RUSSIA: OIL PRODUCER WANTS IRAQ DEAL

Russia’s largest independent oil producer, LUKoil, wants to develop Iraq’s largest oil field, West Qurna-2, company CEO Vagit Alekperov said June 7, RIA Novosti reported. West Qurna-2 is the second field in an initial two-leg deal with LUKoil that was frozen in 2002. Iraq is also reportedly talking to Chevron and Total about the field, although Russia recently wrote off the bulk of the country’s debt, leading analysts to suggest that Baghdad will move forward with LUKoil.

source: www.stratfor.com
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To some the idea that Russia would be able to capitalize on Iraqi oil deals without having participated in the liberation of the country seems contradictory. However, it is important that G-20 players ALL get in on 'FDI'-Foreign Direct Investment in Iraq.
Simple reason, it globalizes the self interest of 'investing nations'.

Just keep in mind its all about keeping the SUPPLY CHAINS OPEN, so that RESOURCES can be moved in and out. This is what created jobs and pulls people from poverty and strengthens pluralistic forms of governments.

The Rise of Non-Americanism
Sunday, May 18, 2008; BW04

THE POST-AMERICAN WORLD

By Fareed Zakaria

Norton. 292 pp. $25.95

After the Iraq war, Fareed Zakaria argued in his Newsweek column that the world's new organizing principle was pro- or anti-Americanism. But as the Iraq muddle drags on and China rises, the larger story of the post-Cold War era has come into sharp relief: We are not the center of the universe. It matters less that particular countries are pro- or anti-American than that the world is increasingly non-American. We need to get over ourselves.

Zakaria's The Post-American World is about the "rise of the rest," a catchy phrase from one of the most widely cited writers on foreign affairs. His prism is correct: We should focus more on the "rest," even if America is still the premier superpower. But within this broad approach, Zakaria leaves policy-makers to figure out how to rank challenges and restore U.S. legitimacy.

Zakaria zooms in on Asia, especially India and China, which he uses as proxies for "the rest." The first third of the book sets out his thesis -- "For the first time ever, we are witnessing genuinely global growth" -- and the next third describes how China's economy has doubled every eight years and how India may have the world's third largest economy by 2040.

This year has brought a flood of books on Asia's rise, including Bill Emmott's Rivals and Kishore Mahbubani's The New Asian Hemisphere. For the most part, they embody the "world is flat" thesis -- lots of economic statistics, little geography. But geopolitics is about more than growth rates. It matters that China borders a dozen more countries than India does, isn't hemmed in by a vast ocean and the world's tallest mountains, has a loyal diaspora twice the size of India's and enjoys a head start in Asian and African marketplaces. Zakaria's chapters on China and India, though of equal length, should not connote equivalency, and all "the rest" cannot be happily lumped together. Does China's example tell us what has gone wrong in Venezuela and Pakistan, and could go wrong in Egypt and Indonesia?

Ironically, the final third of The Post-American World, which focuses on us rather than on "the rest," is the strongest. Zakaria argues that America's world-beating economic vibrancy co-exists with a dysfunctional political system. "A 'can-do' country is now saddled with a 'do-nothing' political process, designed for partisan battle rather than problem solving," he writes. That makes it hard to devise a grand strategy, and Zakaria offers just a few "simple guidelines" on the need to set priorities, build global rules and be flexible. But in this non-American world, it may be too late to restore U.S. leadership. "The rest" is moving on.

-- Parag Khanna is a fellow at the New America Foundation and author of "The Second World."

source: stratfor.com

INTELLIGENCE GUIDANCE: WEEK OF JUNE 8, 2008

All guidance from last week remains in place. Supplemental guidance:

1. More on oil: The oil market has made another run for the top. There is endless speculation about why this is so, of course, but what matters to us is what this means. The transfer of funds to Arabia and Russia continues and so does the squeeze on China. Let’s not worry about the exact price of oil. Let’s focus on the effects it has on the Arabian countries and on China. The pressure on the latter is getting intense.

