addition, it is unclear what will happen to the world monetary system without the trade in oil and the associated recycling of petrodollars. A change to a world where most industrial countries depend on their own domestic energy resources would require a major change in the world’s financial and monetary system. Such a change will bring its own challenges and difficulties to all, including the industrial countries.

Constructive Responses by Major Oil Exporters
Given that oil is an exhaustible resource, major oil-producing countries should not wait until consuming countries reduce their demand for oil. They might choose long-term, market-oriented, economically viable and sustainable options that ensure their economic growth, prevent a world-wide energy crisis, and reduce emissions.

In the transition to a new fuel, the oil-producing countries might choose to invest heavily in CO2 sequestration and various emissions-reduction technologies. This investment might include CO2 flooding of oil and gas wells, which would increase recovery and reserves. This is a transitional option that guarantees the availability of energy supplies and steady stream of oil revenues while reducing carbon emissions from fossil fuels. Oil-exporters might reasonably demand that oil-importers pay a higher price for this “greener” oil.

During a global transition from fossil fuels, the oil-producing countries have several long-term options such as:
Seek to become leaders in post-fossil fuels. Oil producers are keenly aware that oil is a finite resource. While nuclear power is the only practical option for large-scale sustainable non-fossil power, Western environmental activists are as negative about nuclear power as they are about oil. Among the potential power sources favored by Western environmental activists, windmills are at about the limit of their technical development and will continue to be non-competitive without subsidies. In contrast, photovoltaics and biofuels could potentially see the kind of order-of-magnitude improvements in technology necessary for them to become viable large-scale energy sources. Even with technological breakthroughs, those sources would still require very large amounts of vacant land and lots of sunshine. In short, North Africa and the Middle East might become the prime global locations for competitive large-scale production of post-fossil fuels. In a world that relies on alternative sources of energy, Middle East countries might be even more important suppliers than they are today.

Significantly improved technology is the key to practical, large-scale use of photovoltaics or biofuels. Major oil producers could be well-placed to attract patient long-term investors in those technologies. However, oil exporters’ ability to make such long-term investments is constrained by European governments, which are taking the bulk of the economic rent on the producers’ oil. Major oil producers might reasonably demand an adjusted allocation of that rent as a condition for committing to major investments in new energy technology while they continue to make major investments in oil production capacity. In other words, in exchange for a free oil market with lower taxes and fewer trade restrictions, the oil producing countries will be required to invest in new energy technologies. The question remains: will the posturing stop when oil consuming countries become dependent on new energy sources from the Middle East, even if they are environmentally sound? If politicians in the energy consuming countries continue their verbal attacks on the energy producing countries, wouldn’t that reduce these countries’ enthusiasm for developing new energy resources?
Most of the above options are market driven. They are not only long-term options, but they are also sustainable. Short-term political considerations might delay for few years the decisions that are necessary to reduce oil demand in the West, but they could backfire in the long run. They might also strain political relations between producing and consuming countries. The oil producing countries might pursue short-term, and sometimes unethical, options, which include:
Lobbying consuming governments to create legal loopholes to circumvent activities aimed at reducing dependence on oil. Lobbying might include offers of political favors, trade deals, and access to lucrative oil reserves.

Investing in the downstream sector of the consuming countries that would satisfy any actual growth in demand for petroleum products. Such investment in downstream might enable oil producers to influence public opinion and local officials through excellent service and job creation.

Providing funding for genuinely unconstrained scientific research into global climate processes, without any of the politically correct pressures involved in current research funding from Western government sources.
Conclusion
Western environmental and political enthusiasm for eliminating oil as the principle source of energy may generate major unintended consequences. It could have great impact on the decisions of a handful of key oil exporters. Also, a lower oil price would wreak havoc on the economies in the Middle East, one of the least stable areas in the world. The cost of such political instability in terms of lives, money, and pollution will render all the positive results from weaning consuming countries off oil negligible.

Developed economies depend heavily on imported oil. The EU and the US each imports over 10mn b/d, and Japan imports essentially all of its oil. It would be wise for environmental activists and the governments of the consuming countries to pay more attention to the valid concerns of the fuel suppliers on whom they depend. In fact, current cooperation efforts between consuming and producing countries are doomed to failure. Supporters of cooperation have yet to develop a theory that justifies cooperation. Consuming countries demand a liberalization of energy markets that, in the view of oil producing countries, would strip their governments and their national oil companies of the power to control their principle national resource. The recent International Energy Agency’s World Energy Outlook 2006 puts the blame for any future energy crisis squarely on the backs of OPEC members. It does not acknowledge that all the really big energy problems that the consuming countries have suffered from in recent years have had nothing to do with OPEC: the California power crisis, the sharp increase in natural gas prices in the US, the decline in the US oil and gas production that resulted from Hurricanes Katrina and Rita, and natural gas shortages in Europe after Russian actions against Ukraine.

Genuine cooperation requires market-based policies that divide the burden equitably between producers and consumers and reward the most efficient investments. Neither the demands of consuming countries nor the calls for energy independence are market-based and thus current efforts at cooperation will not succeed. Nor do the policies of consuming countries indicate a willingness to adopt the sort balanced assessment of costs that would encourage true cooperation between producers and consumers.

