1) The current US energy profile and 2)Membership in the Arctic Council – May 15, 2013

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1) Since the end of the Second World War when its energy requirements increased appreciably, the US had to import oil, principally from the Middle East, to supplement its domestic oil production. It therefore had to cozy up to the autocracies in the Arabian Peninsula. Most knowledgeable observers of US economic and political policies toward the Middle East have recognized that to quite some degree, US policies were informed by the need for oil. And not only for US domestic consumption but also to shore up the economies of oil-deficient Western Europe, Japan and Israel. Now according to the New York Times (NYT) in a recent article, the US finds itself “on the cusp of realizing one of its long standing goals: energy independence.” The NYT states further that “American politicians in both parties have long dreamed of energy independence – not only for its potential economic benefits, but also because it could free the United States from the vicissitudes of the outside world.”

In the context of a markedly upward trend in US oil and gas production as a consequence of technological improvements, one report has the National Security Advisor Tom Donilon suggesting that the US would utilize gas exports to increase its national security profile. The statement seems to be taking a leaf out of Russia’s book: Russia as a principal supplier of much needed gas to countries west of it such as Ukraine, Germany and Poland etc. has occasionally pressured these countries to fall in line with Russian aspirations, by shutting off the gas tap. The recipient countries were compelled to meet Russian demands. The US probably has similar ideas in dealing with gas- deficient countries such as India China and Japan to whom it could export gas in LPG form via cargo ships. I am flagging Donilon’s statement as it did not appear to me to have had the resonance which it deserved.

The NYT does caution that there could be a negative outcome in the Middle East and even Russia as a result of the oil and gas bonanza in the US. This phenomenon will drive down global energy prices, “undercutting the foundations of petro states everywhere.” With oil, according to one authoritative estimate projected to fall to $50 a barrel within the next two years, the event would compel the US to assume an “even greater international role” in mitigating the destabilizing effects of low oil prices in regions crucial to America’s interests. The entire Arabian Peninsula and Putin’s Russia presently buttressed by huge oil profits, would feel the pinch when their financial coffers are depleted. The US would have to manage this arc of instability which undoubtedly would affect its interests. One can well imagine large cohorts of unemployed poverty stricken youths turning to violent extremism against the remaining regions of affluence.

2) Membership in the Arctic Council: Secretary of State John Kerry is in Kiruna, northern Sweden attending a two day meeting of the Arctic Council. The Council comprises the five Nordic countries, the US, Canada and Russia. 14 countries and organizations including China, India, and Japan are jostling to gain observer status at the Council. According to the Financial Times (FT), “the Arctic is viewed as an increasingly strategic area,” because of the presence of natural resources such as oil. Also the possibility of quicker shipping routes emerging between Europe and Asia is another factor for the worldwide interest in the Arctic region, as the polar ice melts. The FT estimates that more than a fifth of the world’s undiscovered oil and gas reserves is thought to be embedded in the icy expanse of the Arctic.

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