Thursday, August 17, 2006

Oil Disruptions

J. Peter Pham writes today:
Last week's announcement by British Petroleum (BP) that it might have to shut down its 400,000 barrels-per-day Prudhoe Bay oil field – after an inspection turned up severe corrosion and a small leak on an oil transit pipeline – sent waves through the world financial markets as well as unleashing a barrage of political fire in Washington. As problematic as the challenge, BP's difficulties in Alaska are easily remediable, even if the company's announced plans to replace all of its transit lines around the Prudhoe Bay will cost an estimated $170 million.

In contrast, little attention has been paid to the far more daunting challenge that BP and other oil "majors" – and the world as a whole – face in its Niger Delta oilfields where, since the beginning of this year, attacks by a new group calling itself the Movement for the Emancipation of the Niger Delta (MEND) have cut production by an estimated 500,000 barrels of oil per day, or approximately 25 percent of Nigeria's output. (According to a July 28, 2006, report by the United States Department of Energy's Energy Information Administration, during the same period, Nigeria is the America's fifth-largest supplier of petroleum products, shipping approximately 1,207,000 barrels per day, just a little behind third-ranked Saudi Arabia's 1,453,000 barrels.)

This follows predictions made in the spring 2006 issue of The National Interest by Harlan Ullman, about the threat posed by instability in Nigeria. Both Ullman and Pham also call attention to the fact that groups like Al-Qaeda cannot be unaware of the potential for creating economic instability by being able to exploit Nigerian difficulties to curtail oil supplies.

Any sense as to what impact the cut has had on gas prices in the US?
It's amazing to me is that few are considering the potential disruption that is going to occur when the U.S. attacks Iran next year.

If the Iranians go ahead and retalitate by shutting down the Persian Gulf with their rather impressive arsenal of Chinese "rocket mines" (EM-53) and antiship missles (C-802 and varients), we're in for a bumpy ride.

The last time there was a major disruption in the Gulf (1980-1 during the original Persian Gulf War), the price of oil immediately doubled to it's highest level in more than 30 years (adjusted for inflation approx. $70+).

Keep up the good blog...
Hezbollah gave us a preview of what the Iranian silkworm missiles can do when they damaged the Israeli patrol boat too ...

I think there is still uncertainty whether there will be a war with Iran next year, although I agree that the prospects are ominous. Those pressing for military action have not tried to prepare society for the consequences.

Nigeria has had serious problems for some time and The National Interest is right on point to call wider attention to them. Africa cannot be neglected or we will end up with problems there as dangerous as the ones we face in the Middle East.
David Billington:

The President has not made a case for war with Iran. He has to make that case first before he can prepare US for the consequences.

From a Realist perspective; he does not have any positive choices. He cannot engage Iran in a discussion since the prepatroy talks will take months of work to develop (setting up the venue, the agenda) etc. He just does not have the time remaining in office to accomplish that.

That leaves him with sanctions and air strikes as his negativbe options.

The best, in my opinion, that he can do is to settle for sanctions and leave it to the next Presidents (of US and Iran) to negogiate a settlement.
Completely agree David. Too bad we can't get a deal done on ag subsidies whether the forum be the WTO or the U.S. Congress. That would do much more to help Africa than what is currently being proposed.
edward nashton:

Why do you believe there are potential threats to the United States in Africa?

Do you have specific countries in mind?

Are you thinking of the Islamic people there as the source of dnager?
Anonymous 7:08,

It would certainly be helpful if the President could explain how we would win a war with Iran; that is the case he needs to make. I think he or his aides have already given the reasons why they believe Iran shouldn't have nuclear weapons, eg. in the most recent issue of Newsweek.

Talks with Iran would not take very long to initiate or conclude if a basis for agreement existed. It is only when a basis doesn't really exist that you get endless procedural delays, eg. the Paris talks over Vietnam after 1968 and the European effort with Iran of the last few years.
david billington:

2 years of talks preceeded Nixon's trip to China.

Several more years of talks were conducted for the Libyan settlement.

Given the mutual suspicion I just cannot see how there could be rapidly progressing talks.
Anonymous 8:05,

My understanding is that the Libyans dragged their feet until the capture of Saddam Hussein, at which point they suddenly capitulated. The discussions in the preceding years were probably not serious negotiations.

There was a long period before Nixon went to China, but I'm not sure the opening to China is comparable to the situation with Iran today unless you mean to imply that diplomacy might be conducted to achieve a US alignment with Iran against Iran's enemies as part of some deal. This could indeed require time but I don't think this is an aim of US diplomacy.

The problem with Iran today is that there is no way to reconcile (1) the US demand that Iran not possess nuclear weapons-capable technology under the present regime with (2) the demand of the present regime in Iran for technology that is capable of producing nuclear weapons.

The problem does not seem to be one in which both sides have a basis for agreement hampered by detailed differences that can be narrowed or resolved with more time for negotiation. The problem seems to be one of no basis existing for agreement in the first place.

