Category: Energy Policy

Obama’s National Security Strategy Dissed by Republicans

For the third time in a century, America might be asked to save Europeans from themselves.

As is evident in Congress’s unease, events are spiraling out of control in Ukraine. We are again getting drawn into Europe’s centuries-old propensity towards self-destruction. It is evident that Europe seems unwilling and/or unable to contain the geo-political ambitions of Vladimir Putin. It is also evident in the European Union’s (EU’s) stand-off with Greece, which grows uglier by the day. And Greece’s overtures to the Russians make the situation possibly even more alarming.

After WWII, America helped rebuild Europe. That provided the early foundations for the unprecedented period of European stability and prosperity that has followed. Is Europe willing to throw that away? Our global role raises many questions for America’s policy makers:

• Are the Europeans being careless with their hard-won peace and prosperity?
• What is our strategy with Ukraine and Russia’s aggression?
• What is our strategy for the greater Middle East, including Israel, Iran and ISIS?
• What about China?

All of these questions are on the table as the Obama administration seeks a new Authorization for the Use of Military Force (AUMF) against ISIS this week. It is particularly relevant that the Obama administration released its new National Security Strategy (NSS) last Friday. It was greeted by Republicans with disdain. Given the major issues we face throughout the world, most thought it should have been more concrete in its outline of strategy.

It isn’t often that an administration’s own recently retired top official would blast the NSS. Former Army Lt. Gen. Michael Flynn, who retired last year as director of the Defense Intelligence Agency (DIA), said on Fox News Sunday:

We need a much broader strategy that recognizes that we’re facing not just this tactical problem of ISIS in Iraq and Syria…We’re facing a growing, expanding threat around the world…

It’s normal for any president’s political opposition to deride a new NSS. And no NSS is likely to be compared to Sun Tzu’s Art of War. Flynn, who led the DIA for two years under Obama, has some credibility. He used the analogy of a quarterback leading a football team down the field:

I feel like when we say ‘ready, break,’ every player on the team is going off into other stadiums, playing different sports…

By contrast, the administration is describing their approach as “strategic patience” – signaling that they intend to avoid any substantial commitments (at least involving any direct military presence on the ground) for the next two years. This codifies Mr. Obama’s “leading from behind” as at the core of US strategy.

Strategic Patience brings along with it a very high Wimp factor. But should it be dismissed out of hand as weakness, or as a simplistic attempt to avoid foreign policy commitments? The Wrongologist has written before about the urge to “do something”. This is called the “Politician’s Syllogism”, a logical fallacy:

1. We have to do something
2. This is something
3. Therefore, we have to do this.

We hear this most Sunday mornings on “Bloviating with Old Politicians”, featuring John McCain. In fact, Sen. McCain’s wingman, Sen. Graham, launched the first strike against Obama’s NSS, tweeting:

I doubt ISIL, the Iranian mullahs, or Vladimir Putin will be intimidated by President Obama’s strategy of ‘Strategic Patience.’ Lindsey Graham

Many other Republicans piled on during the next few days, but no one offered an alternative strategy.

Iran is far more important than Ukraine, which is more important than ISIS, which is a strategic side show. Short of ‘boots on the ground’ in Iraq, Syria, Yemen and Ukraine, what are the Republicans suggesting we do?

If Strategic Patience is acceptable for our adversaries like Russia or China, it should be acceptable for us. The realities of US resource allocation and the current balance of power dictate we focus on the long game, which may mean that saving Ukraine, or lives in Syria, won’t make it to the top of our list. The most important rule that America’s would-be interventionists must learn is that the “first do no harm” doctrine must apply.

The amount of treasure the US has expended on foreign interventions since 2001 is irreplaceable. We could have covered the Mojave in solar thermal plants, and no longer need foreign oil. We could have completely renovated our transportation infrastructure. We could have built a high speed Internet across the US for what we spent on what are now piles of junk and wrecked installations in the Middle East, not to forget the wrecked lives of our soldiers and their loved ones.

US politicians and foreign policy elites really must resist the urge to “do something” in response to every perceived foreign policy crisis.

 

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Cheaper Oil Prices: Who Wins?

When OPEC announced on Thanksgiving Day that it would maintain oil production at 30 million barrels per day, a volume above the world’s current supply/demand equilibrium, the global price of oil dropped precipitously. Today, you can pay more for a gallon of milk than a gallon of gas.

