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Mexican Relations

1ac mexican relations


Transboundary agreement is critical to guarantee a new era of Mexican relations Martin* and Wood**, 13 *director of the Energy Program at the Institute of the Americas at the University of California, San Diego AND **director of the Me ico Institute at the !oodro" !ilson International Center for Scholars# $e "or%ed as a &rofessor for '( years in Me ico and &reviously "as director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de M, ico -.eremy Martin, , /010'1, 2U#S# Should Act 3uic%ly on *rans4oundary $ydrocar4on Agreement !ith Me ico5, htt&600"""#"orld&oliticsrevie"#com0articles0&rint0'7871900EM :esterday, U#S# President ;arac% <4ama and Me ican President Enri=ue Pena Nieto met in Me ico City to discuss the 4ilateral relationshi&# It "as <4ama>s first meeting "ith Pena Nieto since the latter too% office in Decem4er, although the

t"o did meet "hen Pena Nieto visited !ashington as &resident?elect in Novem4er# In star% contrast to meetings 4et"een the American and Me ican &residents in recent years, the agenda included 4ut "as not dominated 4y security and organi@ed crime# Instead, as underscored 4y the &residents> Aoint &ress conference, <4ama>s visit to Me ico City offered a varied menu of issues such as trade, education, innovation, North American com&etitiveness and energy# <n this last issue, it is li%ely that the Me ican

&resident in=uired a4out the status of the *rans4oundary $ydrocar4ons Agreement , signed "ith much fanfare in Bos Ca4os in Ce4ruary 7D'7# *he agreement creates a frame"or% for resolving the thorny issue of o"nershi& of oil and gas reserves that e ist acrossEor rather underneathEthe international 4order 4et"een Me ico and the U#S# in the Fulf of Me ico# *his &ro&osed frame"or% "ould &ut to rest long? standing Me ican fears of the 2efecto &o&ote,5 or stra" effectEthe idea that U#S# com&anies aim to slur& u& Me ican oil reserves from across the nations> maritime 4order# *he 7D'7 agreement mar%ed a maAor shift 4y &roviding legal

certainty for e &loration and &roduction activities near the 4order, and 4y allo"ing for the &ros&ect of long?&rohi4ited Aoint develo&ment of reserves that straddle the Fulf "aters of 4oth countries# At its core, the agreement see%s to set u& legal guidelines for com&anies to Aointly develo& so?called trans4oundary reservoirs and lift the moratorium on oil and gas e &loration and &roduction for roughly '#/ million acres in the Fulf# Me ico underscored its commitment to the agreement 4y =uic%ly

ratifying itG the Me ican Senate a&&roved the treaty in A&ril 7D'7# In the United States, mean"hile, &rogress stalled for more than a year# ;ut Aust in time for yesterday>s 4ilateral meeting, the agreement is again under discussion as legislators
revive the dormant ratification &rocess, "hich is good ne"s for those eager to see its a&&roval in the U#S# Indeed, according to the !hite $ouse, <4ama s&o%e in &ositive terms yesterday a4out the recent &rogress made on the agreement6 ;oth the $ouse Su4committee on !estern $emis&here Affairs and the $ouse Committee on Natural )esources recently held hearings focused on the challenges and o&&ortunities that a&&roval of the accord "ould &resent for the United States# <n A&ril 'H, a 4ill "as introduced in the $ouse of )e&resentatives that "ould ma%e "ay for the a&&roval and im&lementation of the terms of the agreement# *hese are all &ositive ste&s, and their &rogress "ill 4e monitored closely 4y U#S# and international o4servers, es&ecially Me ico# ;ut it 4ears underscoring that further delay in U#S# ado&tion of the agreement ma%es little sense# *he agreement is not an overly &olari@ing issue domestically6 in fact, =uite the o&&osite# Several la"ma%ers have descri4ed it as a "in?"in for 4oth Me ico and the

U#S# As the U#S# Congress de4ates the deal, it is "orth revisiting the four %ey reasons the agreement merits an e &editious a&&roval in the coming "ee%s# Cirst, approval of the deal in the U#S# "ould 4e an im&ortant sign of 4ilateral concord, &articularly at the outset of a ne" administration in Me ico and a second term for <4ama# *his is im&ortant, as it underscores the t"o nationsI increasing a4ility to "or% together and conclude com&licated agreementsEand coo&erationEon 4inational issues unrelated to immigration or crime and drugs# Second, this agreement ma%es clear that 4oth nations are %eenly a"are of the energy &otential of the Fulf , &articularly along the maritime 4order# ;ut it also firmly esta4lishes the issue of increased regulation and standards for drilling in a 4ilateral
agreement# Since the A&ril 7D'D Macondo accident, the largest oil s&ill in U#S# history, the U#S# has 4een more concerned "ith drilling safety not Aust in the U#S# 4ut also in neigh4oring countries around the Fulf such as Cu4a and Me ico# *his agreement

formali@es interaction in terms of regulation and any res&onses to incidents along the maritime 4order# *hird, then?Secretary of State $illary Clinton "as correct to em&hasi@e the commercial o&&ortunity and energy security element of the accord "hen it "as first announced# *he agreement &rovides the &ossi4ility for U#S# firms to Aoin "ith Me ico>s national oil com&any, Peme , to e &loit dee&?"ater oil resources in the Fulf of Me ico
along the countriesI maritime 4oundaries# *his could &rovide im&ortant o&&ortunities for U#S# com&anies, including e citing Aoint venture o&&ortunities "ith Peme long thought im&ossi4le# Cinally, the agreement is relevant and "orthy of attention in 4oth the U#S# and Me ico 4ecause of the im&ortant role of Me ican oil in the U#S# energy security e=uation, and the im&ortance of the U#S# mar%et for Me ican oil e &orts and revenue# During her remar%s at the signing ceremony, Clinton called the agreement &art of a commitment to im&rove energy security for 4oth countries and to ensure safe, efficient, res&onsi4le e &loration of the oil and gas

reservoirs in the Fulf of Me ico# *his last &oint has echoed throughout the congressional hearings on the to&ic, "hile mem4ers of Congress from 4oth &arties and from across the country have focused on the im&ortance of colla4oration "ith our neigh4ors, shared technology and the o&&ortunity to 4oost energy security on 4oth sides of the 4order# *he &resident>s visit to Me ico and the accom&anying surge in interest in the agreement &rovide the necessary momentum to facilitate &assage of the 4ill and ta%e the critical first ste&s to"ard im&lementation# !aiting any longer to do so merely delays the many 4enefits the agreement has to offer and

sends the "rong signal a4out the need for the U#S# and Me ico to "or%
ico, and on energy issues more generally#

together in the Fulf of Me

Action now is critical to broader Mexican relations and access to oil senaro, 13 -Al4erto Esenaro, J0(0'1, 23UICK !$I*E $<USE )ESP<NSE C<UBD MEAN A C<<* IN *$E D<<) IN MELIC<>S $:D)<CA);<NS SEC*<)5, htt&600me icanla"4log#com0=uic%?"hite?house?res&onse?could?mean?a?foot?in?the?door?in? me icos?hydrocar4ons?sector0900EM A =uic% res&onse 4y the U#S# government could mean American com&anies could access Me ico>s vast hydrocar4on resources, "hich loo% li%e they could 4e o&ening u& than%s to reform &ro&osals from Me ico>s governing Institutional )evolutionary Party -P)I9# Me ico, according to an article from the smart&lanet#com "e4site and other sources, o"ns 2a gold mine of oil5G ho"ever, country>s state?o"ned hydrocar4on mono&oly Petr+leos
Me icanos -PEMEL9 has a heavy ta 4urden, and doesn>t have the infrastructure or technology needed to e tract it# President Enri=ue PeMa Nieto>s &ro&osed reforms, "hile %ee&ing PEMEL a state?o"ned com&any, "ould allo" foreign investment and limited &artici&ation in the oil industry 4ut "ould still ensure that oil "ould remain in Me ican hands# In A&ril of 7D'7, then Secretary of State $illary Clinton made

an agreement "ith former &resident Celi&e Calder+n allo"ing Aoint oil e &loration in the Fulf of Me ico, "hich "ould give the U#S# access to Me ico>s "ell?%no"n oil riches# Interestingly, "hile the deal "as a&&roved "ith lightning s&eed in the Me ican Senate -"here o&&osition to &rivati@ation is
=uite strong9, the current <4ama administration in the United States has delayed finali@ing the off?shore drilling deal# According to )e&u4lican la"ma%ers and industry e &erts, a !uic" response is essential and foot#dragging could

$ave disastrous conse!uences for Americans interested in accessing Mexican oil # *he reason "hy conse=uences could 4e disastrous according to industry e &erts is that Me ico could very easily change its mind and call off the deal6 &u4lic o&inion on any foreign investment in the country>s hydrocar4ons sector generally tends to 4e negative and &oliticians could very "ell su4mit to the "ill of the &o&ulace# )e&# .eff Duncan -)?S#C#9 s&o%e to *he $ill recently after a $ouse Coreign )elations committee
hearing# S&ea%ing a4out energy deals "ith Me ico, he said6 2It>s time for the administration to act# All they have to do is send the enacting legislation over here and let us act on it, 4ecause "e>re sitting on Ngo#>5 %f action by t$e &'(' government

is not prompt, as mentioned a4ove, Mexico may cancel t$e deal' Me ico, for decades, has 4een totally closed to foreign investments and the *rans4oundary $ydrocar4ons Agreement, "hich "as negotiated 4y Clinton and Calder+n last A&ril, offers U#S# investors a foot in the door# According to e &erts, if action isn>t ta%en 4y .une or .uly of this year, Americans could very "ell lose the o&&ortunity to invest in Me ico>s oil industry forever if the &ro&osed PEMEL reforms do not go through# <ne of the reasons that my hinder a
&rom&t res&onse from the United States government is that the administration is deciding "hether to consider the agreement as a treaty, "hich "ould re=uire the a&&roval of the Senate, or as a sim&le agreement, "hich "ould only need a courtesy a&&roval in Congress# In Me ico, &olicy ma%ers and industry e &erts understand that the election "hich too% &lace last year in the U#S# is &artially res&onsi4le for the delayG ho"ever, they are ho&ing for a s&eedy resolution and are said to 4e gro"ing im&atient# Duncan !ood, "ho is an energy reform advisor to the Me ican government and director of the Me ico Institute summed u& the issue 4y saying the finali@ation of the deal 2"ill 4e seen as a very &ositive ste& for"ard and "ill encourage

the &rocess of energy reform in Me ico# Any further delay is ris"y# %t will send exactly t$e wrong message# *hose &eo&le "ho are o&&osed to o&ening the sector in Me ico "ould 4e a4le to loo% at this and to say,
Nsee, the United States all they "ant is access to our oil O it>s not a4out "hat>s good for Me ico#> 5

Pinsert im&act from Me ican relations fileQ

)ac aff solves


T*A is critical to increased relations, t$e Mexican economy, and stability +,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E *)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*? ''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM

Senator )ichard F# Bugar, )an%ing Mem4er of the Senate Coreign )elations Committee, re=uested senior &rofessional staff mem4ers to revie" o&&ortunities for enhanced U#S#?Me ico engagement on oil and gas issues including

the U#S#?Me ico *rans4oundary Agreement, "hich re=uires Congressional action to ta%e effect# As
&art of that revie", mem4ers of Senator BugarIs staff traveled to Me ico City in <cto4er 7D'7 to meet "ith then President?elect Enri=ue Pena NietoIs transition team and leaders from the Me ican Congress, PEMEL, the Me ican energy regulator Comision Nacional de $idrocar4uros, U#S# industry, academic s&ecialists, and U#S# officials at Em4assy Me ico City#S'S *his re&ort contains their &u4lic findings and recommendations# Congressional attention to the Me ican energy situation is

critical for understanding 4ilateral issues 4et"een our countries and for consideration of U#S# energy security# *he United States has a &rofound interest in economic prosperity and &olitical sta4ility in Me ico, and energy is foundational to 4oth interests# <il is vital for the Me ican federal 4udget, under"riting 4oth social &rograms and la" and order, and the oil industry is an im&ortant as&ect of 4roader economic activity# Sta4ility and gro"th, or lac% thereof, in Me icoIs oil and gas sector
can directly im&act issues of 4ilateral concern#

n$ances overall cooperation +,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E *)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*? ''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM *he *;A further contains re=uirements of data sharing and notification of li%ely reserves 4et"een the United States and Me ico, o&ening the o&&ortunity for increased government?to? government colla4oration on strategic energy &olicy choices# Me ico and the United States are relatively less advanced in effective communication and lin%ages of our energy systems than "e are in less &olitically?controversial economic areas# %mproved ties can im&rove understanding and galvani@e coo&eration in often unexpected ways# In the immediate term, closer oil sector communication "ill 4e 4eneficial in case of accidents in the Fulf of Me ico or in case of significant disru&tions to glo4al oil su&&lies#

T-A implementation solves Mexican relations +,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E *)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*? ''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM Cinally, &assage of the *;A "ould 4oost U#S#?Me ico relations on energy issues, "hich have traditionally lagged# Me ican officials roundly e &ressed su&&ort for the *;A and e &ectation for U#S# ratification in conversation "ith the authors# *he &olitical im&act of not a&&roving and im&lementing the *;A "ould set 4ac% U#S#?Me ican relations on energy s&ecifically and more 4roadly# Each of our countries has hot
4utton domestic &olitical issues that ta%e courage for &olitical leaders to address# In Me ico, oil is one such issue, and mem4ers of 4oth the PAN and P)I &ut their &olitical "eight 4ehind ratification in Me ico# *he U#S# not fulfilling its side of the

agreement "ould, therefore, 4e seen as a violation of trust and could erode confidence# In the e treme, although unli%ely, if Me ico &roceeds "ith domestic energy reforms, U#S# com&anies could 4e shut out of certain o&&ortunities until the *;A is ratified# $o"ever, 4ilateral 4enefits of a&&roving the agreement do not re=uire

immediate &assageG U#S# commitment can 4e demonstrated 4y the <4ama administration formally su4mitting the *;A for Congressional a&&roval and commencement of Congressional hearings#

T*A solves relations Martin and Wood 13 O *Director of the Energy Program at the Institute of the Americas at the University of California, San DiegoG **Director of the Me ico Institute at the !oodro" !ilson International Center for Scholars, &rofessor for '( years in Me ico and &reviously "as director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de M, ico -I*AM9 in Me ico City -.eremy M# and Duncan, 2U#S# ShoUld Act 3Uic%ly on trAnS4oUndAry hydrocAr4on Agreement !ith me ico,5 !orld Politics )evie", May 1, 7D'1, htt&600"""#iamericas#org0ne"s0!P)TUSTMe icoTD/D17D'1#&df900;"ang
Cirst, a&&roval

of the deal in the U#S# "ould 4e an im&ortant sign of 4ilateral concord, &articularly at the outset of a ne" administration in Me ico and a second term for <4ama # *his is im&ortant, as it underscores the t"o nations> increasing a4ility to "or% together and conclude com&licated agreementsEand coo&erationEon 4inational issues unrelated to immigration or crime and drugs#