There may be more procedural delays because it is possible that neither side wants to have a confrontation. But the danger seems to be that a point is approaching when diplomacy will end and either we will accept a nuclear Iran or go to war.
david billington:

Thank you for your response.

I do not agree with your third paragraph.

The reason I disagree is becuase I believe Iran already has that technology.
I think the risk that Mr. Gvosdev is pointing to here is that, given the tightness o the global oil supply, even disruptions in mid- to low-tier producers can have dramatic effects on prices. And Nigeria definitely does not look good.

No wonder, though, that the talk turned quickly to the elephant in the room. Interestingly, Dr. Kissinger in an op-ed in the Daily Yomiuri (unfortunately, I cannot find it on the Yomiuri website in either language) also refers to the comparisons made to US diplomacy with China in the 70s. He draws attention to the fact that China changed its position not because of US diplomatic efforts but because it had come to believe that the Soviets were the greater threat to its national security. Iran has yet to make the choice between belief and nation (I am working off the Japanese translation), between religious war and international cooperation; the choice that would open the door to such a choice, . Moreover, the US-China breakthrough was preceded by a couple of years of secret contacts that nurtured a common understanding. This, again, does not exist in the case of the US and Iran.

That is the gist of Dr. Kissinger's take on the prospects for US diplomacy at this point. While waiting for Iran to come to its senses, he advocates powerful sanctions. Not that I have a better idea, but I'm not sure that will work. In any case, sanctions is where it looks like we are headed, so it looks like we're in for a lot of trouble in the near future.
Jun Okumura:

For Iran, there is no other way.

US strategies in ME are a threat to Iran.

It is not just Iran that has to come to its senses; it is also the United States.
Anonymous 12:20,

"The reason I disagree is because I believe Iran already has that technology."

This may well be true. But I meant to argue that a basis for agreement has never existed at any point in the three years since the undeclared aspects of Iran's nuclear program became known. The demands of each side were as mutually exclusive three years ago as they are today, and I don't see what additional time for negotiations would have produced except stalling. Do you think Iran could have been persuaded at some point in the last three years to halt its nuclear work?
david billington:

Iran was persuaded to halt its nuclear work for 2 years.

Iran cannot be persuaded to halt its nulcear work permanently.

Since the power to undo the Iranian nuclear program does not exist in the international arena (including the US military strikes).

Since, as you have observed, there is no basis for agreement and since the nuclear program in Iran cannot be reversed, the realistic policy option for US will be a Cold War like confrontation across ME.
Anonymous 10:28,

Sorry, by "halt" I meant halt permanently, not temporarily.

For deterrence to be a realistic US policy toward a nuclear Iran would depend on whether political conditions of the kind that made the Cold War stable would also hold in this case. There is some disagreement about whether deterrence would work with Iran. But it may be the case that the American people will not accept the risks and costs of going to war unless and until there is a more explicit provocation.
Were Iran for whatever reason to mine the Gulf of Hormuz, the oil delivery systems would go into hypershock. This possibility is easily within the capabilities of Iran, and there is very little anyone anywhere on earth can do about it. There are also potential dire consequences for our 140,000??? something soldiers just across the border should America air power and brilliant strike at Iran nuclear capabilities. We don't know where exactly all these facilicities are, or how deeply bunkered they are, and unlike Iraq before the current Bush government concocted nightmare, - Iran does have a potent military. There are no good options.

Like a chess match the begins with stupid, reckless, thoughtless, idiotic, and bonehead, moves, - if the stupid reckless thoughtless, idiotic, and bonehead player is not mated immediately - the stupid, reckless, thoughtless, idiotic, bonedhead must play defense out of self imposed desparation.

This is exactly the position the fascist warmongers and profiteers in the Bush government have hoisted upon America.

Prancing around sliming our fellow Americans as "emboldening Al Quaida types" for posing legitimate questions and opposition to the Bush governments exceedingly bloody, costly and catastophically FAILED policies - or bruting the ridiculous fictions that we're making progress, the freedom is on the march, and that the terrorists on in their last throes - is beyond incompetent and bleeding into the insane.

We must engage even our enemies in dialogue and negotiation, and largely because we have so few options military or otherwise (outside of bug, chem, or nuke responses) - we must accept that the fascist Pax American pipe dreams of the warmongers and profiteers in the Bush government are dead on arrival.

We must cut our losses, negotiate the best settlements possible, learn to live with a nuclear capable Iraq, just we do a nuclear capable Pakistan, - return to the only real critical action our government should be taking in the ME and globally, (hunting, capturing, or killing every jihadist mass murderer and those who aid and abet them on the planet) - and hope and pray that wiser minds prevail.

Democratizing the ME by the terrible swift sword of America's hypersuperior military is NOT POSSIBLE.

Reboot, and start over.
I mean't a nuclear capable IRAN!
This thread of the discussion shows how so many different areas are interwoven with Iran; a post about the interruption of oil supplies from Nigeria comes back to Iran because Iran sits right now at the nexus points of the things that affect US policy the most--energy, proliferation, and terrorism.
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