Since 2008, energy and food marketsthose most fundamental to human existencehave remained in turmoil. Resource scarcity has had a much bigger global impact in recent years than has been predicted, with ongoing volatility a sign that the world is only part-way through navigating a treacherous transition in the way it uses resources. Scarcity, and perceptions of scarcity, increase political risks, while geopolitical turmoil exacerbates shortages and complicates the search for solutions.
The New Politics of Strategic Resources examines the political dimensions of strategic resource challenges at the domestic and international levels. For better or worse, energy and food markets are shaped by perceptions of national interest and do not behave as traditional market goods. So while markets are an essential part of any response to tighter resource supplies, governments also will play a key role. David Steven, Emily O'Brien, Bruce Jones, and their colleagues discuss what those roles are and what they should be.
The architecture for coordinating multilateral responses to these dynamics has fallen short, raising questions about the effective international management of these issues. Politics impede here too, as the major powers must negotiate political and security trade-offs to cooperate on the design of more robust international regimes and mechanisms for resource security and the provision of global public goods.
This timely volume includes chapters on major powers (United States, India, China) and key suppliers (Russia, Saudi Arabia). The contributors also address thematic topics, such as the interaction between oil and state fragility; the changing political dynamics of climate change; and the politics of resource subsidies.
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About the Author
David Steven is a nonresident senior fellow in the Foreign Policy program at Brookings, where he works with the International Order and Strategy project.
Emily O'Brien was a senior research officer at New York University's Center on International Cooperation (CIC), where she worked on natural resource management, international institutions, and emerging powers; she now works for REDD Associates.
Bruce Jones is a deputy director of the Foreign Policy program at Brookings, where he also directs the International Order and Strategy project; he has past experience with the United Nations, the World Bank and in intergovernmental negotiations on security and transnational threats.
Read an Excerpt
The New Politics of Strategic Resources
Energy and Food Security Challenges in the 21st Century
By David Steven, Emily O'Brien, Bruce Jones
Brookings Institution PressCopyright © 2015 The Brookings Institution
All rights reserved.
Introduction: Energy Policy on the Edge
BRUCE JONES AND DAVID STEVEN
This book is about the political economy of energy. There are few more consequential topics for understanding today's global economy, for global development, or the very well-being of humankind.
Energy isn't always thought of as being essential to the fabric of the global economy, or to development—but it should be. This can be dramatized by juxtaposing three simple facts.
Energy goods account for almost one out of every five dollars traded in today's global economy. That makes it one of the largest sectors in contemporary globalization. Only finance is in the same league in terms of shares of global economy activity.
Despite the huge volumes of energy being produced and consumed, more is needed: 1.3 billion people live without access to modern energy. This is not a phenomenon primarily of the world's poorest states, but of its most dynamics ones—there are upward of 300 million without access to modern energy in India alone, a state otherwise poised to join the ranks of the top powers. Securing new supplies for the world's energy insecure is going to be among the most critical tasks of development in the coming decades.
Yet, we're already burning more fossil fuels than our climate can handle. The drive to expand energy access and security will complicate and be complicated by the mounting fight and fright over global warming. The vast majority of the world's scientists agree that to stabilize the global climate at a less than 2°C rise in average global temperatures requires keeping the quantity of carbon and other greenhouse gases in the atmosphere at around 450 parts per million. Right now, we're at 403 ppm and we're on track to hit 650 ppm—and that's if governments meet the climate targets they agreed to in Copenhagen in 2009. Growing demand for energy by the world's rising states and growing middle classes puts that target comprehensively out of reach even if we see something approaching the full-scale decarbonization of the economy in the West—a near-impossible challenge.
The long and the short of it is, energy is emerging as a defining feature of globalization, of global development, and, of course, of climate change. Indeed, if the first phase of modern globalization was about its geographical spread (what's been called extensive globalization), and the second was about the deepening of economic integration between existing markets (intensive globalization), there's a case for arguing that the next phase is going to be heavily about energy—its acquisition, transportation, and, most importantly, the debate over whether to constrain its use. Call it the phase of sustainable globalization.