)ac terrorism add#on


Mexican relations solves drug cartel expansion Roseman 1) O )esearch Associate at the Council on $emis&heric Affairs -Ethan, 2EN$ANCED )ECIP)<CI*: C<) *$E U#S#?MELIC< )EBA*I<NS$IPU5 Coha, '70'(0'7, htt&600"""#coha#org0enhanced?reci&rocity?for?the?u?s?me ico?relationshi&0900;"ang *he economy in the United States is currently in turmoil, as evident 4y the 2fiscal cliff5 negotiations that may result in an overall ta adAustment# As such, a stronger 4i?lateral trade relationshi& "ith Me ico might turn out to 4e a vital factor in the restoration of the U#S# economy in the months to come# President <4ama>s relentless efforts to find a solution to the deficit &ro4lem may 4e more &roductively directed to"ards a colla4orative relationshi& "ith ne"ly elected Me ican President, Enri=ue PeMa Nieto# *his revived North American relationshi& 4et"een the t"o leaders, tied together 4y increasing cross?4order trade, has the &otential to mutually stimulate 4oth the United States and Me ican economies# $o"ever, as the Me ican economy continues to rise, it is li%ely that &o"erful Me ican drug cartels, along "ith &er&etuated violence and corru&t &u4lic officials associated "ith these criminal organi@ations, could "itness a concurrent e &ansion as "ell# <n Decem4er 7, Enri=ue PeMa Nieto assumed office as the President of Me ico and 4egan the tedious &rocess of reesta4lishing Me ico as a country of economic distinction and glo4al im&ortance, rather than continue to 4ear its current stigma as a narco?state that has seen nearly RD,DDD drug related deaths since 7DDR#P'Q In an attem&t to redirect international focus a"ay from the 4loodshed, President PeMa Nieto has 4een
sho"casing the 4righter side of Me ico "hile on a recent !hite $ouse visit in "hich President <4ama &raised him for his 2am4itious reform agenda5# Domestically, PeMa Nieto has 4een &romoting this o"n '1?&oint &lan that em&hasi@es his

&arty>s focus on o&timistic economic gro"th in Me ico>s future, rather than one in the hands of corru&t agencies and drug cartels# PeMa Nieto>s o&timism a4out his country>s future is a &roduct of increased trade and

the volume of industrial e &orts to Me ico>s northern friend and ally# In 7D'', "ith nearly HD &ercent of all Me ican goods 4eing e &orted to the United States, Me ico 4ecame the second largest oil su&&lier to the North American su&er&o"er# Numerous factors contri4ute to this relationshi&, s&ecifically6 a 7,DDD?mile 4order that facilitates ' million daily travelers, an internationally recogni@ed free trade agreement -NAC*A9, numerous 4i?national organi@ations and agreements, u&"ards of 'H,DDD U#S# invested com&anies "ith over V'J/ 4illion USD invested in Me ico and an overall average e=ual to V'#7/ 4illion USD in reci&rocal trade &er day#P7Q As Me ico e &eriences increases in international investment, there "ill 4e an increasing &arallel in levels of Me ico>s relia4ility# *he rise of 4i?lateral cor&orations forces an increasingly clear de&enda4ility that is needed in Me ico in order to maintain the millions of USD invested through these com&anies# A continued rise in the Me ican?American commercial

relationshi& is one of the defining factors that "ill 4e necessary to contri4ute to the &roAected mutual economic &rogress of 4oth countries# Although the current trade relationshi& 4et"een the United States and Me ico is un&aralleled, the drug?induced side south of the 4order al"ays seems to overshado" such a ra&&ort# Since 7DDR, Me ico has e &erienced u&"ards of RD,DDD deaths, including at least 1,DDD &olice officers and soldiers
"ho confiscated over ''J tons of cocaine, '',DDD tons of mariAuana, (/ tons of metham&hetamines and close to 'DD,DDD large and small?scale firearms# Fiven the structured control of 8D &ercent of the cocaine that enters the United States and an estimated annual income of 'H to 18 4illion USD, it is the furthermore, utili@e e tortion, corru&tion that the rest of the "orld associates "ith Me ico#P1Q

Me ican drug cartels that truly govern these &olitical units and and e treme violence in order to 4ring a4out current hostile stereoty&es

T$e impact is WM. terrorism on t$e &( A/. R(0/ 1 -'D0H07DDH, Curt, AP, 2US officials fear terrorist lin%s "ith drug lords,5 htt&600usatoday1D#usatoday#com0ne"s0nation07DDH?'D?DH?HD/'JR(D8T #htm9 *here is real danger that Islamic e tremist grou&s such as al?3aida and $e@4ollah could form alliances "ith "ealthy and &o"erful Batin American drug lords to launch ne" terrorist attac%s, U#S# officials said !ednesday# E tremist grou& o&eratives have already 4een identified in several Batin American countries, mostly involved in fundraising and finding logistical su&&ort# ;ut Charles Allen, chief of intelligence analysis at the $omeland Security De&artment, said they could use "ell?esta4lished smuggling routes and drug &rofits to 4ring &eo&le or even "ea&ons of mass destruction to the U#S# W*he &resence of these &eo&le in
MIAMI E

the region leaves o&en the &ossi4ility that they "ill attem&t to attac% the United States,W said Allen, a veteran CIA analyst# W*he threats in this hemis&here are real# !e cannot ignore them#W Added U#S# Drug Enforcement
Administration o&erations chief Michael ;raun6 WIt is not in our interest to let that &ot&ourri of scum to come together#W

/uclear terrorism results in extinction Ayson 12 -)o4ert, Professor of Strategic Studies and Director of the Centre for Strategic Studies O Xictoria University of !ellington, 2After a *errorist Nuclear Attac%6 Envisaging Catalytic Effects5, Studies in Conflict and *errorism, 11-(9, .uly, Informa!orld9 !ashington>s early res&onse to a terrorist nuclear attac% on its o"n soil might also raise the &ossi4ility of an un"anted -and nuclear aided9 confrontation "ith )ussia and0or China# Cor e am&le, in the noise and confusion during the immediate aftermath of the terrorist nuclear attac%, the U#S# &resident might 4e e &ected to &lace the country>s armed forces, including its nuclear arsenal, on a higher stage of alert# In such a tense environment, "hen careful &lanning runs u& against the friction of reality, it is Aust &ossi4le that Mosco" and0or China might mista%enly read this as a sign of U#S# intentions to use force -and &ossi4ly nuclear force9 against them# In that situation, the tem&tations to &reem&t such actions might gro", although it must 4e admitted that any &reem&tion "ould &ro4a4ly still meet "ith a devastating res&onse# As &art of its initial res&onse to the act of nuclear terrorism -as discussed earlier9 !ashington might decide to order a significant conventional -or nuclear9 retaliatory or disarming attac% against the
leadershi& of the terrorist grou& and0or states seen to su&&ort that grou&# De&ending on the identity and es&ecially the location of these targets, )ussia and0or China might inter&ret such action as 4eing far too close for their comfort, and &otentially as an infringement on their s&heres of influence and even on their sovereignty# <ne far?fetched 4ut &erha&s not im&ossi4le scenario might stem from a Audgment in !ashington that some of the main aiders and a4etters of the terrorist action resided some"here such as Chechnya, &erha&s in connection "ith "hat Allison claims is the 2Chechen insurgents> Y long?standing interest in all things nuclear#5J7 American &ressure on that &art of the "orld "ould almost certainly raise alarms in Mosco" that might re=uire a degree of advanced consultation from !ashington that the latter found itself una4le or un"illing to &rovide#

0il .ependence

1ac oil dependence


(tatus !uo Mexican imports are declining due to lac" of capital investment and cooperation 3 t$e result is increased dependence on t$e middle east 4ugar 1) -)ichard Bugar, yeah the congressmen, -good luc% "0&olitics9 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E
USE <C *$E C<MMI**EE <N C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E <ne $undred *"elfth Congress Second Session htt&600"""#g&o#gov0fdsys0&%g0CP)*?''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm <IB, MELIC<, AND *$E *)ANS;<UNDA): AF)EEMEN* Decem4er 7', 7D'7 O;)!9 I directed Senate Coreign )elations Committee Senior Staff Mem4ers Neil ;ro"n and Carl Meacham to assess o&&ortunities for enhancing the U#S#?Me ico oil and natural gas relationshi&# Me ico is a relia4le trading &artner# :et it continues

to struggle to maintain and increase its domestic oil &roduction# Calling =uantities of Me ican heavy oil availa4le for U#S# Fulf Coast refineries have actually $elped lead to increases in Middle astern imports to t$e &'(' even as our total im&orts have fallen# Congress needs to understand the o4stacles??and o&&ortunities??ahead in Me icoIs oil &roduction# Put 4luntly, "e %no" that "e can rely on Me ico as a
trading &artner, 4ut "e do not %no" the =uantity or the =uality of oil to e &ect it to 4e a4le to e &ort in the years ahead# Fiven domestic &olitical sensitivities a4out oil "ithin Me ico , t$e bilateral relations$ip on t$is topic $as

struggled' :et, t$e newly elected 5resident of Mexico $as signaled a desire to wor" toget$er on energy issues, and the largest o&&osition &olitical &arty Aoins in that call# I urge my colleagues, and the
<4ama administration, to sei@e todayIs o&&ortunity# My staff identified s&ecific areas in shale gas, safety enhancement, trans&arency, and security that re&resent near?term o&&ortunities for 4ilateral gain# I strongly encourage the <4ama

administration to send the U#S#?Me ico *rans4oundary Agreement, signed in Ce4ruary of this year, to Congress and urge my colleagues to &ass the agreement # *he *rans4oundary Agreement is good for energy

security, good for the environment, good for U#S# commercial interests, and, most critically, can o&en the door to 4ilateral engagement on shared energy interests# *his re&ort &rovides useful insight on the need and &ros&ects for domestic oil sector reforms in Me ico and im&ortant recommendations for the U#S# government to ta%e in order to strengthen U#S#?Me ico energy coo&eration# I ho&e that you find this re&ort 4y Mr# ;ro"n and Mr# Meacham hel&ful and loo% for"ard to "or%ing "ith you on these issues# Sincerely,

0nly ratifying T*A solves t$at -oman, 13 oil and natural gas e &ert -Karen ;oman, J0770'1, 2;ill See%s to Allo" Drilling Near US Me ico Maritime ;order5, htt&600"""#rig@one#com0ne"s0article#as&U aTidZ'7/8/D900EM

;ill See%s to Allo" Drilling Near US Me ico Maritime ;order A legislative hearing "ill ta%e &lace *hursday in !ashington D#C# as la"ma%ers consider a 4ill that "ould lift the current moratorium on drilling along the U#S#?Me ico maritime 4order in the Fulf of Me ico# $#)# 'R'1, the <uter Continental Shelf *rans4oundary $ydrocar4on Agreement Authori@ation Act, "ould amend

the <uter Continental Shelf Bands Act and im&lement the terms of the U#S#?Me

ico *rans4oundary $ydrocar4on )eservoirs Agreement# *hat agreement, signed in Ce4ruary 7D'7 4y then Secretary of State $illary Clinton and Me icoIs Minister of Coreign Affairs Patricia Es&inosa Castellano at the F?7D Summit in Bos Ca4os, Me ico, "ould govern develo&ment of shared oil and natural gas resources in the U#S# Fulf 4et"een the United States and Me ico maritime 4order# *he agreement lifts the current

moratorium on e &loration and &roduction along the !estern Fa& section of the 4oundary, o&ening u& '#/ million acres in the Fulf &reviously off limits due to 4order issues, and &rovides a frame"or% for the safe management of oil and gas resources in the 4oundary area# Beaseholders on the U#S# side of
the 4oundary and Petroleos Me icanos "ould 4e a4le to e &lore and e &loit a trans4oundary reservoir as a unit as leaseholders are &ermitted to do on the U#S# side of the 4oundary# *he agreement also "ould allo" a means of resolving dis&utes and esta4lish a system of Aoint ins&ections# W*his 4ill is another ste& to"ards em4racing an all of the a4ove a&&roach to

energy that safely develo&s our natural resources to hel& achieve North American energy inde&endence,W said )e&# .eff Duncan -)?S#C#9, "ho co?authored the 4ill along "ith $ouse Natural )esources Committee

Chairman Doc $astings -)?!ash#9 and $ouse Coreign Affairs Su4committee on !estern $emis&here Chairman Matt Salmon -)? Ari@#9, in a statement# W*his 4ill "ill hel& lo"er energy costs "hile creating American Ao4s 4y safely o&ening u& more areas in the Fulf of Me ico for e &loration and &roduction#W WA&&roval and im&lementation of this agreement is un=uestiona4ly in the national interests of the U#S# as a ste& to"ards energy security and Ao4 creation in the United States, as "ell as much needed energy reform in Me ico, and !estern $emis&here energy inde&endence,W said Salmon in a statement# W We can ac$ieve energy

independence and 4etter energy coo&eration "ith our neigh4or and t$is is an im&ortant ste& in that direction#W Me icoIs Senate ratified the agreement in A&ril 7D'7# *he agreement "as negotiated &ursuant to the 7DDD

*reaty on the Continental Shelf, "hich called for the United States and Me ico to esta4lish a mechanism that trans4oundary oil and gas reserves "ould 4e shared e=uita4ly, according to a Decem4er 7D'7 re&ort &re&ared for the U#S# SenateIs Committee on Coreign )elations# At the time, concern that com&anies "ould drain Me ican reserves from the United States side of the 4order "as re&ortedly a hot 4utton &olitical issue in Me ico# *he United States &laced a moratorium on oil and gas e &loration on the U#S# side of the maritime 4order u&on conclusion of the 7DDD *reaty# Cormer Sen# )ichard Bugar -)?Indiana9 last year urged the

<4ama administration to send the U#S# Me ico *rans4oundary Agreement to Congress and for his colleagues to &ass the agreement# Bugar, "ho re=uested senior staff mem4ers revie" o&&ortunities for enhanced
U#S#?Me ico engagement on oil and gas issues including the trans4oundary agreement, said congressional attention to the Me ican energy situation is critical for understanding 4ilateral issues 4et"een our countries and for consideration of U#S# energy security# WMe ico is a relia4le su&&lier of oil to the United States,W said Bugar in a Decem4er 7D'7 re&ort# W*he =uestion for U#S# &olicyma%ers is "hat volumes Me ico "ill 4e a4le to e &ort in the future#W Me ican &roduction has dro&&ed 4y over a =uarter

in the &ast decade, and the colla&se of Xene@uelan heavy oil &roduction and insufficient &i&eline infrastructure to 4ring Canadian oil sands &roduction to Fulf Coast refineries means the United States in effect has had to increase im&orts of Middle East crudes to ma%e u& for Me ico &roduction shortfalls, Bugar added# (cenario one is (audi dependence (audi Arabian instability is inevitable 3 but t$e &( gets drawn in if we6re dependant on (audi 0il 7laser )211 -Professor of Political Science and International )elations Elliot School of International Affairs *he Feorge !ashington
University, 2 )eframing Energy Security6 $o" <il De&endence Influences U#S# National Security,5 August 7D'', htt&600de&ts#"ashington#edu0&olsadvc0;log[7DBin%s0FlaserT?TEnergySecurity?AUFUS*?7D''#doc 9