From the perspective of oil-consuming countries wishing to reduce the global use of fossil fuels without provoking an economic depression, the objectives of cooperation should be (1) ensuring adequate supplies of oil during the transition away from oil, and (2) keeping the oil price stable at a level which is sufficiently high to encourage investments in alternative energy sources. From the perspective of major oil-exporting countries, the objectives of cooperation should be (1) maintaining their national revenues as demand for oil is progressively reduced, and (2) replacing the asset they will sacrifice as their patrimony of oil in the ground becomes less valuable.

Balancing these diverse objectives will be a very challenging task, requiring a lot of cooperation and trust from all parties. It may require some major sacrifices from oil-consuming countries, such as turning over a growing share of their revenues from taxes on end-users to oil exporters to make up for the latters’ declining sales volumes. It may also require developed countries to mothball their own oil production capacity to maintain demand for oil from oil-exporting countries, which would lead to increased global dependence on oil from the Middle East. The willingness to make such sacrifices and accept such risks will be a stern test of how serious oil-consumers are about weaning themselves off fossil fuels.

Some developed countries want to cut back oil use for global climate reasons. Most OPEC countries need to keep selling oil. These developed countries have “extra-territorial” ambitions – they want to cut back global oil use, not just their own oil use. It does no good (in their world view) if they cut back oil consumption and OPEC members simply sell more oil to China and others.

OECD is a convenient proxy for countries that fear global warming. They produce about 19.8mn b/d (24% of global oil production); OPEC countries produce 33.8mn b/d (42%). Perhaps a “confidence building” measure would be for OECD countries to cut back on their own oil production. They could put their oilfields into standby mode, and pay all the costs for that. This policy would leave more of the (supposedly declining) global oil market to OPEC countries and allow them to maintain their own production and revenues. The standby production capacity within OECD borders might let those countries feel more comfortable about relying on OPEC producers. And this way global oil production would be reduced while maintaining the price of oil as demand decline.

If OECD countries are reluctant to incur the costs of mothballing their own sizable oil production capacity, or are unable to agree on equitable sharing of the costs of this policy among themselves, then they will have demonstrated to the world that they are really not serious about reducing global oil consumption. OPEC countries will comfortably invest accordingly.

Notes:

1. An abridged version of this article was published in the Oil and Gas Journal, Volume 105 Issue 6, 12 February 2007.
2. “A dot-com energy vision” Oil and Gas Journal, 23 October 2006.
3. See “Sweden aims to eliminate oil” 2 September 2006 at http://www.eubusiness.com/archive/Energy/sweden.2006-02-09
4. For instance, on 31 January 2006, he stated in his State of the Union address “…make our dependence on Middle Eastern oil a thing of the past." For more information see the speech on the White House web page at http://www.whitehouse.gov/stateoftheunion/2006/
5. “CERA Estimates Remaining Oil Resources at 3.74 Trillion Barrels, ”Middle East Economic Survey, 20 November 2006.
6. See, for example “Bush and Saudi Prince Discuss High Oil Prices in Ranch Meeting.” New York Times, 28 April 2005.
7. “Naimi Outlines Oil Capacity Expansion Plans, Reiterates Oil Reserves Position.” Middle East Economic Survey, 25 April 2005.
8. Alhajji, A F "What Have we Learned from Lower Oil Prices?" OPEC Review, Vol 25, No 3, September 2001.

Venezuela to Seize Foreign Oil Projects
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Feb 26, 8:36 PM (ET)

By NATALIE OBIKO PEARSON

(AP) Venezuela's President Hugo Chavez speaks during a news conference at Miraflores presidential palace...
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CARACAS, Venezuela (AP) - President Hugo Chavez ordered by decree on Monday the takeover of oil projects run by foreign oil companies in Venezuela's Orinoco River region.
Chavez had previously announced the government's intention to take a majority stake by May 1 in four heavy oil-upgrading projects run by British Petroleum PLC, Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), ConocoPhillips (COP) Co., Total SA (TOT) and Statoil ASA. (STO)
He said Monday that has decreed a law to proceed with the nationalizations that will see state oil company Petroleos de Venezuela SA, or PDVSA, taking at least a 60 percent stake in the projects.
"The privatization of oil in Venezuela has come to an end," he said on his weekday radio show, "Hello, President.""This marks the true nationalization of oil in Venezuela."
By May 1, "we will occupy these fields" and have the national flag flying on them, he said.
The law is expected to be published shortly in the government's official gazette, and the companies will have four months from then to negotiate terms and conditions with PDVSA to decide whether they will take part in new joint ventures as minority partners, Chavez said.
Chavez did not detail how the government will pay for its increased share in the projects in which the companies are estimated to have invested some $17 billion.
The government has compensated companies reasonably in recent weeks for nationalizations it has carried out in other sectors, but those agreements were for assets valued far less than the oil projects.
The Orinoco projects are the only oil-producing operations in the country remaining under private control, which Chavez called "disgraceful."
But he added that Venezuela doesn't "want the companies to go ... We just want them to be (minority) partners."
Private companies pumping oil elsewhere in Venezuela submitted to state-controlled joint ventures last year, and few resisted because they were reluctant to abandon Venezuela, which has the largest oil deposits outside of the Middle East.
Chavez has been given special powers by congress for 18 months to issue laws by decree in energy and other areas, which he has used to nationalize the country's biggest telecommunications company and electricity company in recent days.
Chavez has justified the nationalizations as necessary to give the government control of sectors "strategic" to Venezuela's interests.