It's also reshaping geopolitics. In a book published simultaneously with this one, Bruce Jones and David Steven examine the geopolitical consequences of the changing global energy landscape. The Risk Pivot: Great Powers, International Security, and the Energy Revolution focuses on the way energy is amplifying three already complicated problems: geopolitical competition between the great powers; the struggle over global development in the new middle powers, as well as in fragile states; and global climate change negotiations. The book highlights the critical choices facing the top powers. As we see it, these are three: whether to allow energy to continue to be a source of geopolitical tension for globalization; whether to choose deliberately to use energy as a source of additional tension, that is, to use energy as a political and economic weapon against one another; or whether to forge a "governance" approach, that is, to build the relationships, rules, and mechanisms to limit the way energy amplifies tensions and, by contrast, to find areas—and important ones do exist—where energy is a source of win-win outcomes and thus of potential cooperation.
While those outward themes echo through this book as well, our concentration here is inward—on the way energy plays into the internal political economy of major states, and on their search for internal and human security (though not neglecting regional security). Geopolitics and international war get a prominent mention herein too, because they cannot be wished away even from the search for more basic forms of security, like food security and internal political stability. But our emphasis here is on the search by major states for secure national "control" (if that word meaningfully applies to global energy dynamics) over the sources of their internal growth and social well-being. Energy plays vitally into that search, especially for the rapidly growing powers.
This book proceeds as follows. We look first precisely to those rapidly growing powers, to examine how it is that energy is literally fueling and simultaneously complicating their rise. These chapters cover the three most important rising powers—China, India, and Brazil. But we also include an analysis of a rising state often overlooked, Nigeria—the seventh most populous state in the world, larger than both Russia and Japan. Then we turn to various dimensions of security, between states to be sure but primarily within states—incorporating key dynamics of human security in our analysis. We examine regional security (between Asia's two giants and in Europe's backyard); the way energy-producing regimes often use energy as a weapon in regional or even global political struggles; and internal security. These chapters incorporate what we might consider status quo actors, like the European Union (EU) and Saudi Arabia—though as the chapters make clear, even these countries face serious challenges to their own status quo. This part also incorporates Russia—often considered to be a "rising" power, but for all intents and purposes really a slumping one.
Then, finally, we look at both the internal and international dimensions of the one state whose energy developments will most shape and constrain global ones: the United States. It may seem odd to treat the United States this way, given the mostly dominant narrative that it is a declining and retreating power. The realities are different. Seen through the lens of energy, the United States is part way through a stunning renaissance. These do not eradicate other sources of U.S. challenge or constraint, but they do substantially offset them. And the energy revolution in the United States is a function first and foremost of the dynamism of the American market model—a fact that has not gone unnoticed in Mumbai or Shanghai, even if it's not yet fully acknowledged in New Delhi or Beijing. Important questions remain for the United States. These are first of all internal—how will it respond to a series of U.S. political economy challenges? But they are also external—will it use its new-found energy strength to attempt to shield itself from international dynamics, retreating into a more isolationist stance? Will it seek to use its energy endowment as a "weapon" of foreign policy? Or will it use its energy strength as a lever to push for more stable markets?
Unsustainable Developments: Energy and the Rising Powers
We start by looking in depth at the internal challenges of energy in the world's most dynamic markets. China and India are obvious targets of that analysis, as the world's two most populous states, and the core of the Brazil, Russia, India, China, and South Africa, or BRICS, grouping. Brazil is not as populous as either state, but it's richer, and so has already thrust its way into the ranks of the top six economies, topping Britain; and it's done so in substantial part because of its ability to harness its own vast energy and food resources. And Nigeria: the world's seventh most populous state doesn't show up on everyone's account of rising state dynamics of the past decade, but it will in the next. At least, it will if it can overcome some deep internal challenges—Nigeria is both a rising state, and a fragile one, a dichotomy that increasingly will characterize the next set of rising states.