A cutoff of Saudi oil might &ose a sufficiently a large threat to the U#S# economy to "arrant U#S# military intervention# Saudi oil accounts for more that '/[ of glo4al oil e &orts and a long?term cutoff of Saudi oil "ould im&ose large costs
on the U#S# economy# Even analysts "ho 4elieve that most su&&ly interru&tions can 4e a4sor4ed and offset 4y the international oil mar%et and countries> strategic &etroleum reserves conclude that the loss of Saudi oil is the e ce&tion# ' Conse=uently, a resulting from a Saudi?im&osed em4argo, domestic u&heaval "ithin Saudi Ara4ia, or attac% 4y a regional adversaryE might

cutoff of Saudi oilE"hether "arrant U#S#

military intervention# Saudi leaders a&&ear unli%ely to im&ose another em4argo 4ecause their country de&ends heavily on oil revenues and,
&ossi4ly more im&ortant, 4ecause the sta4ility of the Saudi regime de&ends on continuing to &rovide &ros&erity via the flo" of oil# *his reluctance is reinforced 4y Saudi recognition that the em4argo it im&osed in '8(1 resulted in a variety of su4stantial costs# 7 *he more li%ely &aths for a cutoff of Saudi oil involve internal conflict# *he &ossi4ilities include the violent overthro" of the Saudi regime 4y a radical grou& that decides to greatly reduce the &roduction of Saudi oil and the destruction of the oil fields during a civil "ar or massive terrorist attac%# *he

&ossi4ilities for domestic u&heaval have roots in the "ea%nesses of the Saudi economy, divisions "ithin the regime, =uestions a4out the regime>s legitimacy -"hich su&&ort o&&osition 4y radical Islamic factions9, and regional and tri4al divides "ithin the %ingdom#1 ;efore the Ara4 S&ring, assessments of the sta4ility of the Saudi regime divergedJ6 for e am&le, one account concluded that (audi Arabia 8could e &lode into violent conflict at any time, destroying the oil
fields and much of the "orld>s economyG5 in contrast, another assessment concluded that although Saudi Ara4ia e &erienced un&recedented internal violence from 7DD1 to 7DD(, this e &erience 2re&resents an e ce&tion "hich confirms the rule of Saudi Ara4ia>s relative internal sta4ilityY*he Saudi regime is currently more secure and less challenged from "ithin than it has 4een in a very long time#5 /

1 2

Gholz and Press, Protecting The Prize, pp. 481-483.

te!e ". #eti!, Crude Awakening: Global Oil Security and American Foreign Policy $%thaca& 'ornell (ni!ersit) Press, 2**4+, chap. 8, and pp. 1,3-,- speci.icall) on a/di 0ra1ia2 his anal)sis relies partl) on lo3 oil prices, so the constraints toda) are less se!ere2 and te!en 4. 5a!id, Catastrophic Consequences: Civil ar and American !nterests $6alti7ore& The 8ohns 9op:ins (ni!ersit) Press, 2**8+, chp. 2.
3 4 ,

5a!id, Catastrophic Consequences, chp. 2. ;or an o!er!ie3 o. internal and e<ternal threats #eti!, Crude Awakening, chap. T3o.

5a!id, Catastrophic Consequences, pp. 3*-312 Tho7as 9eggha77er, %sla7ist =iolence and 4egi7e ta1ilit) in a/di 0ra1ia, !nternational A""airs, =ol. 84, >o. 4 $2**8+, pp. ?*1-?1,, at p. ?1,. @ther relati!el) opti7istic assess7ents incl/ded 8. 4o1inson Aest, a/di 0ra1ia, %raB and the G/l., in Calic:i and Gold3)n, #nergy and Security.

T$at fuels regional arms racing 3 specifically results in (audi proliferation 4uft )229 -Fal Buft, e ecutive director of the Institute for the Analysis of Flo4al Security, 2De&endence on Middle East Energy and its Im&act
on Flo4al Security,5 Institute for the Analysis of Flo4al Security, most recent cited date O 7DD(, htt&600"""#iags#org0luftTde&endenceTonTmiddleTeastTenergy#&df,9 Des&ite the high visi4ility of the Ara4?Israeli conflict, historically, "ars among Muslim countries in the Middle East have caused far 4igger losses in Ira=i invasion of Ku"ait caused terms of 4oth 4lood and treasure# Such conflicts have 4een a desta4ili@ing factor for the glo4al energy mar%et# ;oth the Iran?Ira= !ar and the '88D

energy crises "hich "ere follo"ed 4y recessions# In such a com4usti4le environment fee4le and insecure regimes flus$ wit$ petrodollars feel the need to arm themselves to the teeth, fueling a regional arms race "hich only contributes to the general sense of insecurity' *his &ro4lem is no" 4eing e acer4ated 4y the dee&ening rift 4et"een Sunnis and Shiites as it e &resses itself in Ira=# !hile
Sunnis constitute the lion share of the Muslim "orld as a "hole, in the Persian Fulf, Shiites com&rise a (D?&ercent maAority# *his means that the divide 4et"een Sunnis and Shiites "ill inesca&a4ly affect the oil mar%et# Increasing sectarian violence and ina4ility to reach an acce&ta4le "ealth sharing com&romise is ta%ing a heavy toll on the Ira=i oil industry "ith &rofound im&lications for the glo4al oil mar%et# Cour years after the U#S#?led invasion, Ira= has not 4een a4le to match its &re?"ar crude &roduction level of 7#/ million 4arrels &er day# Due to non?sto& sa4otage ta%ing &lace in the north, Ira= "as 4arely a4le to &roduce 7#' million 4arrels &er day in 7DDR# Perha&s the

4iggest casualty of a s&illover of Muslim sectarianism "ould 4e Saudi Ara4ia# *he eastern &rovince of Saudi Ara4ia is home to most of the Kingdom>s giant oil fields and e &ort terminals# It is
also the home of the 4itter Saudi Shiite minority# Shiites ma%e u& roughly '/ &ercent of Saudi Ara4ia>s &o&ulation of 7/ million# *hey are treated as second?class citi@ens and they har4or strong antagonism against the Kingdom>s !ahha4i esta4lishment "hich considers them heretics# Should an Iranian ins&ired Shiite revolt 4rea% out, the damage to the Saudi oil industry and the "orld economy at large could 4e incalcula4le#

(audi proliferation collapses t$e &'(' (ecurity &mbrella in t$e middle east and allows for terrorist groups to obtain nuclear weapons

Mc.owell 3, Bt, US navy, Novem4er 7DD1 -Steven ,2Is Saudi Ara4ia a Nuclear *hreatU5 Naval Postgrad *hesis,
htt&600"""#ccc#n&s#navy#mil0research0theses0McDo"ellD1#&df?;)!9

*he security umbrella provided by t$e &'(' military $as enabled t$e &nited (tates to maintain a level of influence wit$ (audi Arabia, "hich often e ercises &redominant influence on the glo4al su&&ly of oil# If the Saudis re&lace their CSS?7 missile system "ith a more modern, nuclear missile system, the region could spiral into a new arms race at a time "hen one of the region>s &rimary &roliferators PIra=Q has 4een su&&ressed# A new arms race could potentially destabili:e t$e global supply of oil ;ust as t$e United States and the glo4al economy are re4ounding from the attac%s of Se&tem4er '', 7DD'# *his U#S#?Saudi relationshi& "ould face tremendous strain if the Saudis ac=uired a nuclear ca&a4ility# In the event of a cou&, (audi nuclear capability could potentially fall into t$e $ands of a new and unstable leaders$ip# In the event of a failed Saudi state follo"ing
a 2cou& gone "rong,5 the effects "ould 4e even more catastro&hic for the United States and the Fulf region# *he &ur&orted nuclear "ea&ons could also fall into t$e $ands of Al#<aeda members or other radical fundamentalist grou&s, "hich

could attem&t to hold the United States hostage, levy demands, and further ham&er U#S# efforts in the "ar on terrorism# /uclear terrorism causes extinction (id#A$med = -Mohamed Sid?AhmedG former mem4er of the Political ;ureau of the Communist Party of Egy&t, leading

mem4er of the National Progressive Unionist Party, and leading Aournalist for Al?AhmarG Accessed .une 7/, 7D'7G htt&600"ee%ly#ahram#org#eg07DDJ0(D/0o&/#htmG !ritten August 7R, 7DDJG 2E tinction\5?;)!9 *he advent of the nuclear age, "hich 4egan "hen America dro&&ed t"o atom 4om4s on $iroshima and Naga@a%i Aust 4efore the end of !orld !ar II, introduced an altogether ne" dimension to the arms race "orld"ide# In fact, it changed the very notion of "arfare as the realisation set in that human%ind no" had the means to turn the &lanet into a "asteland inca&a4le of sustaining life# Cor the first time in its long history, the human race "as at ris% of e tinction not through an act of nature 4ut 4y its o"n hand# At the same time, ho"ever, the emergence of a ne" "orld order in the aftermath of the "ar served to &revent the ris% from materialising even as it lent im&etus to a deadly arms? race of the summit of the glo4al community# *he &ost?"ar "orld had 4ecome shar&ly &olarised along ideological lines 4et"een a ca&italist &ole led 4y the United States and a communist &ole led 4y the Soviet Union# As each sought to assert its su&remacy over the other, the "orld "as held hostage 4y an arms race 4et"een t"o cam&s ca&a4le of e terminating the inha4itants of the &lanet not once 4ut several times over# Although one of the t"o &oles develo&ed a greater over%ill ca&a4ility than the other, this hardly mattered# After all, you can only die once# *hus des&ite this discre&ancy the t"o &oles enAoyed a %ind of &arity "hich &revented the Cold !ar 4et"een them from hotting u& into an armed conflict# Mutual deterrence or, more &recisely, mutual neutralisation, &roved to 4e the most effective "ay of &reventing the out4rea% of "hat "ould have 4een the third, and &ro4a4ly final, "orld "ar# !ith the colla&se of the Soviet Union, the 4i&olar "orld order that had &revailed since the end of !orld !ar II came to an end# America, "ith its military and economic &re?eminence over all other nations com4ined, "as no" the sole remaining su&er&o"er, "ithout any constraints on its freedom of manouevre# *his created an im4alance in the "orld system

and tem&ted the US administration to &ursue its o"n agenda "ithout regard to considerations of international la", state sovereignty or international &u4lic o&inion# *o give its e ercise of 4rute force a sem4lance of legality, it came u& "ith its doctrine of &re?em&tive "ars, li%e the one it launched against Ira=# It is 4ecoming increasingly clear that the onset of a uni&olar "orld system has made the "orld more dangerous &lace, not the o&&osite# *he most critical moment "as the one "hen the Soviet

Union colla&sed and fragmented into a num4er of inde&endent re&u4lics# *he lac% of a central authority in a vast nation "ith massive arsenals of nuclear and other "ea&ons of mass destruction raised the nightmare &ros&ect of those "ea&ons falling into the hands of irres&onsi4le &arties "ho "ould not hesitate to use them# Des&ite the acute contradiction on "hich it "as 4ased, the 4i&olar "orld order "as an international system in "hich nations could 4e in a state of conflict 4ut "here they "ere also mem4ers of the United Nations, related to each other via agreements, accords, treaties, etc## that is, through a system of mutual o4ligations, "hich restricted, to one e tent or another, their freedom of action# *he disa&&earance of
the Soviet Union left the field clear not only to the United States at the summit of the glo4al community 4ut to the forces of international terrorism at its 4ase# *hese forces are "aging a "ar on the international system un4ound 4y any constraints# It is a war waged by >irresponsible> groups w$o do not expose t$emselves to t$e

accountability of t$e world system, nor to transparency in any form# T$at is w$y terrorism is so difficult to cast light on and can re&resent a greater danger t$an wars waged by regular armies# During the Cold !ar, the over%ill ca&a4ilities develo&ed 4y the su&er&o"ers allo"ed them to use deterrence as a device to &revent nuclear conflagrationG there "as a tacit agreement 4et"een them that "hile they
could, and did, engage in 4rin%manshi& 4y threatening to use their "ea&ons of mass destruction, they "ould desist from actually doing so# In the a4sence of any %ind of &arity 4et"een the &rotagonists in today]s shado"y "ar on

terror, mutual deterrence $as been replaced by a &rocess of pre#emption that incites the enemy to ta%e antici&atory measures# *he devastating attac% of '' Se&tem4er 7DD', "hich claimed nearly 1,DDD

victims, is a case in &oint# !hat &rovo%ed the attac%U !hy that &articular ty&e of antici&atory 4lo"U Is there an e &lanation for the se=uence of events that 4egan "ith raids against t"o US em4assies in Africa, follo"ed 4y the attac% on an American destroyer close to Aden and clima ed "ith 80''U It "as a &ractice run for an even more devastating attac% involving nuclear "ea&ons# ;ut if <sama ;in Baden "as in &ossession of nuclear "ea&ons at the time, "hy did he choose to go for an intricate &lan entailing the hiAac%ing of four &assenger &lanes, tight synchronisation and s&lit?second timingU Surely triggering a nuclear device "ould have 4een easier# Settling for the lo"?tech alternative of turning &lanes into missiles indicates that ;in Baden "as not then in &ossession of nuclear "ea&ons# Actually, the idea of lin%ing terrorism to &rohi4ited "ea&ons of mass destruction came from ;ush, not from the terrorists themselves, and "as aimed at esta4lishing some sort of lin% 4et"een Ira= and terrorism to legitimise his "ar against Saddam $ussein# !e have reached a &oint in human history "here the &henomenon of terrorism has to 4e com&letely u&rooted, not through &ersecution and o&&ression, 4ut 4y removing the reasons that ma%e &articular sections of the "orld &o&ulation resort to terrorism# *his means that fundamental changes must 4e 4rought to the "orld system itself# *he &henomenon of terrorism is even more dangerous than is generally 4elieved# !e are in for sur&rises no less serious than 80'' and "ith far more devastating conse=uences# A nuclear attac% 4y terrorists "ill 4e much more critical than $iroshima and Naga@a%i , even if ?? and this is far from certain ?? the "ea&ons used are less harmful than those used then, .a&an, at the time, "ith no %no"ledge of nuclear technology, had no choice 4ut to ca&itulate# *oday, the technology is a secret for no4ody# So far, e ce&t for the t"o 4om4s dro&&ed on .a&an, nuclear "ea&ons have 4een used only to threaten# No" "e are at a stage "here they can 4e detonated# *his com&letely changes the rules of the game# !e have reached a &oint "here antici&atory measures can determine the course of events# Allegations of a terrorist connection can 4e used to Austify antici&atory measures, including the invasion of a sovereign state li%e Ira=# As it turned out, these allegations, as "ell as the allegation that Saddam "as har4ouring !MD, &roved to 4e unfounded# !hat "ould 4e the conse=uences of a nuclear attac% 4y terroristsU Even if it fails, it "ould further e acer4ate the negative features of the ne" and frightening "orld in "hich "e are no" living# Societies "ould close in on themselves, &olice measures "ould 4e ste&&ed u& at the e &ense of human rights, tensions