2. The harvest season impact: On the flipside we’re getting into the season when early grain crops are available for harvest. This should take the sting out of high food prices, but only in specific locations. Other regions will suffer on until autumn. Map out who gets hit and how hard.

3. Mexico crime surge continues: Violence in Mexico is hitting new highs, but the government still hasn't mobilized a larger response. They've maintained a system of rotating troops around the country to combat violence in different areas as it pops up, but haven't made any substantial shifts. Increasing threats are being made against law enforcement officials. We need to watch for a shift in government tactics and increased high-value target attacks.

4. Israel and peace: Israeli politics are reaching the crisis stage and with it the future of any peace talks. Israeli Prime Minister Ehud Olmert has had his time in the United States and burnished his credentials as a world leader as much as possible. From here forward, the prime minister is subject to his Cabinet’s maneuvers and decisions by prosecutors. The next week or two should be very telling.

5. Latin maneuvers: Venezuelan President Hugo Chavez has taken a pretty radical step in his reorganization of the intelligence structure and new regulations on informing. These moves are not those of a confident leader. Chavez has always played to an international audience and this won’t play well. He must be serious and in need of dramatically enhanced security. Several questions abound, namely will this make any difference? And, if it does, how will Venezuelans respond? It seems that Chavez is becoming more extreme and erratic in his actions. But the ultimate question remains, are we on the verge of anything or is this just standard behavior?

6. The Iranian situation: Stories about internal struggles in Iran continue. In particular are those about the position of Iranian President Mahmoud Ahmadinejad and Ali Akbar Hashemi Rafsanjani. FARS, a news service, was shut down this week in a symbolic gesture. Behind the shadows, something seems to be happening. We need to figure out what.

7. Iran and Israel: Shaul Mofaz, former chief of staff and a potential prime minister of Israel, has threatened attacks on Iran if it continues with its nuclear program. Obviously, the last thing you want to do if you intend to attack is announce it ahead of time. Surprise is crucial, or vital systems can be moved to other locations, scientists evacuated and so on. If you do attack, you want to get the entire capability, physical and human. So announcing attacks ahead of time doesn’t appear to be smart. Mofaz is no fool, raising the question of whether his actions are a response to internal Israeli politics, a bid to wage psychological warfare against Iran, or merely represent some weird interplay with U.S. President George Bush -- who is leery of talks with the Syrians and might prefer bellicose statements.

8. Alarming Iraqi silence: There is relatively little happening in Iraq that leaps to mind. That is extraordinarily important news. The entire situation has fallen into a definable container, and events are oscillating much less than before. Is this a long-term event or is there another storm coming.

9. The U.S. stage is set: It is Barack Obama against John McCain. How are foreign governments reading the race and who are they favoring? We need to start contacting our sources from Beijing to Paris to try to figure out how they read the candidates and who they are rooting for.

EURASIA

June 6-8: Russia's St. Petersburg Economic Forum to take place; new President Dmitri Medvedev is slated to attend, and an informal summit of Commonwealth of Independent States' heads of state will take place on the sidelines
June 9: Chancellor Angela Merkel and French President Nicolas Sarkozy will hold a meeting, postponed from March 3, in Staubing, Bavaria; Elysee Palace had attributed the postponement to "scheduling reasons" rather than disagreement over France's Mediterranean Union project
June 12: Ireland to hold a referendum on EU's Treaty of Lisbon; Ireland is the only EU member state planning to hold a referendum on the treaty

MIDDLE EAST/SOUTH ASIA

June 6-7: Pakistani Prime Minister Yousaf Raza Gilani to visit Saudi Arabia, accompanied by economic officials, to meet with Saudi officials and discuss economic cooperation and Pakistani oil facilities
June 7: French President Nicolas Sarkozy to visit Lebanon and meet with Lebanese parliament speaker Speaker Nabih Birri, Fouad Siniora and President Michel Suleiman; Sarkosy does not intend to meet with the United Nations Interim Force in Lebanon
June 8: Iraqi Prime Minister Nouri al-Maliki to meet with Iranian President Mahmoud Ahmadinejad and Supreme Leader Ayatollah Ali Khamenei in Tehran and discuss the possible expansion of Iraqi-Iranian ties and the resumption of U.S.-Iranian talks on Iraqi security
June 10: Lawyers in Pakistan to begin "long march" protest covering multiple cities to demand that judges dismissed by President Pervez Musharraf, including deposed Chief Justice Iftikhar Mohammed Chaudhry, be reinstated