If one theme connects the dots between this otherwise disparate set of countries, it is energy insecurity. This is true even of the largest and most successful of them to date, China.
The simple fact is that as China grows, its demand for oil and other forms of energy grows, and so too does the complexity of its search for energy security. In "China's Search for Oil Security: A Critique," Andrew B. Kennedy analyzes the ways in which the Chinese government has sought to enhance its access to oil supplies, focusing on four policies that aim to improve access to oil supplies.
For more than a decade, the Chinese government has encouraged its national oil companies (NOCs) and other state-owned enterprises to "go out"—to invest overseas and gain greater access to foreign resources. However, the results of going out have been limited. While the Chinese NOCs' overseas equity production surpassed 1.5 million barrels a day in 2011, that's only a fraction of global crude oil production at 84.5 million barrels a day. Furthermore, the NOCs do not necessarily send the oil they produce back to China, and it is not necessarily cheaper or more available to China in a supply crisis. Lastly, there is concern that the NOCs' international expansion may actually detract from China's overall welfare and security as the expansion brings China into relationships with isolated states like Iran. (This theme of political risk increasingly flowing to the emerging Asian giants is a central theme of Risk Pivot.)
In addition to encouraging its own NOCs to go abroad, China has sought to diversify its energy import mix through "loan-for-oil" and "loan-for-gas" deals, as well as try to diversify the routes that its oil shipments follow. Yet, though the loan-for-oil deals will improve China's overall energy security by reducing its reliance on imports from the Middle East and Africa, the effects will likely not be large.
Also, recognizing the great percentage of its energy that travels through open waters, China has been working to improve its blue-water navy. In theory, a stronger navy would improve China's leverage in its territorial disputes in the East China and South China Seas, helping it to gain control over energy resources there. However, it remains unclear how extensive the energy resources are, and in any case it is unlikely they would dramatically reduce China's dependence on oil imports.
Last, China has been building its own strategic petroleum reserve to strengthen its energy security. This investment has the potential to make a significant contribution to the country's energy security, as it provides Beijing with new policy options in the event of a disruption to oil imports. However, it would be more effective if it were used in coordination with the reserve systems of other countries.
While Beijing has been trying to build up domestic capabilities and bilateral deals with oil- producing states, the payoff for China's energy security has been limited. Going forward, Kennedy argues, China will need to invest in stronger multilateral cooperation to truly enhance its energy security.
If anything, India faces starker challenges still. As India's economy and population grow, so too does its resources challenge. Energy, water, food, and environmental challenges will continue to present themselves globally, but India provides a powerful illustration of how complex and deep these challenges are. Domestically, inadequate infrastructure, intense political pressures, and the need to tackle poverty all constrain India's options with regard to resources.
Thus, in "Materials, Markets, Multilateralism: A Strategic Approach to India's Resource Challenges," David Steven and Arunabha Ghosh argue that while resource scarcity will play an important role in shaping India's future, it is unclear that India will be able to change the game domestically. More likely, global drivers will help frame what is possible within India's domestic policy environment: India's exposure to the breakdown in global energy markets could grow; the country's size does give it considerable power in the food market; transnational water stress issues may prove unmanageable in the medium term; the intersection between maritime and energy security could become a source of international friction; and climate change politics will become increasingly challenging.
However, the global governance regimes that deal with the issues that India most cares about are both weak and contested, and India often lacks a clear strategy for its international engagement. Both India and its allies, therefore, have an incentive to look for opportunities for international cooperation on resource and environmental issues. Greater international engagement can help increase understanding of the risks that India faces, provide India with a platform to share potential solutions with its partners, provide a basis for Indian leadership in the G-20, and help India influence the post-2015 development agenda. But to take full advantage of more decisive international engagement on resource issues, India will need to increase its capacity to engage internationally.