4et"een civilisations and religions would rise and ethnic conflicts would proliferate# It "ould also speed up t$e arms race and develo& the a"areness that a different ty&e of "orld order is im&erative if human%ind is to survive# ;ut the still more critical scenario is if the attac% succeeds# T$is could lead to a t$ird world war, from w$ic$ no one will emerge victorious# Unli%e a conventional "ar "hich ends "hen one side trium&hs over another, this "ar "ill 4e "ithout "inners and losers# !hen nuclear &ollution infects the "hole &lanet, "e "ill all 4e losers#

T$eir turns will miss t$e boat # dependence on finite amounts of oil breeds conflict 3 increases t$e incentive to go to war w$ile s$ort#circuiting barriers to conflict 7laser )211 -Professor of Political Science and International )elations Elliot School of International Affairs *he Feorge !ashington
University, 2 )eframing Energy Security6 $o" <il De&endence Influences U#S# National Security,5 August 7D'', htt&600de&ts#"ashington#edu0&olsadvc0;log[7DBin%s0FlaserT?TEnergySecurity?AUFUS*?7D''#doc ,9

<il de&endence could reduce a state>s security if its access to oil is vulnera4le to disru&tion and if oil is necessary for o&erating the state>s military forces# Xulnera4le energy su&&lies can leave a state o&en to coercionErecogni@ing that it is more li%ely to lose a "ar, the state has a "ea%er 4argaining &osition and is more li%ely to ma%e concessions# R Closely related, if "ar occurs the state is more li%ely to lose# Conflict that is influenced 4y this mechanism is not fundamentally
over the oilG( rather, "hen states already have incentives for conflict, the oil vulnera4ility influences their assessment of military ca&a4ilities and in turn the &ath to "ar# )ecogni@ing this ty&e of danger during the Cold !ar, U#S# &lanning to &rotect its sea lanes of communication "ith the Persian Fulf "as motivated &artly 4y the im&ortance of insuring the steady flo" of oil that "as necessary to ena4le the United States to fight a long "ar against the Soviet Union in Euro&e# During the Second !orld !ar, .a&an>s vulnera4ility to a U#S# oil em4argo &layed an im&ortant role in destroying .a&an>s a4ility to fight#H *his ty&e of threat to the U#S# military ca&a4ilities is not a serious danger today 4ecause the United States does not face a maAor &o"er ca&a4le of severely interru&ting its access to %ey su&&lies of oil# In contrast, China does face this ty&e of danger 4ecause its oil im&orts are vulnera4le to disru&tion 4y the U#S# Navy# Protecting access to oil threatens other statesEan access?driven security dilemma *he

vulnera4ility of a state>s access to oil su&&lies could reduce its security via a second, more com&licated mechanismEif the state>s efforts to &rotect its access to oil
threaten another state>s security, then this reduced security could in turn reduce the state>s o"n security# *he danger "ould follo" standard

security?dilemma logic, 4ut "ith the defense of oil su&&ly lines re&lacing the standard focus on &rotection of territory# In the most e treme case, a state could try to solve its im&ort vulnera4ility through territorial e &ansion# In less e treme cases, the state could deal "ith its vulnera4ility 4y 4uilding u& military forces re=uired to &rotect its access to oil, "hich has the unintended conse=uence of decreasing its adversary>s military ca&a4ility and signaling that the state>s motives are malign, "hich decreases the adversary>s security, "hich leads the adversary to 4uild u& its o"n military forces#8 .ust as &rotecting a distant ally can re=uire a state to ado&t an offensive ca&a4ility, &rotecting access to oil can
re=uire offensive &o"er?&roAection ca&a4ilities# *hus, a state>s need to &rotect its access to oil could create a security dilemma that "ould not other"ise e ist# Conflict fueled 4y this

security dilemma need not 4e over oil or access to oilG 4y damaging &olitical relations the security dilemma could &revent the states from resolving &olitical dis&utes and avoiding the escalation of crises# $ere
again, the United States does not currently face this ty&e of dangerG this is largely 4ecause the military status =uo currently favors the United States, "hich relieves it from having to ta%e &rovocative actions# In contrast, China>s efforts to &rotect its access to oil could 4e more &rovocative and generate military com&etition "ith the United States# <il ma%es territory increasingly valua4le In this ty&e of case, a

state &laces greater value on o"ning territory 4ecause the territory contains energy resources that are increasingly valua4le# *he greater value of territory can increase com&etition 4et"een states, 4ecause the 4enefits of success gro" relative to the costs of com&etition, for e am&le, the costs of arming# Cor similar reasons, the greater value of territory increases the &ro4a4ility that crises over territory "ill lead to "ar instead of negotiated com&romises, as states are more "illing to run the ris%s
of fighting#'D *his ty&e of conflict is the classic resource "ar, "hich is the &ath 4y "hich oil is most commonly envisioned leading to conflict# '' !e can also hy&othesi@e that the &ro4a4ility of conflict is greater "hen territorial 4oundaries are contested and the &olitical status =uo is am4iguous# ;ecause the norm of state sovereignty is no" "idely held, states are less li%ely to launch e &ansionist "ars to ta%e other states> territory# $o"ever, "hen 4oundaries are not settled, states are more li%ely to com&ete to ac=uire territory they value and "ill com&ete harder "hen they value it more# '7 In addition, unsettled 4oundaries increase the &ossi4ilities for 4oundedly rational 4argaining failures that could lead to "ar# *here are t"o 4asic &aths via "hich a state could 4ecome involved in this ty&e of oil conflict# *he more o4vious is for the state to 4e a claimant in the dis&ute and 4ecome directly involved in a territorial conflict# *he second is li%ely more im&ortant for the United StatesEan alliance commitment could dra" the state into a resource conflict that initially 4egan 4et"een its ally and another state# '1 *he state "ould not have energy interests of its o"n at sta%e, 4ut intervenes to &rotect its ally# Along this &ath, energy &lays an im&ortant 4ut less direct role in damaging the state>s security, 4ecause although energy interests fuel the initial conflict, they do not motivate the state>s intervention# 'J A later section e &lores the &ossi4ility of conflict 4et"een China and .a&an in the East China Sea, "ith the United States dra"n in to &rotect .a&an and conse=uently involved in a "ar "ith China# !hen
-

a state>s economy

;or a ./ll anal)sis o. the 3hen and ho3 oil dependence lea!es states !/lnera1le to coercion, see 4ose7ar) 0. Celanic, 6lac: Gold and 6lac:7ail& The Politics o. %nternational @il 'oercion $Ph5 dissertation, (ni!ersit) o. 'hicago, 2*11+.
? 8

;or i7portant e<ceptions, see Celanic, 6lac: Gold and 6lac:7ail. ar and &econstruction $Dinneapolis& (ni!ersit) o. Dinnesota,

8ero7e 6. 'ohen, $apan%s #conomy in 1E4E+.


E

@n the sec/rit) dile77a see 4o1ert 8er!is, 'ooperation (nder the ec/rit) 5ile77a, orld Politics, =ol. 3*, >o. 2 $8an/ar) 1E?8+, pp. 1-?-2142 and 'harles F. Glaser, The ec/rit) 5ile77a 4e!isited, orld Politics, =ol. ,*, >o. 1 $@cto1er 1EE?+, pp. 1?1-2*1.
1*

%n ter7s o. 1argaining theor), see 4o1ert Po3ell, 'argaining in the Shadow o" Power $Princeton& Princeton (ni!ersit) Press, 1EEE+, 'hp. 3.
11

;or a generall) s:eptical anal)sis o. the standard reso/rce 3ar arg/7ents see 5a!id G. =ictor, Ahat 4eso/rce Aars, (he )ational !nterest $>o!e71erG5ece71er 2**?+.
12

;or related points, see ha..er, #nergy Politics, pp. -?-?*, 3ho identi.ies additional e<a7ples that % do not address, incl/ding the pratl) %slands in the o/th 'hina ea and the 0rctic 'ircle.

de&ends heavily on oil, severe su&&ly disru&tions might do sufficiently large economic damage that the state "ould use military force to &rotect its &ros&erity# A state this suffers this vulnera4ility ris%s not
4ut also ris%s 4eing coerced 4y an adversary# Conse=uently, states "ill "ant to 4e confident that their a4ility to im&ort oil "ill 4e uninterru&ted and "ill &ursue &olicies to ensure secure access#

only suffering the damage that could 4e inflicted 4y a su&&ly disru&tion, "hich might 4e the 4y?&roduct of unrelated domestic or international events,

%nvestment solves long term oil dependence 3 Mexico is sitting on a goldmine it is ;ust a matter of investment and exploration Myers et' Al 1) -!illiam C# Danvers, Staff Director Kenneth A# Myers, .r#, Staff Director U#S# F<XE)NMEN* P)IN*INF <CCICE ((?/R( !AS$INF*<N 6 7D'7 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E USE <C *$E C<MMI**EE <N C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E O;)!9 Nonetheless, t$e &nited (tates $as direct interests in t$e future of oil and natural gas in Mexico# Most im&ortant among U#S# interests is enhancing the &ros&erity of the Me ican &eo&le# !ith strong cultural ties and a shared 4order, the U#S# 4enefits "hen Me ico gro"s# Petroleos Me icanos - 5 M ?@ $as successfully staved off years of decreasing oil production and discovered deep water resources, but it $as not been able to meaningfully increase production 4eyond its @one of comfort in shallo" "ater# !ithout reform, Me icoIs oil resources "ill not 4e develo&ed in a "ay that translates into a higher =uality of
life for Me icans# Me ico is a relia4le su&&lier of oil to the United States# *he =uestion for U#S# &olicyma%ers is "hat volumes Me ico "ill 4e a4le to e &ort in the future# Me ican &roduction dro&&ed 4y more than a =uarter in the last

decade, leaving U#S# refiners on the Fulf Coast geared for heavy oil having to loo% else"here # Xene@uelan heavy oil &roduction has also colla&sed# Canadian heavy crude &roduction is increasing in the oil sands region, 4ut &i&eline infrastructure is insufficient# *herefore, in effect, t$e &'(' $as $ad to increase imports of Middle ast crudes in order to ma"e up for s$ortfalls in Mexico'
Understanding the li%ely traAectory of reform in Me ico is necessary to a&&ro&riately &lan for future volumes and ty&es of crude oil traded "ith the United States, "hich also "ill have 4roader im&lications for U#S# security and economic gro"th# Me ican

energy reforms "ill determine to "hat e tent Me ico "ill 4e &art of future U#S #, and North American,
energy security# Progress, 4ut can it lastU A sna&shot of Me icoIs oil sector Me ico has a long history of oil &roduction and has &ros&ects for a 4right future as an oil &o"er, 4ut such an outcome is not guaranteed # Me ico sits ato& significant

amounts of oil estimated at 'D#J 4illion 4arrels of &roven reserves, 4ut t$at number could more t$an double "hen unconventional and dee& offshore reserves are fully &roven# *he large
unconventional Chiconto&ec area alone is estimated to hold u& to '(#( 4illion 4arrels# *urning Me icoIs oil resources into &ros&erity for the Me ican &eo&le is a tremendous challenge for PEMEL, its 'DD[ state?o"ned national oil com&any esta4lished in '81H after international oil com&anies "ere e &elled#S1S Me ican oil &roduction relies &rimarily on a fe" maAor fields, the largest of "hich -Cantarell9 is in stee& decline# <il &roduction in Me ico &ea%ed in 7DD1 at a4out 1#J million 4arrels &er day -m4d9, falling to 7#R m4d in 7D'D# *hat &reci&itous fall is due &rimarily to the estimated (/[ decline in &roduction from the massive Cantarell field from its &ea%# In recent years, CantarellIs decline has 4een com&ensated for 4y the Ku?Maloo4?^aa& -KM^9 fieldsG ho"ever, many analysts dou4t the longevity of current &roduction in those fields# Barge increases in direct and

third?&arty investment in recent years has ena4led PEMEL to halt net decreases in &roduction, at least
tem&orarily# Im&ortantly, PEMEL also no" re&orts achieving a 'DD[ re&lacement rate for reserves, im&roving &ros&ects for continued &roduction# Increased investment also has led to discoveries of large ne" dee& "ater resources at *rion, Su&remos, and Ma imino, achievements of "hich PEMEL officials are Austifia4ly &roud# Several interlocutors credited energy reforms &assed in 7DDH for ena4ling those finds 4y giving PEMEL more fle i4ility to &artner "ith international com&anies on a service contract 4asis, 4uilding on the shift to reliance on contracting services to ena4le investments stretching from the late '88Ds# PEMEL leaders &lan to raise &roduction to 7#( m4d in 7D'1 and 1 m4d 4y 7D'(, re=uiring u& to V1H 4illion annually in investment# Near term gro"th is e &ected to come &rimarily from Chiconto&ec, a highly com&le unconventional onshore &roAect that is su4Aect of great ho&e and scorn# Des&ite years of develo&ment and re&ortedly V/ 4illion in investment, the &roAect is "ell 4ehind e &ectations and currently only (D,DDD 4arrels &er day are &roduced, "hich &uts claims of near?term gro"th in serious dou4t# <ver the longer?term

PEMEL has set a goal to increase &roduction to 1#1 m4d 4y 7D7J# Achieving that goal "ill re=uire significantly more ne" &roduction than the difference 4et"een the 1#1 m4d goal and
13

till another path is .or a state to inter!ene in an energ)-dri!en con.lict to protect its access to oil2 this is an e<a7ple o. ho3 !ario/s 7echanis7s co/ld o!erlap 3ith each other.
14

This can 1e /nderstood as a .or7 o. alliance entrap7ent2 see Glenn 9. n)der, The ec/rit) 5ile77a in 0lliance Politics, orld Politics, =ol. 3-, >o. 4 $8/l) 1E84+, pp. 4-1-4E,.

todayIs 7#R m4d given e &ected large declines in KM^' ,ield decline emp$asi:es t$e urgent need for Mexico to $ave several new pro;ects in t$e pipeline in order to maintain and boost production' S%e&ticism of PEMELIs a4ility to com&ensate for declining fields has led to some dire forecasts# *he
U#S# Energy Information Administration has estimated that Me ico "ill 4e a net im&orter of oil 4y 7D7D,SJS thus also raising concerns a4out im&acts on its 4alance of trade# !hile not investigated on this StaffDel, that situation highlights the need for more attention to demand management &olicies and continued reform of fuel su4sidies#S/S Mexico needs a diverse

portfolio of future oil pro;ects "ith staggered ca&acities over time# 5 M ? leaders $ave identified suc$ a set of oil development pro;ects , including dee& offshore and the Chiconto&ec unconventional area, each of "hich are com&le underta%ings "ith high &otential, forming a gro"th strategy to
com&lement conventional shallo" offshore &roAects and investment in enhanced recovery at &revious "ells# Some o4servers &oint out that &rivati@ation of the sector "ould 4ring com&etition and &rivate investmentG ho"ever, that &ros&ect is so remote as to 4e non?e istent and not under even s&eculative consideration# *herefore, t$e