EAST ASIA

June 7: Japan and North Korea to hold unofficial working-level talks in Beijing on Pyongyang's past abductions and other issues in preparation for a possible resumption of stalled bilateral working group negotiations under the six-party framework; Akitaka Saiki, director general of the Japanese Foreign Ministry's Asian and Oceanian Affairs Bureau, and Song Il Ho, the North's ambassador in charge of normalization talks with Japan, will meet at 3 p.m. at the Japanese Embassy in Beijing
June 8-12: Australian Prime Minister Kevin Rudd to visit Japan to discuss whaling, ongoing free trade agreement negotiations, financial cooperation, the development of regional architecture, climate change and disaster relief coordination
June 9-15: Sudanese Vice President Ali Osman Mohammed Taha to pay an official visit to China
June 9-16: U.S. and North Korean nuclear experts to meet in Pyongyang at some point to discuss technical aspects of North Korea's possible declaration of its nuclear programs as promised under a six-party deal
June 11–14: Chairman of the Strait Exchange Foundation Chiang Pin-kun to visit Beijing by invitation of the Association for Relations Across Taiwan Straits to discuss weekend scheduled flights between the two countries and mainland tourists traveling to Taiwan
June 12-14: Australian Prime Minister Kevin Rudd to visit Indonesia to discuss economic and security ties, financial cooperation, the development of regional architecture, climate change and disaster relief coordination

LATIN AMERICA

June 7: Venezuelan opposition groups will march to the office of the General Comptroller of the Republic to protest the government
June 9: Final day of ongoing Argentine farmer strikes

AFRICA

June 7-8: Delegates from the U.N. Security Council to visit the Democratic Republic of the Congo (DRC)
June 9: Delegates from the U.N. Security Council to visit Cote d'Ivoire
June 12: Nigerian President Umaru Yaradua to pay official visit to France

COUNTERTERRORISM/SECURITY

June 7: Kenyan outlawed Mungiki sect is to hold a prayer meeting at Uhuru Park in Nairobi; the government has banned the meeting, calling it illegal
June 11: Parliamentary by-elections in five Kenyan constituencies: Embakasi, Wajir
North, Kilgoris, Ainamoi and Emuhaya; two seats became vacant after the parliament members were killed, two were vacated after electoral disputes, and one incumbent parliament member was elected speaker of the National Assembly

Copyright 2008 Strategic Forecasting, Inc.

KAZAKHSTAN: OPENING THE DOOR TO CHEVRON

Summary
Kazakh President Nursultan Nazarbayev said June 6 that he has reached an agreement with U.S. energy supermajor Chevron on the first leg of a pipeline project. Though this is not the project's stated purpose, it will divert most Kazakh oil exports away from Russia. If it is realized, the Chevron project will dwarf other pipeline systems in the region, but there are obstacles to its completion.

Analysis
Kazakh President Nursultan Nazarbayev announced June 6 that he had reached an agreement with U.S. energy supermajor Chevron on the first leg of a pipeline system that has the unstated aim of diverting the majority of Kazakhstan's oil exports away from Russia.

It is difficult to overstate the implications of such a development. Russia uses its Soviet-era petroleum transport systems to maintain a stranglehold on the economic and political life of the Central Asian states. Meaningful alternative shipping routes have so far been small in volume and long in coming. In part this is because the Russian routes are present and available, and in part because the region's remote -- and landlocked -- location makes infrastructure and oil development very expensive.


But change, while slow in coming, has still come. In 2006 a BP-led consortium opened a line from Baku, Azerbaijan, to Ceyhan, Turkey (BTC). Also under development is a Chinese option that is shipping increasing volumes of crude east.