After the meetings ended, the Saudi oil minister was smiling victoriously, while representatives of several other OPEC nations were steaming. That group included Venezuela, Algeria, and Iran. From Reuters:

Saudi Arabia’s oil minister told fellow OPEC members they must combat the US shale oil boom, arguing against cutting crude output in order to depress prices and undermine the profitability of North American producers. Ali al-Naimi won the argument at Thursday’s meeting, against the wishes of ministers from OPEC’s poorer members such as Venezuela, Iran and Algeria which had wanted to cut production to reverse a rapid fall in oil prices.

The question before the house is who gets hurt by lower priced oil?

• Iran, Venezuela, Algeria, Mexico, Iraq, Nigeria, and Ecuador have built their domestic budgets based on oil prices that exceed $100/barrel of oil. But, yesterday’s price was $70.54. Venezuela already borrowed $4 Billion from the Chinese, and then spent $1 Billion in a week to cover domestic needs.
• Russia’s break-even budget price of oil is over $100/barrel.
• Canada has managed to increase its production of oil by a million barrels a day over the last decade. But almost all of that increase has come from oil sands that are unprofitable at today’s price.
• Mexico’s oil was selling for $63.72/ barrel on Monday, its lowest point since July 2009. Mexico cannot survive for long at this price, especially considering that oil revenues account for roughly one-third of government finances.
• Keystone Pipeline: The Fiscal Times reports today that it may never be completed. Lower oil prices may make Canadian oil sands output (it is supposed to travel via Keystone to Louisiana) too costly to ship. Also, Saudi is taking aim at Canada, since the Saudi crude competes directly with Canada’s tar sands oil, which is the highest cost oil being produced today.
• The Koch Brothers may now have to produce oil at a loss from their vast holdings of tar sands. But, their party is the Saudis’ best friend, so in a way, this may cause some Republicans to recalibrate their love of Saudi Arabia.

We should be happy with lower oil prices, right?

• Gas prices at the pump are down dramatically. Lower gas prices are an increase in take-home pay for Americans who drive.
• Iran’s foreign policy is very expensive, since it supports Syria, Hamas and Iraq. They may soon have to make difficult choices that entail scaling back their regional commitments. They may have trouble maintaining those commitments and their nuclear program.
• Russia’s currency has fallen steeply along with the price of oil, meaning that it may have to restrict imports of key goods. Russia imports a lot of basic products, including beef, cheese, shoes, TV’s, cosmetics and pharmaceuticals. According to Bloomberg, Finance Minister Anton Siluanov estimates that Russia would also lose about $100 billion in revenue next year because of falling oil prices.

We live in a complex world:

1. Our major ally, the Dark Ages Kingdom of Saudi Arabia, perhaps the world’s largest funder of terrorism in the ME, is attempting to prevent our move towards energy independence. As long as the Saudis control much of our energy supply, we will remain involved in these ME wars. Many people think that our State Dept. may have encouraged the Saudis in order to punish Russia for blocking our takeover in the Ukraine.
2. Oil is not used to generate much electricity in the US. Cheaper oil does nothing to effect the economic viability of solar or wind, whose main competitors are coal and natural gas. The primary effect here in the US is twofold:

• Reduce the economic attractiveness of fracking (a good percentage of fracking is for natural gas, and will not be effected by cheaper oil).
• Reduce the demand for electric cars to the extent that their sales are a function of lower gas prices.

Low oil prices over a long enough period will burst the US fracking bubble. We could react to cheap oil by ending fracking and never starting it up again. We could plug the wells, clean the soil, repair the damage from earthquakes, pay the medical bills of the innocent folks forced to live near these sites. And, in a time of water scarcity, save the billions of gallons of water that are used to frack today.

Finally, the economic pressure lower priced oil puts on our so-called “enemies” brings with it the real cost of confirming the neo-con view that the US can still muscle its way around in the world. So, will our relations with Iran, Syria, and Russia will remain intractable? Or, can it lead to a nuclear deal with Iran and a political accommodation with Russia? That has to be the underlying bet by Saudi Arabia and the US.

The “oil weapon” was used in 1973 against the US. We hated OPEC’s war on our economy back then. We of course, used that very same old oil weapon when we embargoed oil sales by Saddam Hussein’s Iraq. Skip ahead a couple of decades, and it is now smart policy, it’s effective, and it’s now the American way.

Oil, as always, remains the centerpiece of our Middle East strategy.

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