!uestion is w$at 5 M ? can ac$ieve on its own or in partners$ip wit$ international companies' Most interlocutors
are s%e&tical of PEMEL having the ca&ital or e &ertise necessary to develo& dee& offshore fields, and, &ro4a4ly, the unconventional reserves at Chiconto&ec# Analysts &oint out that PEMEL too% over '/ years and more than 7D "ells to discover the most recent dee& "ater finds# Moreover, dee& "ater re=uires massive investments over many years, and even the "orldIs largest international oil com&anies -I<Cs9 &artner "ith one another to generate ca&ital and s&read the ris% of such investments# PEMELIs ca&ital

limitations are further com&licated 4y the com&anyIs large de4t 4urden# <n the other side, &ro&onents of
PEMELIs a4ility argue that they have gained e &ertise and dramatically lessened the ris%s im&licit in develo&ment# PEMEL li%ely could develo& a dee& offshore &roAect 4y 4uying technology and e &ertise through very generous service contracts "ith many of the same com&anies "ith "hich the I<Cs contract# $o"ever, under current ca&ital and management constraints,SRS 5 M ?

alone is extremely unli"ely to $ave t$e resources necessary to underta"e multiple massive deep offs$ore developments w$ile also investing in conventional oil production' Moreover, "hile some technology can 4e &urchased through service contracts, &roAect management e &ertise to
run that ty&e of &roAect is not easily ac=uired# *herefore, the decision on "hether I<Cs should 4e granted access individually or in &artnershi& "ith PEMEL to develo& oil in Me ico de&ends on ho" much oil the Me ican Fovernment "ants &roduced and over "hat s&an of time# Interlocutors did not indicate that the e &ectations of either of the largest &olitical &arties or the Me ican &u4lic are conducive to the long time hori@ons it "ould ta%e for PEMEL under current conditions to fully develo& Me icoIs oil# Dealing "ith this challenge is com&licated 4y the fact that PEMEL is as much a 4ureau of the government as it is a com&any# In defiance of conventional 4usiness sense -of 4oth &rivate com&anies and state oil com&anies9, multi&le Ministries and a &olitically?a&&ointed ;oard of Directors ma%e %ey decisions, including deciding the amount and direction of investment in e &loration and develo&ment of future &roduction# It is not clear that all 4oard mem4ers &ut the interests of the com&any, and hence future finances for the Me ican state, at the forefront of decision ma%ing# $aving &oliticians "ith multi&le constituencies -including the &etroleum "or%erIs union and com&anies that thrive off the oil su&&ly chain9 and short?term &olitical considerations often ma%e

essential decisions is incom&ati4le "ith the long?term &lanning needed in the oil sector # $o"ever, precisely because 5 M ? can 4e a useful tool for &olitical goals, achieving fundamental structural change is very difficult# In sum, the authors agree that reform must $appen to sustain and robustly grow Mexican oil production' *he sta%es of doing so are high for the Me ican Fovernment# PEMEL directly &rovides JD[ of government revenues, including significant resources transferred to the individual Me ican states# Decreased oil &roduction has, thus far, 4een offset 4y higher than average glo4al oil &rices, 4ut no government budget s$ould rely so $eavily on volatile commodity mar"ets' !hile some
commentators have argued that the 4udgetary &ain of falling &roduction "ould 4e useful to "ean the 4udget from PEMEL, such a &ros&ect could have "ide re&ercussions on all &rograms funded in the Me ican 4udget, from &overty alleviation to the rule of la", let alone 4roader economic gro"th# !hile oil &rovides vital government revenue, lac% of natural gas develo&ment

threatens to stunt Me ican industry# It is re&orted that &arts of Me

ico could face natural gas shortages in the coming year# Mean"hile, Me ico sits on a sea of unconventional natural gas reserves# *he current natural gas situation??"hich several interlocutors identified as a ]]crisisII??results from Me ican natural gas 4eing &riced artificially lo" 4ecause it is lin%ed to the U#S# &rice, "hich has fallen "ith the ra&id e &ansion of shale gas su&&lies# :et the im&act of U#S# su&&ly on Me ican &rices e ists des&ite the limited &hysical integration of the t"o countriesI &hysical gas mar%ets# !hen com4ined "ith gas shortages in Me ico, this indicates the need 4oth for more &i&eline connections to the United States and for 4uilding out Me icoIs domestic gas infrastructure# Doing so is made difficult, ho"ever, 4y confusion in the Me ican mar%et "here the do"nstream natural gas sector has 4een relatively li4erali@ed "hile the u&stream remains under the mono&oly control of PEMEL# *he lac% of an a&&ro&riate &rice signal drives u& demand "hile, re&ortedly, causing PEMEL to ]]shutinII some conventional &roduction due to lac% of &rofita4ility# Several interlocutors &ointed s&ecifically to the need for e &edited &i&eline construction to connect "ith *e as# 3uic% U#S# federal

and state actions to &ermit &i&elines could hel&fully reduce short?term su&&ly &ressures in Me ico and hel& o&en ne" mar%et o&&ortunities for U#S# gas# Bong?term economic gro"th in Me ico,
ho"ever, is 4elieved to 4e 4etter served 4y develo&ment of its a4undant domestic resources# As an analyst said, ]]:ou cannot 4uild a future in Me ico 4ased on chea& gas im&orts from the U#S#II *he United States government estimates that

Me ico has one of the largest shale gas reserves in the "orld at more than RHD trillion cu4ic feet

-tcf9 of technically recovera4le reserves, although Me ico itself uses estimates as lo" as 'JD tcf #
Much of that shale gas is thought to 4e contained in an e tension of the Eagle Cord formation that is already &roducing in *e as# PEMEL re&ortedly has drilled Aust a handful of e &loratory "ells, and "ith &rices 4eing held do"n 4y the United States gas 4oom, it has little economic incentive to invest heavily in shale in its o"n right, let alone the o&&ortunity cost of that ca&ital com&ared to much more lucrative oil# A4sent natural gas &ricing reform, it is unli%ely that PEMEL "ill choose to invest heavily into shale gas# A"areness of shale gas &otential is gro"ing in Me icoG at the time of the authorsI visit, for e am&le, the Me ican government "as hosting a meeting of shale gas e &erts# Many interlocutors "ere carefully "atching shale develo&ments in the United States 4oth in terms of direct Ao4 creation and in "ider economic o&&ortunities for &o"er generation, chemicals, and manufacturing#

Develo&ment of shale could 4e &articularly hel&ful for economic gro"th in Me icoIs northern 4order region# *he authors found that develo&ing Me icoIs shale gas reserves, as "ith technologically challenging ne" oil frontiers, "ill re=uire energy reform to galvani@e &rivate investment, technology, and e &ertise# At the same time, an additional level of government ca&acity 4uilding "ill 4e useful to aid

official understanding in the geology, economics, and environmental &rotections necessary for shale &roduction# *he U#S# State De&artmentIs Unconventional Fas *echnical Engagement Program is "ell &ositioned to ena4le access to needed information, if the Me ican Fovernment chooses to &artici&ate# Most interlocutors "ere o&timistic that gas reforms to allo" &rivate

investment "ould come to fruition 4ecause natural gas is generally regarded to 4e less &olitically sensitive than oil# *he most common fear of such a reform e &ressed 4y interlocutors "as that if gas reform &assed se&arately than oil reform, it could stunt momentum for the latter# Moreover , it is highly unli%ely that a successful natural gas reform could 4e com&letely delin%ed from oil# ;ased on the U#S# e &erience, much of the &rofita4ility of shale
gas comes from associated high?value li=uids co?&roduced "ith the gas, so it seems unli%ely that significant &rivate ca&ital "ill flo" if li=uids are not dealt "ith in reform#

)ac plan solves


T*A is "ey to relieving oil dependence 4ugar, 1) U#S# Senator -)ichard F# Bugar, '707'0'7, 2<IB, MELIC<, AND *$E *)ANS;<UNDA): AF)EEMEN*5, htt&600"""#g&o#gov0fdsys0&%g0CP)*? ''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM Dear Colleagues6 Energy security is a vital issue for United States foreign &olicy and economic gro"th # Increases in U#S# domestic oil &roduction are hel&ing relieve our im&ort de&endence, yet our nation "ill rely on oil im&orts for decades to come# Strengthening trade "ith relia4le, friendly neigh4ors Canada and Me ico "ould ma%e a valua4le contri4ution to our future# I directed Senate Coreign )elations Committee its domestic oil &roduction# Calling =uantities of Me ican heavy oil availa4le for U#S# Fulf Coast refineries have actually hel&ed lead to increases in Middle Eastern im&orts to the U#S# even as our total im&orts have fallen#

Senior Staff Mem4ers Neil ;ro"n and Carl Meacham to assess o&&ortunities for enhancing the U#S#?Me ico oil and natural gas relationshi&# Me ico is a relia4le trading &artner# :et it continues to struggle to maintain and increase

)ac atA s$ale solves


.oesn6t solve Mallet, 13 Partner in the Arra%is Frou&, a &rivate energy consulting firm, ;#Sc# in Chemical Engineering from MI* and M;A from Stanford University -Xictor Mallet, /0'R0'1, 2Shale Fas _ Coreign <il6 $o" )ealistic Is US Energy Inde&endence5, htt&600theenergycollective#com0victormallet077/R/'0shale?gas?foreign?oil?ho"?realistic?us? energy?inde&endence?natural?gas900EM Foing for"ard "e must 4e careful to avoid an a&&les?to?oranges com&arison # Most of the im&orted hydrocar4ons are li=uid fuels and so "e must first see ho" far tight oil could go to"ards meeting the ga&, and then evaluate ho" far shale gas can go to"ards covering the 4alance, &rimarily through gas?to?
li=uid conversion# Currently, tight oil from the ;a%%en and Eagle Cord Shale formation in North Da%ota dominate &roduction O &roducing /J/,DDD 4arrels &er day -4&d9 in A&ril 7D'7, "ith national tight oil &roduction hitting (7D,DDD 4&d as at the end of 7D'7# *his re&resents Aust over half the amount im&orted from a single im&orter such as Saudi Ara4ia, 4ut only H[ of total im&orts# *here is an added layer of difficulty facing su4stitution # )efineries are highly s&eciali@ed to o&timally &rocess a certain ty&e of oil de&ending on the =uantity of sulfur &resent -lo" sulfur crudes are %no"n as 2s"eet5 and high sulfur crudes are 2sour59, and ho" 2heavy5 -highly viscous "ith a high s&ecific gravity9 or 2light5 -relatively lo"er viscosity and s&ecific gravity9 the crude oil is# )efineries on the Eastern coast of the US are designed &rimarily for !est

African crudes that are light and s"eet "hereas Fulf of Me

ico refineries are tuned to &rocess heavy and sour Middle Eastern, Me ican and Xene@uelan crudes# It is "orth re&osting this great ma& from an article 4y ;rad Plumer of the !ashington Post earlier this year# <il refineries in the USA Cig 16 !here US refineries get their oil -sourced from the !ashington Post, article 4y ;rad Plumer9 In fact, the advent of chea&er crude from *e as has revived numerous mori4und refineries such as Sunoco>s Philadel&hia and Marcus $oo% refineries and ConocoPhili&s *rainer refinery in Dela"are -recently &urchased 4y Delta Airlines9# ;lue chi& &rivate e=uity firms are already &lacing 4ig 4ets on these, "ith *he Carlyle Frou& &urchasing a share in the Philadel&hia refinery# Fiven the marginal additional tight oil from shale roc% , &rivate refineries in Ne" <rleans or $ouston are unli%ely to re?tool their refineries at the cost of 4illions of dollars in order to acce&t s"eet, light tight oil, "hen it is already finding a ready home in the Mid?Atlantic region# And so "hile some amount of im&ort dis&lacement 4y tight oil is occurring, it is at the e &ense of more friendly im&ort &artners such as Nigeria, Angola and Fhana# *he EIA e &ects total US oil &roduction to &ea% at a4out '#J million 4&d from tight oil de&osits 4y 7D7D and that even into 7DJD there "ill 4e an im&ort re=uirement of a4out 1([ of consumed li=uid fuel -see Cig J9# <il Im&orts vs Shale Fas Cig J6 EIA e &ectation of im&ort consum&tion and domestic su&&ly ga& *he economics of converting gas to li=uid fuels -usually diesel9 also does

not &oint to massive re&lacement of im&orts# South African energy and chemicals giant Sasol has announced

tentative &lans for the first gas?to?li=uids &lant in the US? a V'J; facility to 4e 4uilt in Ba%e Charles, Bouisiana, that "ould &roduce 8R,DDD 4arrels a day# F*B &lants are of course only economical "hen there is a significant &rice differential 4et"een gas and diesel -"ith the s"eet s&ot seemingly 4eing a difference of at least V''0MM;*U9 O and aided greatly "hen the gas does not have to 4e &i&ed in and "ill 4e in &lentiful su&&ly for at least 7D years# Sasol has announced it "ill "ait till 7D'J to ma%e a final decision# Even if the &roAect is green?lit, the additional fuel &roduced "ould re&resent Aust over '[ of &etroleum im&ort su4stitution# !ithout a dou4t chea& shale gas &romises to usher in other maAor 4enefits O one "ould say a ne" era of American industrial &ro"ess# Already, electricity &roduction 4y natural gas &lants almost matches that from coal O leading to an overall reduction in car4on dio ide emissions# In areas of Pennsylvania -under "hich "e find the Marcellus shale9 consumer electricity &rices have dro&&ed /D[# $undreds of thousands of 2non?offshore?a4le5 Ao4s are 4eing created# *he Marcellus Shale Coalition, an industry grou& consisting of 1DD com&anies such as Chesa&ea%e Energy, Ca4ot <il _ Fas, Chevron and others &roudly &roclaim that the Marcellus shale industry alone em&loys over 7JD,DDD "or%ers "ith an average annual salary of VR/,DDD &er year# Chea& natural gas is forming the 4asis for a revived manufacturing industry, from fertili@er to &ro&ylene and ethylene -the "orld>s highest volume chemical, used to ma%e everything from toys to clothes to car tires9, and even the steel industry is feeling the &ositive im&act# Serious environmental concerns such as contamination of ground"ater a=uifers and induced seismic activity -mini earth=ua%es9 still need to 4e =uantified and addressed -my colleague Frant McDermott has "ritten a4out some of this here9# Crac%ing is far from a &erfect techni=ue for &rimary energy e traction, and documentaries such as .osh Co >s FasBand are immensely im&ortant in dra"ing &u4lic attention to the &otential dangers and ma%ing sure there are ade=uate safety regulations to &revent "hat seems li%e an early "ild "est era of shale gas drilling from destroying America>s "ater"ays# Shale gas and tight oil "ill not decou&le America from

the rest of the "orld# *he 4igger story is that "ith ne"found chea& shale gas America may finally have "hat it ta%es to chase
a"ay the looming ghosts of an ongoing domestic recession and the s&ecter of lost industrial dominance# *hat should 4e enough to =uiet even the most adamant energy ha"%s#

nergy .iplomacy

1ac energy diplomacy


)etirement of Secretary Clinton has &ut an end to efforts at energy di&lomacy ? all current &roAect are li& service 7eman 1) - Clinton6 IEnergy di&lomacyI central to US foreign &olicy ;y ;en Feman ? 'D0'H0'7 D86JR AM E*
htt&600thehill#com04logs0e7?"ire0e7?"ire07R7(7(?clinton?energy?central?&art?of?di&lomacy?foreign?&olicy`i @@7aAyDcRFA O;)!9 Secretary of State $illary Clinton "ill ma%e the case *hursday that 2energy di&lomacy5 is central to U#S# foreign