If it is realized, the Chevron project will dwarf them all. First, it explicitly taps Kazakh crude, unlike the BTC which predominately transports the less geographically-complicated Azerbaijani crude. Second, it is massive. The Chinese line can only handle about 200,000 barrels per day (bpd) at present. At maximum capacity the Chevron line will transport approximately 1.1 million bpd.

The project is hardly in the bag, however. While Chevron has confirmed its participation in the project, there are still the pesky details of arranging financing, selecting the route and fending off the Russians. Financing will be the least troublesome of these challenges. If a big fish like Chevron cannot get a dollop of loans for an oil project when crude is selling above $130 a barrel, no one can.

The route will be trickier. So far Chevron has only publicly committed to the $1.5 billion first stage of the project, which will ship oil from Tengiz to Kazakhstan's tanker port of Karyk. From there one of two things will have to happen. Either a second leg will need to be built under the Caspian to Baku, or a small fleet of shuttle tankers will need to unload the oil at Karyk and steam over to Baku to load it into the BTC. After that, the third and most expensive part of the plan must be built. The BTC is "only" able to ship 1 million bpd, so if Chevron's plan is to be fully implemented the BTC must be doubled in capacity. All told the complete price tag will probably edge up near $10 billion. (A consortium of interested companies will almost certainly be assembled for phases II and III -- perhaps even phase I -- to help manage the cost.)



But the real thorns will come in dealing with the Russians. Chevron's primary rationale for building this alternate route via Karyk is due to Russia's attitude toward the export route Chevron currently depends on: a patched-together linkage of old and new infrastructure collectively known as the Tengiz-Novorossiysk pipeline (CPC). For years Chevron has been attempting to increase the line's capacity to handle additional Kazakh volumes, but it has faced numerous Russian objections (many in the Kremlin do not want the Central Asian states exporting any petroleum). More recently, Russia has attempted to make the CPC -- currently managed by a broad consortium of governments and firms -- a wholly operated (and likely owned) asset of the Russian government. It appears that Russia's 11th-hour attempts to keep Kazakhstan interested have failed to sway Chevron. Putting aside Chevron's smarting at likely losing a critical flagship piece of equipment, Chevron no longer trusts its regional business plans to the murky world of Kremlin strategic planning and internal politics.

Russia, of course, is not even remotely a disinterested observer. The proposed line expressly flies in the face of Russian national interests; it financially empowers Kazakhstan (a state Moscow thinks of as its personal stomping ground), snakes through Georgia (a patch of territory that rarely passes up an opportunity to rile Moscow), terminates in Turkey (a strategic rival) and supplies Europe (a region that Russia feels it must maintain leverage over).

Russia's tools for dealing with its newfound problem are nearly as numerous as the complications the line has raised. Most obviously, Russia can hold the CPC -- currently Chevron's primary export route -- as ransom. Shadier options include pressuring the Kazakh government behind the scenes, something that can involve everything from a foreign minister making a trip to visits from more cloak-and-dagger agencies. Another option would be triggering crises in Georgia that would threaten directly the BTC (something that Stratfor is more than a touch surprised has not happened already).

Copyright 2008 Strategic Forecasting, Inc.

TURKEY: SNAP ELECTIONS AND THE POWER STRUGGLE
>
> Summary
> Turkey's ruling Justice and Development (AK) Party is considering calling snap
> elections after it lost a major case before the Constitutional Court. The
> court's decision indicates that Turkey's secular establishment may be going in
> for the kill to disband the Islamist-rooted AK Party. Snap elections will not
> stop that from happening, but they will send a message that the party remains
> confident and extremely popular -- and could serve to get foreign powers
> involved in the Turkish power struggle.
>
> Analysis
>
>
> Turkish Prime Minister Recep Tayyip Erdogan called an emergency meeting June 6
> of the ruling Justice and Development (AK) Party to discuss how to proceed
> after the party suffered a major legal defeat in the Constitutional Court on
> June 5. Some AK members have suggested responding by dissolving the government
> and holding snap elections, less than a year after the party took 47 percent
> of the vote in national elections in July 2007.
>
> The case -- in which the high court repealed an AK-sponsored constitutional
> amendment that had lifted a ban on the Islamic headscarf in universities -- is
> one prong of a power struggle between the Islamist-rooted AK Party and
> Turkey's ultrasecular Kemalist establishment, which is centered in unelected
> institutions such as the military, judiciary, bureaucracy and academia.