Brazil has had an easier time so far, as it is well endowed with domestic resources. Of the emerging powers, it's the country that most resembles the United States in terms of its providence and commitment to global norms. No surprise, then, that as energy insecurity has receded as an internal challenge for Brazil, it has turned its gaze outward. As Antonio Jorge Ramalho argues in "Brazil's Principled Pragmatism: A Viable Response to the New Geopolitics of Resource Competition?," Brazil's concern increasingly is not its internal energy issues, but its external ones. As the world population and developing economies expand, Brazil is preparing for a world with increased demand for resources and attempting to position itself to take advantage of the opportunities such a world offers.
Brazil sees a strong link between development and security. As resource scarcity grows, it sees a greater potential for international conflicts. To cope with this possibility, governments need a legitimate global response that will allow countries like Brazil to enlarge their supply of biofuels. Brazilian policy emphasizes the argument that to sustainably grow, these governments must respect both human rights and the environment, suggesting that sustainable development and social inclusion need to be part of the response. Brazil, which is already in the process of reducing subsidies to Petrobras and relies on small farms to provide more than 40 percent of the country's total agriculture, believes that it can become a model of sustainable development for other developing countries, and that it can lead on the articulation of multilateral frameworks to advance these goals.
Nigeria has no such luck. Domestic demand in Nigeria is shaped primarily by two forces—a growing, urbanizing, and slowly aging population, and a growing but unstable economy. Nigeria's population has more than quadrupled since 1950, and most of the population is now adult and increasingly urban, creating significant demand for food, water, land, power, and other resources. Further increasing resource demand is Nigeria's oil-dependent economy, an economy that is large for the region but still does not provide jobs for its population. Overall, consumption exceeds production, with natural resource revenues, debt, remittances from overseas, and development assistance filling the gap.
These factors combined create the possibility of a demographic disaster, coupled with a steep growth in domestic resource demand. Nigeria—Africa's biggest oil producer—has already failed to meet domestic energy requirements, and the gap between supply and domestic demand will continue to grow without major reforms. In addition, a growing population will put increased stress on Nigeria's land, food, and water resources, and this stress will likely be exacerbated by climate change.
Excerpted from The New Politics of Strategic Resources by David Steven, Emily O'Brien, Bruce Jones. Copyright © 2015 The Brookings Institution. Excerpted by permission of Brookings Institution Press.
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Table of Contents
1 Introduction: Energy Policy on the Edge Bruce Jones and David Steven,
Part I. The Rising Actors,
2 China's Search for Oil Security: A Critique Andrew B. Kennedy,
3 Materials, Markets, Multilateralism: A Strategic Approach to India's Resource Challenges David Steven and Arunabha Ghosh,
4 Brazil's Principled Pragmatism: A Viable Response to the New Geopolitics of Resource Competition? Antonio Jorge Ramalho,
5 The Big Squeeze: Nigeria on the Brink Mark Weston,
Part II. Facets of Resource Security,
6 Routes to Energy Security: The Geopolitics of Gas Pipelines between the EU and Its Southeastern Neighbors Angel Saz-Carranza and Marie Vandendriessche,
7 Energy Rivalry between India and China: Less than Meets the Eye? C. Raja Mohan and Lydia Powell,
8 Resource Security in Saudi Arabia: Domestic Challenges and Global Implications Kristian Coates Ulrichsen,
9 Governance for a Resilient Food System Alex Evans,
10 Water Security: Global Implications and Responses Daniel Kim Chai Yeo,
11 Oil, Domestic Politics, and International Conflict Jeff D. Colgan,
12 Russia Gambles on Resource Scarcity: Energy Intrigues in a Time of Political Crisis Pavel K. Baev,
Part III. The Critical Actor,
13 Challenges to Sustainable Growth after the Great Recession: How America Can Lead Joshua Meltzer, David Steven, and Claire Langley,
14 Governance Challenges and the Role of the United States in the New Energy Landscape Kevin Massy,