&olicy# *he !all Street .ournal got a loo% at the s&eech that Clinton "ill give *hursday afternoon at Feorgeto"n University# 2*oday, energy cuts across the entirety of U#S# foreign &olicy # It is a matter of national security and glo4al sta4ility# It is at the heart of the glo4al economy # ItIs an issue of democracy and human rights,5 Clinton intends to say, the &a&er re&orted# 2It has 4een a to& concern of mine as secretary# And it is
sure to 4e the same for the ne t secretary of State#5 Clinton is 2e &ected to stress the role that U#S# energy &roduction, cou&led "ith U#S# di&lomatic efforts, has &layed in ratcheting u& sanctions on Iran,5 the .ournal re&orts# Clinton, "ho has said she "ill

not serve a second term even if President <4ama "ins, has 4oosted State>s focus on energy# Bast year State
launched its ;ureau of Energy )esources, aimed at hel&ing ensure 2ade=uate and afforda4le su&&lies,5 %ee&ing mar%ets sta4le, aiding access to su&&lies in &oor countries and 4oosting trans&arency, among other goals# Clinton has 4een a vocal

su&&orter of controversial Securities and E change Commission trans&arency rules that "ill force SEC?listed &etroleum and mining com&anies to disclose their &ayments to foreign governments

*he &lan is %ey to e &anded energy di&lomacy O 4ilateral engagement s&ills over to 4roader dialogue 7oldwyn 13 -David Fold"yn, President and Counder, Fold"yn Flo4al Strategies Energy <&&ortunities in Batin America and
the Cari44ean# *estimony 4y U#S# $ouse of )e&resentatives Documents O &u4lished6 7D'1 O a&ril ?? htt&600search#&ro=uest#com#&ro y#li4#umich#edu0docvie"0'17R(18'JJ0'1C('RJ8H'A'7HE;EDC07UaccountidZ'JRR(?;)!9 <n Ce4ruary 7D, 7D'7, the U#S# and Me ico signed a trans4oundary hydrocar4ons agreement that allo"s for the Aoint the develo&ment of oil and gas reservoirs that cross the international maritime 4oundary 4et"een the t"o countries in the Fulf of Me ico# n1D If im&lemented, the agreement "ould end the current moratorium on e &loration and

&roduction in the 4order area# !hile the Me ican Senate ratified the agreement on A&ril '7, 7D'7, the <4ama Administration has not formally su4mitted the agreement to the U#S# Congress for &assage # *he entry into force of this agreement "ould render significant 4enefits for 4oth the U#S# and Me ico#1' It "ould &rovide a means for Peme to colla4orate "ith &rivate com&anies in the Fulf of Me ico 4order area, "hich "ould give Peme a crucial o&&ortunity to gain e &ertise in dee&"ater activities that could 4e a&&lied to the firmIs o&erations throughout Me ico# *his "ould serve U#S# interests 4y 4oosting Me ican &roduction and reducing U#S# de&endence on im&orts from more &olitically trou4lesome regions, "hich have re&laced
lagging Me ican e &orts in recent years#17 Conversely, U#S# reticence to im&lement the agreement may send the "rong signal to Me ico and dam&en enthusiasm for energy sector reform at a time "hen the stage may 4e set for historic change# Indeed, com&etent im&lementation of the agreement could demonstrate to Me ico that its interests can 4e &rotected in Aoint &roduction regimes "ith U#S# com&anies and 4ring

a4out an im&etus for 4roader Me ican energy reforms# R# )evive Energy Di&lomacy and Commercial Engagement Energy di&lomacy and commercial advocacy should 4e vital com&onents of U#S# energy &olicy in the coming decades# *he glo4al energy system is &roAected to remain de&endent u&on fossil fuels for the foreseea4le future, and as a result, having access to relia4le, afforda4le sources of energy "ill remain im&ortant, as "ill the sta4ility of energy mar%ets# Energy di&lomacy should center on ensuring that the U#S# has good "or%ing relationshi&s "ith the countries that &roduce and consume energy# Successful energy diplomacy can serve a critical role in managing tensions over energy develo&ment, trans&ortation, investment, and other issues# *he De&artment of
State has significantly increased its ca&a4ilities to conduct energy di&lomacy through the esta4lishment of the Energy and Natural )esources ;ureau, led 4y Am4assador Carlos Pascual# Its &rograms should 4e ro4ustly funded# !e should also dee&en the international energy di&lomacy ca&acity of the De&artment of Energy# *he De&artment of EnergyIs relationshi&s "ith civil servants in ministries across the glo4e &rovide a 4ridge across changes in government here and there# *hey can tal% "hen the

&olitics of non?energy issues o4struct dialogue among the foreign ministries# It is easier to get Energy

Ministers together for regular meetings than Secretaries of State# *heir staff should 4e e &anded and serious &rogram 4udget esta4lished to ma%e our coo&eration more than rhetorical# Cor true reform to 4e achieved, foreign ministers

and heads of government "ill have to 4e involved, as this "ill 4e the %ey to integrating energy security into foreign &olicy# T$e t$ree countries t$at need robust attention at t$is time are Mexico, -ra:il and Bene:uela# Me ico is considering maAor reforms and "e have much "e can share at a technical level on gas mar%ets, unconventional oil and gas technology, safe regulation of the dee&"ater, and energy efficiency# !e should create a =uiet 4ilateral mechanism for sharing this information "ith Me ican ministries, its nascent regulator and PEMEL# Changing glo4al mar%ets also im&act ;ra@il, and "e should ensure that the Strategic Energy Dialogue is reactivated as soon as ne" officials are on 4oard at the De&artment of Energy# Xene@uela is tric%ier 4ecause it is in &olitical
transition and there is a great deal of rhetorical hostility# ;ut the US had a technical dialogue "ith Xene@uela that lasted over 1D years# !e need to %no" the ne" officials at the Ministry and PdXSA and to share our vie" of mar%et realities, even if "e may not agree on them# Sometime in 7D'1, after the Xene@uelan elections, this technical dialogue should 4e revived, &erha&s at the Assistant Secretary, or De&uty Assistant Secretary level#

!e have t"o scenarios Cirst is the Economy S&ecifically hydrocar4on engagement acts as a Starting &oint for Energy di&lomacy O this is a sta4ili@ing mechanism for transitioning energy 4ased economies 4ecause it acts as a 4ridge fuel Ota%es out relations lin%s and solves commodity insta4ility "hich is %ey to 4roader economic gro"th *ormats 13 -!hy Flo4al Energy Di&lomacy Matters ;y )o4ert D# $ormats a *hursday, A&ril 7/, 7D'1 )o4ert D# $ormats
"as s"orn in as the U#S# Under Secretary of State on Se&tem4er 71, 7DD8# Mr# $ormats "as formerly vice chairman of Foldman Sachs -International9# ;efore Aoining Foldman Sachs, he served as Assistant Secretary of State for Economic and ;usiness Affairs from '8H' to '8H7, Am4assador and De&uty U#S# *rade )e&resentative from '8(8 to '8H', and Senior De&uty Assistant Secretary for Economic and ;usiness Affairs at the De&artment of State from '8(( to '8(8# Mr# $ormats has 4een a visiting lecturer at Princeton University and served on the ;oard of Xisitors at *ufts UniversityIs Cletcher School of Ba" and Di&lomacy and the DeanIs Council at $arvardIs Kennedy School of Fovernment# $e is also a mem4er of the Council on Coreign )elations# O;)!9

AmericaIs gro"ing energy self?sufficiency raises a num4er of geo?&olitical and geo?economic =uestions, says the State De&artmentIs )o4ert D# $ormats# *hese develo&ments &resent enormous o&&ortunities not Aust for strengthening the U#S# economy and reducing U#S# financial outflo"s, 4ut also for ena4ling the United States to &ursue ne" %inds of energy di&lomacy# *he "orldIs ne" energy geogra&hy and increased American self?sufficiency should not 4e seen in the United StatesEor a4roadEas foreshado"ing, or Austifying, an American &ull4ac% from the rest of the "orld # *he "orldIs ne" energy
geogra&hy and increased American self?sufficiency should not 4e seen in the United StatesEor a4roadEas foreshado"ing, or Austifying, an American &ull4ac% from the rest of the "orld# Energy shortages, &rice volatility or disru&tions

any"here can threaten economic gro"th every"here# !e "ant to "or% "ith &artici&ants in this ne" geogra&hy of energy E our traditional &artners &lus maAor emerging economies E to hel& vital goals# *he most &rominent ones among them are to ensure sta4ility and trans&arency in energy mar%ets, the develo&ment of alternative fuels, freedom of navigation and good environmental &ractices# *he United States has
seenEand "ill continue to seeEglo4al energy security, mar%et efficiency, sta4ility and coo&eration to 4e in our economic, foreign &olicy and national security interests# ;ut the United States cannot successfully guarantee glo4al energy

security, efficiency and mar%et sta4ility on its o"n# *his is es&ecially true today, "ith so many ne" or ra&idly gro"ing &layers,
"ho account for ever?increasing amounts of the energy consum&tion and &roduction# <n the consum&tion side, the IEA re&orts that

nearly t"o?thirds of gro"th in glo4al energy demand over the ne t 7D years "ill come from emerging economies in Asia# China, in &articular, is e &ected to use RH[ more energy than the United States 4y 7D1/# Already, (/[ of oil flo"ing from the Persian Fulf goes to Asia# Increasingly, the Indo?Pacific Sea lanes "ill 4e the channels for moving energy east# <ne gra&hic indication of this comes from &roAections that oil and gas shi&ments through the Straits of Malacca "ill dou4le over the ne t t"o decades# As a result, many countries share an interest in %ee&ing those lanes o&en and secureEand ensuring that dis&utes in the region are settled &eacefully and 4ased on international la"# <n the &roduction side, technical advancements u&stream, ne" finds in &laces li%e *an@ania, Mo@am4i=ue and the eastern Mediterranean, as "ell as the glo4ali@ation of natural gas mar%etsE driven 4y the rise in BNF tradeE"ill also alter su&&ly &atterns and the direction and volume of trade# MaAor changes in Euro&e in recent years have
demonstrated that a greater diversity of su&&ly choices, a "ider range of &i&eline and distri4ution systems, enhanced infrastructure,

&rice li4erali@ation as "ell as meaningful anti?mono&oly la"s and regulations have

led to greater energy security and more efficient mar%ets# As the U#S# ta%es advantage of o&&ortunities from the glo4al gas revolution, "e
cannot sto& strengthening environmental standards# *his has hel&ed these mar%ets overcome &ast rigidities, distortions and &otential &olitical leverage# As Asian governments "eigh their o&tions, they find that their economies no"

have many com&etitive o&tions# *hese include &i&eline gas from Eurasia and BNF im&orts from Australia and other &arts of Asia, 3atar and North America to fulfill their gro"ing demand for natural gas# <f course,
there is another layer of com&le ity that must urgently 4e addressed E the interaction 4et"een energy and the environment# Flo4al gro"th in energy demand in emerging economies has follo"ed the &ath set 4y the United States and other industriali@ed economies in the course of their develo&ment# As countries develo&, they consume more energy# ;ut the &eriod of ra&id gro"th for most <ECD countries came at a time "hen the environment "as for many an afterthought# *he "orld today no longer has that o&tion# *he threats of catastro&hic climate change and &ermanent environmental degradation are real# Cor many emerging countries, the environmental im&act is increasingly a&&arent "ithin their 4orders# Cho%ing

&ollution threatens the health of their citi@ensE&articularly childrenEand their &eo&lesI economic &roductivity as "ell as the =uality of millions of lives# Fiven the 4road s"ee& of changes in the glo4al energy e=uation , it is clear that "e need a ne" vision, a ne" &ath for"ard# I see four o&&ortunities# !hen it comes to natural gas mar%ets, "e all EAsia es&eciallyEcan learn from the Euro&ean e &erience# *he first o&&ortunity is that all of our countries need to focus on &roducing greater amounts of energy from rene"a4le sources, such as "ind, solar, geothermal and hydro# !e also need to continue develo&ing nuclear &o"er, "hich offers a source of electricity free of C<7 emissions#
Accelerating the develo&ment and de&loyment of clean energy technologies "ill re=uire a rene"ed commitment to innovation# Fovernments must, therefore, avoid mercantilist &olicies that hinder innovation # *hese detrimental &olicies include6 E Providing su4sidies to local &roducers, E Cavoring indigenous over foreign com&anies, E Corcing technology transfer as a condition of mar%et access, E Distorting regulatory standards, as "ell as E Im&osing restrictive trade 4arriers# A ne" form of mercantilism has emerged in the energy and environmental sectorsEoften referred to as Wgreen mercantilism#W !hile attractive to some in the short?term, over the long?term, green mercantilism "ill discourage investments of time, money and talent for the develo&ment of ne" technologies# *hese &olicies "ill reduce the &ace of innovation, "hich is critical to

revolutioni@e our energy sector and ena4le ne" technologies to 4e com&etitive, "ithout re=uiring su4sidies or other forms of &rotection# *he ongoing natural gas revolution presents an intermediate or bridge fuel opportunity' *he second o&&ortunity I see is that the ongoing natural gas revolution &resents an
intermediate or 4ridge fuel o&&ortunity# *he glo4al landsca&e has changed mar%edly 4ecause of ne" shale technologies, as "ell as maAor conventional gas finds in Africa, the Mediterranean, Australia and other regions# *he United States has organi@ed

dialogues "ith a num4er of large emerging countries to discuss the develo&ment of their gas resources# *he State De&artmentIs Unconventional Fas *echnical Engagement Program, in &articular, is hel&ing countries develo& their gas resources safely and reasona4ly# <ur engagement "ith foreign governments
es&ecially features &rivate sector &artici&ation# Many of our com&anies have great e &erience in &roduction techni=ues that can 4e de&loyed around the "orld# It is im&ortant to note that our engagement in this area involves our regulators, "ho can "or% "ith foreign governments to &romote good environmental &ractices# )e&lacing other fuelsE&articularly coalE "ith natural gas