> The other prong is a still-pending case that would outlaw the AK Party on the
> grounds that it threatens the secular nature of the Turkish state. It remains
> unclear how the court will decide in that case, but the 9-2 decision in the
> headscarf case shows that the judiciary is not inclined to be friendly or
> lenient toward the party.
>
> There is some chance that the party and the establishment could reach a
> settlement, or that the judiciary might feel that the headscarf case can serve
> as a warning, making it unnecessary to ban the party at this time. As long as
> the disbandment case is still pending, however, the AK Party has to assume
> that the establishment is still serious about it -- and the party has no
> control or influence over what the outcome will be.
>
> Essentially, then, the AK Party has three options before it.
>
> First, it can put up no resistance.

In that case, it can expect to lose the
> second court case as well and be disbanded, or at least be barred from
> carrying out activities of which the secularists disapprove. Some 71 of its
> members -- including Erdogan and President Abdullah Gul -- would likely have
> to stay out of politics for a number of years. In previous cases in which the
> establishment used this tactic with the AK Party's Islamist predecessors, new
> elections were called before another Islamist party had time to form, leaving
> the government with essentially no Islamist representation for a period of
> time. The AK Party is not an Islamist party per se, but the establishment
> would likely follow the same playbook.
>
> Second, the party can strike back with a legal counteroffensive,

using its voting power in the parliament to attempt to rewrite the law of the land and oust the secularists from the bureaucracy and the courts.

However, it is not clear that the party could muster the parliamentary support it would need for such a move -- and in any case the secular establishment is too powerful and too entrenched for this kind of counteroffensive to succeed.

The judiciary can still overturn any constitutional changes the party might try to enact.
>
> The army, meanwhile, considers itself the ultimate guardian of the secular
> republic, and while it is not eager to face the consequences of destroying the
> AK Party, it has launched coups in the past when it perceived that
> anti-secular forces were gaining too much power. The likely result if AK
> leaders should go on the offense is that they would still be banned, and
> possibly also imprisoned or shot.

It is worth noting, however, that the party's recent actions have not demonstrated an appetite for this kind of open conflict. And, in past power struggles, the party's Islamist predecessors always bowed to the establishment and exited the scene with life and limb intact.
>
> The AK Party's third option is to call snap elections.

On the face of it, this choice appears to accomplish little since the party's most committed opponents are not elected officials. New elections would not stop the high court from banning the party. Also, the party did essentially the same thing in the summer of 2007, when Gul's presidency was being blocked; the AK did increase its percentage of votes, but it was not a major jump. It could be that the
> party has reached the ceiling of its ability to pull in additional votes.
>
> Given the AK Party's popularity, however, the party is nearly certain to be
> returned to power with a similar margin of victory to the one it enjoys now.
>
That would send a message to the secular establishment that the AK Party holds
> a fresh, strong mandate, and that the Kemalists' moves to disband the party
> will fly in the face of the country's democratic choice. It might not stop the
> disbandment case from going forward, but it might put the establishment on the
> defensive and make it think twice about striking hard against the ruling
> party.
>
> Such a strategy also could get the international community involved. Coups
> against democratically elected governments do not play well in the United
> States and Europe, and the AK Party can hope that some Western diplomatic
> pressure will be brought to bear in its defense.

The move could backfire, however -- the secularists already see the West as being on the ruling party's side, which is one of the reasons they believe the party is too powerful and are moving to dismantle it.
>
> The move would be a big gamble for the ruling party -- but given the other
> options, the AK Party will likely feel that it does not have much to lose.
>
> Copyright 2008 Strategic Forecasting, Inc.
>