can 4enefit 4oth energy security and the environment# No"here is this truer than Asian countries, "here &o"er
sectors are ra&idly develo&ing# Natural gas, ho"ever, is not a &anacea# *he third o&&ortunity I see is that, as "e ta%e advantage of dramatic ne" o&&ortunities stemming from the glo4al gas revolution, "e cannot lose momentum in &ursuing higher environmental standards# *he State De&t#Is Unconventional Fas *echnical Engagement Program hel&s emerging mar%et countries "ith develo&ment of gas resources# *his can 4e done "ith great effect# Cor instance, in the '8(Ds, the United States Congress &assed the Clean Air Act# <"ing to this legislation, the United States enAoys some of the cleanest air in the "orld today# Some feared that that the economy "ould 4e "ea%ened from clean air regulations# It "as not# National air =uality standards for the emission of sulfur dio ide and nitrous o ides from &o"er &lants s&urred an industry of environmental control technology that created large num4ers of Ao4s and &roduced over V1( 4illion in e &orts in 7D'D# *he fourth o&&ortunity I see is sim&ly to use energy more efficiently# *he energy intensityE"hich is a measure of energy use &er dollar of FDPEof the U#S# economy is e &ected to decline 4y J7[ 4et"een 7D'D and 7D1/# Com&anies are striving for efficiency not sim&ly to advance good environmental &ractices, 4ut also 4ecause it is good 4usiness# ;eing more efficient ma%es them more com&etitive# Some governments, unfortunately, have gone do"n a &ath of &roviding large fossil?fuel su4sidies for their citi@ens# Although intended to su&&ort &oor citi@ens, energy su4sidies are, 4y and large, counter?&roductive# *hese su4sidies im&ose su4stantial fiscal, economic and environmental costs# Several studies have sho"n that fossil?fuel su4sidies 4enefit high?income households more than the &oor# )emoving or reducing energy su4sidies "ould incentivi@e energy efficiency and lo"er energy consum&tion# WFreen mercantilismW discourages investments of time, money and talent for develo&ing ne" technologies# ;ut "e must also recogni@e that doing this is far from easy# Cor some lo"?income countries, crafting a more effective social safety net that 4enefits lo"?income households "ould ease the difficult and &olitically fraught tas% of reducing or eliminating fuel su4sidies# 0ur own political, economic, environmental and national

security interests depend on robust energy diplomacy and strong &artnershi&s to sei@e the o&&ortunities and address the challenges "e all face# *hat is "hy the State De&artment "ill continue to "or% across the glo4e in &artnershi& "ith others to hel& countries develo& and 4olster a variety of ne" su&&lies and su&&liers, find o&&ortunities to manage the gro"ing glo4al thirst for energy, and ensure secure and
efficient means of energy trans&ort and transmission, as "ell as mitigate environmental damage and climate change#

conomic collapse incentivi:es war and conflict 3 t$is inevitably goes nuclear Royal, 12, director of Coo&erative *hreat )eduction at the U#S# De&artment of Defense, 7D'D -.edediah, Economics of !ar and
Peace6 Economic, Begal, and Political Pers&ectives, &g 7'1?7'/, ?;)!9 Bess intuitive is ho" &eriods of economic decline may increase the li%elihood of e ternal conflict# Political science literature has contri4uted a moderate degree of attention to the im&act of economic decline and the security and defense 4ehavior of interde&endent states# )esearch in this vein has 4een considered at systemic, dyadic and national levels# Several nota4le contri4utions follo"# Cirst, on the systemic level, Pollins -7DDH9 advances Models%i and *hom&son>s -'88R9 "or% on leadershi& cycle theory, finding that rhythms

in the global economy are associated wit$ t$e rise and fall of a pre#eminent power and t$e often bloody transition from one pre# eminent leader to t$e next# As such, e ogenous shoc%s such as economic crises could usher in a redistri4ution of relative &o"er -see also Fil&in, '8H'9 that leads to uncertainty a4out &o"er 4alances, increasing the risk of miscalculation -Cearon '88/9# Alternatively, even a relatively certain redistri4ution of &o"er could lead to a permissive environment for conflicts as a rising power may see" to c$allenge a declining power -!erner, '8889# Se&arately, Pollins -'88R9
also sho"s that glo4al economic cycles com4ined "ith &arallel leadershi& cycles im&act the li%elihood of conflict among maAor, medium and small &o"ers, although he suggests that the causes and connections 4et"een glo4al economic conditions and security conditions remains un%no"n# Second, on a dyadic level, Co&eland>s -'88R, 7DDD9 theory of trade e &ectations suggest that 2future e &ectation of trade5 is a significant varia4le in understanding economic

conditions and security 4ehavior of states# $e argues that interde&endent states are li%ely to gain &acific 4enefits from trade so long as they have an o&timistic vie" of future trade relations# $o"ever, if the e &ectations of future trade decline, particularly for difficult to replace item suc$ as energy resources , t$e li"eli$ood for conflict increases, as states will be inclined to use force to gain access to t$ose resources' Crises could potentially be the trigger for decreased trade expectations either on its own or because it triggers protectionist moves by interdependent states. *hird, ot$ers $ave considered t$e lin" between economic decline and external armed conflict at a national level' -lomberg and *ess C)22)@ find a strong correlation between internal conflict and external conflict, &articularly during
&eriods of economic do"nturn# *hey "rite, *he lin%ages 4et"een internal and e ternal conflict and &ros&erity are strong and mutually reinforcing# Economic conflict tends to s&a"n internal conflict, "hich in turn returns the

favor# Moreover, the &resence of a recession tends to am&lify the e tent to "hich international and e ternal conflicts self?reinforce each other# -;lom4erg and $ess, 7DD7, &# H89 Economic decline has also 4een lin%ed "ith an increase in t$e li"eli$ood of terrorism C-lomberg, *ess and Weerapana, )22=@, w$ic$ $as t$e capacity to spill across borders and lead to external tensions# Curthermore, crises generally reduce the &o&ularity of a sitting government# 2Diversionary theory5 suggests that, w$en facing unpopularity arising from economic decline, sitting governments $ave increased incentives to fabricate external military conflicts to create a 8rally around t$e flagD effect# !ang -'88R9, De)ouen -'88/9 and ;lom4erg, $ess and *hac%er -7DDR9 find su&&orting
evidence sho"ing that economic decline and use of force are at least indirectly correlated# Fel&i -'88(9, Miller -'8889, and Kisangani and Pic%ering -7DD89 suggest that the tendency to"ards diversionary tactics are greater for

democratic states than autocratic states due to the fact the democratic leaders are generally more susce&ti4le to 4eing removed from office due to lac% of domestic su&&ort # De De)ouen

-7DDD9 has &rovided evidence sho"ing that &eriods of "ea% economic &erformance in the United States and thus "ea% Presidential &o&ularity are statically lin%ed to an increase in the use of force# In summary, recent economic scholarshi& &ositively correlates economic integration "ith an increase in the fre=uency of economic crises, "hereas &olitical science scholarshi& lin%s economic decline "ith e ternal conflict at systemic, dyadic and national levels# *his im&lied connection 4et"een integration, crises and armed conflict has not featured &rominently in economic?security de4ate and deserves more attention# *his o4servation is not contradictory to other &ers&ectives that lin% economic interde&endence "ith a decrease in the li%elihood of e ternal conflict, such as those mentioned in the first &aragra&h of this cha&ter# *hose studies tend to focus on dyadic interde&endence instead of glo4al interde&endence and do not s&ecifically consider the occurrence of and conditions created 4y economic crises# As such the vie" &resented here should 4e considered ancillary to those vie"s#

Additionally it is reverse causal O increased economic gro"th ma%es "ar o4solete and acts as an im&act filter to your disadvantages .eudney, E, -A CE! :EA)S BA*E) $E C$ANFED $IS MIND A;<U* K !AXE *$E<):9 &rofessor of &olitical science at
.ohn $o&%ins et al, D8 PDaniel, and .ohn I%en4erry, &rofessor of international affairs at Princeton, Coreign Affairs, htt&600"""#foreignaffairs#com0articles0R1(7'0daniel?deudney?and?g?Aohn?i%en4erry0the?myth?of?the?autocratic?revival?;)!9 *his 4lea% outloo% is 4ased on an e aggeration of recent develo&ments and ignores &o"erful countervailing factors and forces# Indeed, contrary to "hat the revivalists descri4e, the most stri%ing features of the contem&orary international

landsca&e are the intensification of economic glo4ali@ation, t$ic"ening institutions, and s$ared problems of interdependence# *he overall structure of the international system today is =uite unli%e that of the nineteenth century # Com&ared to older orders, the contem&orary li4eral?centered international order &rovides a set of constraints and o&&ortunities#of pus$es and pulls# t$at reduce the likelihood of severe conflict "hile creating strong im&eratives for coo&erative &ro4lem solving' *hose invo%ing the nineteenth century as a model for the t"enty?first also fail to ac%no"ledge the e tent to "hich "ar as a pat$ to conflict resolution and great#power expansion $as become largely obsolete# Most im&ortant, nuclear "ea&ons have transformed great?&o"er "ar from a routine feature of international &olitics into an e ercise in national suicide # !ith all of the great &o"ers &ossessing nuclear "ea&ons and am&le means to ra&idly e &and their deterrent forces, "arfare among t$ese states $as truly become an option of last resort# *he &ros&ect of such great losses has instilled in the great &o"ers a level of caution and restraint t$at effectively precludes ma;or revisionist efforts# Curthermore, the diffusion of small arms and the near universality of nationalism have severely limited the a4ility of great &o"ers to con=uer and occu&y territory
inha4ited 4y resisting &o&ulations -as Algeria, Xietnam, Afghanistan, and no" Ira= have demonstrated9# Unli%e during the days of em&ire 4uilding in the nineteenth century, states today cannot translate great asymmetries of &o"er

into effective territorial controlG at most, they can ho&e for loose hegemonic relationshi&s that re=uire them to give something in return# Also unli%e in the nineteenth century, today the density of trade, investment, and production networ"s across international borders raises even more t$e costs of war' A Chinese invasion of *ai"an, to ta%e one of the most &lausi4le cases of a future interstate "ar, "ould &ose for the Chinese communist regime daunting economic costs , 4oth domestic and international# *a%en together, these c$anges in t$e economy of violence mean t$at t$e international system is far more primed for peace than the autocratic
revivalists ac%no"ledge#

(cenario two is Russia Recent dispute over snowden and summit cancelation $as put t$e &'('#Russia relations$ip on t$e roc"s A5 13 - ;y Associated Press, Pu4lished6 .uly 'H a U&dated6 Criday, .uly '8, J67D AM Possi4le <4ama cancellation of Mosco"
tal%s could mean US, )ussia relations headed for ne" lo" htt&600"""#"ashington&ost#com0&olitics0courtsTla"0us?russia? relations?could?4e?headed?for?ne"?lo"?if?o4ama?cancels?mosco"?tal%s?"ith?&utin07D'10D(0'H07(/ed8HD?fDDf?''e7?Hc1R? DeHRH7//a8H8Tstory#html ? ;)!9 !AS$INF*<N E *he !hite $ouse is considering canceling a fall summit 4et"een President ;arac%

<4ama and )ussian President Xladimir Putin in Mosco", a move t$at would furt$er aggravate t$e already tense relations$ip between t$e two leaders # *he !hite $ouse is dangling that o&tion over the )ussians as Mosco" considers a tem&orary asylum &etition from Ed"ard Sno"den, the American accused of lea%ing information a4out classified U#S# intelligence &rograms# ;ut officials have &rivately signaled that scra&&ing the 4ilateral tal%s "ould also 4e retaliation for other areas of disagreement "ith )ussia, including its continued su&&ort for Syrian President ;ashar Assad>s attac%s
against civilians# )egardless of "hat ha&&ens "ith Sno"den, the !hite $ouse says <4ama "ill still attend an international summit in St# Peters4urg, )ussia# ;ut officials have gone out of their "ay in recent days to avoid &u4licly committing to the meetings in Mosco"# 2*he &resident intends to travel to )ussia for the F7D Summit,5 !hite $ouse s&o%esman .ay Carney said# 2And I have no further announcements to ma%e 4eyond "hat "e>ve said in the &ast a4out the &resident>s travel to )ussia in the fall#5 ;y sim&ly

considering cancellation of the tri&, the <4ama administration is indicating its concern the Kremlin "ill allo" Sno"den to ta%e refuge in )ussia# *he !hite $ouse has called on )ussia to return the 1D?year?old former government contract systems analyst to the U#S# "here he is facing es&ionage charges# Sno"den, in a

tem&orary asylum re=uest su4mitted 4y his la"yer *uesday, claimed he faces &ersecution from the U#S# government and could face torture or death# Andre" Kuchins, director of the )ussia &rogram at the Center for Strategic and International Studies, said the !hite $ouse>s cancellation threat could 4e effective leverage over Putin, "ho li%ely "ants to avoid an em4arrassment on the "orld stage# 2!hen the s&otlight of the "orld is on him and )ussia, he doesn>t "ant that s&otlight to reveal a lot of negative things "hich are going to 4e distractions,5 Kuchins said# Pulling the &lug on the U#S#?)ussia tal%s "ould dee&en the

tensions 4et"een the t"o leaders# And it would li"ely ma"e it even more difficult for t$e two countries to find common ground on areas of disagreement t$at plague t$e relations$ip' *he U#S# accuses )ussia of &roviding military su&&ort to Assad that has allo"ed him to cling to &o"er during
more than t"o years of clashes "ith re4els see%ing to overthro" his government# *he U#S# dee&ly angered )ussia earlier this year "hen it announced sanctions against 'H )ussians as &art of a la" named after Sergei Magnits%y, a )ussian la"yer "ho "as arrested in 7DDH for ta evasion after accusing )ussian &olice officials of stealing V71D million in ta re4ates# )ussia also announced last year that it "as 4anning U#S# ado&tions of )ussian children, a move seen as a retaliation for the Magnits%y act, &assed last year# <n *hursday, the !hite $ouse also said it "as 2dee&ly disa&&ointed and concerned5 4y the conviction of )ussian o&&osition leader Ale ei Navalny, "ho challenged the Kremlin "ith e &osures of high?level corru&tion and moc%ed the leadershi& "ith 4iting satire# $e "as sentenced to five years in &rison *hursday in a verdict that fueled street &rotests near )ed S=uare and dre" condemnation from the !est# Kuchins said that "hile granting Sno"den asylum "ould certainly 4e the im&etus for canceling <4ama>s Mosco" tri&, it "ould not 4e the only reason# 2It "ould 4e saying at least t"o things to the )ussians,5 Kuchins said# 2*hat granting asylum to Ed"ard Sno"den "as a 4ridge too far, and secondly that "e don>t feel li%e "e>re actually losing so much out of the cancellation of the summit 4ecause "e didn>t e &ect to get much out of it#5 Some U#S# la"ma%ers are calling on <4ama to go 4eyond sim&ly canceling his tal%s "ith Putin# Sen# Bindsey Fraham, )?S#C#, has also called on the U#S# to 4oycott ne t year>s !inter <lym&ics scheduled for Sochi, )ussia#

nergy diplomacy is critical to stabili:ing Russian Relations t$roug$ inter# governmental cooperation 3 t$is facilitates a peaceful transition from Russia6s unsustainable energy model and spills over into broader relations 4oug$ 11 -)ussia>s Energy Di&lomacy .ohn Bough Associate Cello", )ussia and Eurasia Programme a May 7D''
htt&600"""#chathamhouse#org0sites0default0files0'81/7TD/''4&Tlough#&df ? ;)!9

)ussia>s vast energy resources are a mainstay of its foreign &olicy and an essential source of its current &olitical &o"er &roAection and international &restige# *hese resources can act as a source of economic attraction for neigh4ours and &artners# *hey are a significant factor in 4ilateral relations "ith neigh4ours that can 4e traded for &olitical and economic 4enefit# Russia also uses its energy relations as a means of ac$ieving economic and political influence through non?traditional and non? trans&arent mechanisms# At times, )ussia em&loys energy in coercive "ays and to 4uild &atterns of de&endence# !hile )usssia>s energy e &orts give it international clout, the current develo&ment and e &ort model has created a dynamic that has undermined trust and at times created counter&roductive outcomes "ith 4oth CIS and EU countries# *he changing e ternal environment and &ressures to develo& ne" )ussian sources of oil and gas &roduction may force changes# )ussia may 4e &ushed to run its energy sector more efficiently "ith greater foreign investment, closer relations "ith foreign &artners and increased mutual mar%et access# If this ha&&ens, )ussia might develo& a =ualitatively different energy?4ased influence across a much "ider area# Energy is a mainstay of )ussia>s foreign &olicy and an essential
source of its current &olitical &o"er &roAection and international &restige# ' !ithout its a4ility to &roduce and su&&ly energy, )ussia "ould not have the status it has today# It "ould not have the same influence as a FH mem4er, it "ould not command the attention of the United States as it does, and it "ould not have the same &rivileged relations "ith several leading Euro&ean Union countries, nota4ly Fermany# It "ould also 4e of less interest to China# )ussia has the "orld>s largest natural gas reserves,

the second largest coal reserves and seventh largest oil reserves# It is the largest e

&orter of natural gas, and since 7DD8 has &eriodically overta%en Saudi Ara4ia as the "orld>s largest oil &roducer# It currently su&&lies around 1D[ of the oil and 7/[ of the gas that the EU consumes, and is also a signifi cant glo4al force in the nuclear &o"er industry# )ussia>s use of energy resources as a source of &o"er &roAection reflects a change over the &ast 7D years that has seen a significant decline in em&hasis on the role of nuclear "ea&ons# Crom the late '8RDs, "hen the USS) 4ecame an increasingly im&ortant oil and gas su&&lier to "estern Euro&e, and u& to the end of the Soviet &eriod, energy rela tions had a different &lace in Mosco">s foreign &olicy# A sym4ol of reduced &olitical tensions, they &rovided a source of hard currency for the USS) and an im&ortant tool of commercial engagement, &articularly "ith !est Fermany# Cor the USS) to have used them for &olitical &ur&oses in a system of mutual restraint im&osed 4y nuclear "ea&ons "ould have desta4ili@ed security relations "ith the !est and

damaged the Soviet economy# No" that )ussia>s &o"er derives far less from military power than in the days of the USS), energy relations are a different and much more fle i4le tool of influence # In 4road terms, they serve as6 @ a source of economic attraction for neigh4ours and &artners , @ a significant factor in 4ilateral relations "ith
neigh 4ours that can 4e traded for economic and &olitical 4enefit and sometimes ta%es the form of coercion, and @ a means of

achieving economic and &olitical influence

through non?traditional and sometimes non?trans &arent mechanisms# )ussia>s energy relations can 4e used in different "ays to e ert influence at different levels of intensity# *heir influ ence is strongest in the Common"ealth of Inde&endent States -CIS9 4ut it e tends far into Euro&e too# *here is &ronounced influence in some EU countries, &articularly Fermany and some ne" mem4er states "hose de&end ence on )ussian energy su&&lies develo&ed during Soviet times on the 4asis of Soviet?4uilt infrastructure and favoura4le &ricing arrangements Since coming to &o"er Xladimir Putin has sho"n consid era4le s%ill at integrating foreign &olicy and energy &olicy to leverage )ussia>s advantage 4oth as a holder of hydro car4on resources and as a very im&ortant and ca&a4le &roducer in its o"n right# $is understanding of 4oth areas of &olicy and their overla& has made him a difficult negotiating &artner for Euro&ean leaders# No !estern leader has a level of %no"ledge of the international energy 4usiness com&ara4le to Putin>s, 4ased on his strong interest in Fa@&rom# *he )ussian understanding of the overla& 4et"een its energy and foreign &olicies "as reflected in the 7DD1 Energy Strategy, "hich noted that )ussia>s Nsignificant energy resources and &o"erful fuel?energy com&le > "as Nan instrument for conducting domestic and foreign &olicy> and that Nthe role of the country on glo4al energy mar%ets to a great degree deter mines its geo&olitical influence># 7 Crom 7DDJ )ussia 4enefited from a steady increase in the glo4al oil &rice that transformed its international &osition and fuelled a level of economic gro"th that "as unimagi na4le in the late '88Ds# *his &rofoundly changed the attitude of )ussia>s leaders to"ards neigh4ours and &artners# !hen Putin 4ecame &rime minister in '888 the &rice of ;rent crude "as Aust under V'H a 4arrel# In .uly 7DDH it hit V'J(# *here "as over?enthusiastic tal% of Fa@&rom 4ecoming a trillion?dollar com&any and the 4iggest cor&oration in the "orld# *his coincided "ith a &ea% in )ussian foreign &olicy influence, demonstrated 4y Putin>s outs&o%en &erformance at the NA*< Summit in ;ucharest in 7DDH, follo"ed 4y )ussia>s incursion into Feorgia a fe" months later# In a matter of months this "ildly o&timistic &rognosis a4out Fa@&rom came 4ac% to haunt )ussia>s leaders# !ith the glo4al economic crisis, the &rice of oil had dro&&ed to 4elo" VJ/ 4y Decem4er 7DDH# *his e &osed as hollo" the 4elief of many of )ussia>s economic &olicy?ma%ers that the country "as a Nsafe haven># *his a4ru&t change in economic fortunes, al4eit "ithout a &rolonged crisis at home, tem&ered )ussia>s a&&roach to its use of energy in its foreign relations# No"here is this more visi4le than in the area of gas e &orts, 4y far the
most &o"erful element of )ussia>s energy influence# Fa@&rom>s cash?flo" situation in 7D'D "as very far from "hat it "as in 7DDH# Am4itions for do"nstream ac=uisitions and gro"th have 4een scaled 4ac% in line "ith investments in ca&ital e &enditure# 1 At the same time, there have 4een &rofound changes in the structure of the Euro&ean gas mar%et, "hich is the source of roughly t"o?thirds of Fa@&rom>s revenues from the sales of one?third of its &roduction# Fa@&rom is dis&ro &ortionately de&endent on the Euro&ean gas mar%et# !ith *ur%ey included, it accounts for over 8/[ of Fa@&rom>s non?CIS e &orts# <il and li=uefied natural gas -BNF9

can 4e glo4ally traded in a "ay that &i&eline gas cannot# In short, there have 4een signs for several interde&endence 4et"een Euro&e and )ussia has 4een evolving in a "ay that is not conducive to )ussian interests# *his is des&ite strong &ressure from )ussia and some of Fa@&rom>s allies in
years that the relationshi& of gas Euro&e to counter this trend# Euro&ean concerns a4out overde&endence on )ussian gas in the face of decreasing indigenous gas &roduction have started to recede for a num4er of reasons# *hese include the current glut of BNF as a result of the use of revolutionary gas &roduction technologies in the United States to develo& &reviously inaccessi4le uncon ventional gas, as "ell as EU rene"a4le energy &olicies and im&roved interconnections in res&onse to the 7DDR and 7DD8 gas crises 4et"een )ussia and U%raine# *hese are not the only factors in &lay, ho"ever# *he &rotected terms of trade for the Euro&ean gas 4usiness that develo&ed in the '8(Ds have started to unravel# NUn4undling> of &roduction and trans&ortation assets, &rovision of third&arty access to &i&eline infrastructure, as "ell as moves to limit ca&acity reservations in &i&elines, all mar% significant change in mar%et rules and &ractices# Com4ined "ith the start of a move a"ay from oil?inde ed &ricing as demon strated 4y the em4ryonic s&ot mar%et for gas, this is ma%ing life less comforta4le for maAor investors in the gas 4usiness# Fa@&rom>s &artners such as E#oN, )!E and Fasunie have seen their 4usiness models come under ne" &ressures and have 4een forced to ada&t to the changing realities# In short, Fa@&rom faces a much more uncertain situation in Euro&e as com&etition from other sources &uts &ressure on &rices# Several maAor Euro&ean 4uyers of )ussian gas have negoti ated discounts on their long?term contracts in res&onse to lo"er s&ot &rices# Fa@&rom is understanda4ly concerned at the erosion of the traditional model in "hich guaranteed demand from Euro&ean customers under&inned u&stream investments# *he limited diversity of sources to the Euro&ean mar%et effectively gave Fa@&rom and its esta4lished &artners the o&&ortunity to restrict the su&&ly of gas to the Euro&ean mar%et and %ee& &rices high# U& to 7DD(0DH Fa@&rom>s Euro&ean customers "ere =ueuing u& to e tend their longterm contracts amid concerns a4out long?term gas su&&ly to the Euro&ean mar%et# *his &eriod may &rove to have 4een a high?"ater mar% of )ussian influence on Euro&ean energy &olicy# According to the )ussian Energy Strategy to 7D1D , )ussia "ill devote more effort to increasing mar%et share for its

hydrocar4ons -including &i&eline gas and BNF9 in Asia than in Euro&e, 4ecause Euro&e is regarded as a

mature mar%et for gas# J *o maintain its mar%et &osition in Euro&e, Fa@&rom "ill have to com&ete "ith a range of other sources# At the same time, it "ill &ursue asset s"a&s "ith Euro&ean com&anies to strengthen its do"nstream &osition to secure demand and e tract additional rent# / )ising confidence encourages )ussia>s use of the energy card )ising &rices in the early &art of the last decade, coin ciding "ith concerns a4out future energy 4alances, gave )ussia a s&ring4oard to re?esta4lish its &osition as a maAor &o"er# E &ort revenues aside, foreign countries 4egan to vie" )ussia differently 4y virtue of its a4undance of oil and gas reserves and its record of su&&ly to glo4al mar%ets# It is fair to say that if )ussia had not 4oosted its oil &roduction from 7DD1, the glo4al economy "ould not have 4een a4le to co&e "ith the increased demand from the Asian economies# In this res&ect, )ussia made a very significant contri4ution to glo4al energy security, "hich "as em&hasi@ed 4y its FH chairmanshi& in 7DDR# *his reflected recognition 4y the )ussian leadershi& that it held an im&ortant card "hich no other country could match# )ussia>s leaders also sa" that the country "as

a4le to use its energy influence to strengthen its &ositions in the CIS and forge a ne" ty&e of relationshi& "ith the EU and the United States# *he energy dialogues esta4lished "ith the EU -7DDD9 and United States -7DD19 4ore little fruit, 4ut )ussia had discovered that energy coo&eration "as highly attractive to a num4er of Euro&ean governments and could 4e used to influence their relations "ith )ussia# *he EU>s difficulty in finding a Nsingle voice> to deal "ith )ussia on energy issues is testimony to Mosco">s di&lo matic achievements# It offered !estern governments a deal6 invest in the )ussian energy sector
according to our rules and in return allo" )ussian energy com&anies to invest in your countries# *he energy consultancy CE)A has descri4ed this as )ussia>s N4ar4ell strategy>6 Euro&ean investment in )ussia>s u&stream "ith )ussian &artici&a tion in the Euro&ean do"nstream connected 4y &i&eline# R It is fair to say that )ussia is still learning to 4alance energy among its foreign &olicy instruments# )ecent history sho"s that as a source of influence, energy resources can 4e easily overused# As a result, they can re&el as "ell as attract# *heir ca&acity to create counter&roductive outcomes for )ussia has 4een &articularly visi4le among EU countries follo"ing the gas crises of 7DDR and 7DD8 4et"een )ussia and U%raine# In terms of foreign investment, )ussia is still trying to 4alance its needs "ith its desire for control, as demonstrated 4y the 7DDH Ba" on Coreign Investment in Strategic Sectors, "hich hardly offers a red car&et to foreign energy com&anies# In the case of China, energy resources have &resented a dilemma for )ussia6 to su&&ly or notU Des&ite a firm inten tion e &ressed in 7DDR 4y President Putin to su&&ly (D 4illion cu4ic metres a year of &i&eline gas to the Chinese mar%et 4eginning in 7D'', and an a4undance of gas reserves in East Si4eria, )ussia still a&&ears hesitant a4out esta4lishing gas coo&eration "ith China# *here are some grounds to 4elieve that Fa@&rom has 4een reluctant to commit gas volumes from East Si4eria to China for fear that they might 4e needed to 4ac%fill the gas su&&ly system else"here in )ussia# Nevertheless, over recent years Fa@&rom senior e ecu tives have occasionally raised the &ros&ect of diverting the focus of )ussian gas e &orts from Euro&e to China 4ecause of changing EU regulations# At &resent, the &ros&ects for oil e &orts are much 4etter6 a s&ur from )ussia>s Eastern Si4eriaOPacific <cean &i&eline -ESP<9 to China has 4een com&leted and regular deliveries are due to start in 7D''# $o"ever, it is clear that )ussia continues for the moment to have dou4ts a4out Chinese investment in its energy sector and has favoured !estern com&anies over their Chinese counter&arts# China has Aust one significant u&stream investment in )ussia O a J8[ sta%e in Udmurtneftega@ that has not &roved a success# China has, ho"ever, 4een instrumental in &roviding loans to )osneft, including a V7/4n &ac%age &rovided to )osneft and *ransneft in return for a 1DD,DDD 4arrel &er day oil su&&ly agreement to run for 7D years from 7D''# At the same time, there are signs of increased coo&eration around &roAects related to coal, nuclear energy and electricity# Cor the moment, energy coo&eration "ith China and the rest of Asia is at an early stage # !hile concerns a4out the im&lications of further Chinese economic gro"th for )ussia

may constrain the )ussian desire to develo& a full?4looded energy relation shi&, there is no reason "hy )ussia cannot develo& an energy 4usiness in Asia to balance its position in Euro&e# Similarly, energy coo&eration "ith India is no" a focus of interest# *his is reflected in the signing of a num4er of agreements in the oil, gas and nuclear fields in Decem4er 7D'D#
E &ansion into the Indian mar%et is logical for )ussia given the vast o&&ortunities, and 4alances its efforts to 4uild a long?term &osition as an energy su&&lier to the main Asia?Pacific mar%ets# It already su&&lies BNF to .a&an and South Korea# )ussia has

also sho"n interest in develo&ing energy coo&eration -including nuclear9 "ith a num4er of coun tries in Africa,
including Angola, Egy&t, Nami4ia, Nigeria and South Africa# *his is a logical effort to e &and )ussia>s trade relationshi&s using its &rime e &ort commodities, in some cases 4uilding on e &erience from Soviet days# Energy resources as a source of attraction Fiven )ussia>s a4undance of energy resources, including its strong nuclear energy ca&a4ilities, the country attracts interest from a "ide range of foreign governments and com&anies# *his is reci&rocated 4y )ussia>s interest in e &loiting energy resources to access a range of foreign mar%ets# *he &icture is diverse since )ussia>s energy sector remains tightly integrated "ith the CIS and ;altic coun tries through shared infrastructure from Soviet days# !hile this gives it a significant lever in relations "ith some of these countries, )ussia also relies on ;elarus, U%raine and Estonia for access to its foreign mar%ets# Interest in commercial o&&ortunities "ith )ussian com&anies 4oth inside and outside the country has encour aged a range of leading international energy com&anies to invest in the )ussian energy sector# Russia $as an interest in attracting "orld?class com&anies to "or% in

&artner shi& "ith it to develo& its resource 4ase and to 4enefit from investment and transfers of technology and s%ills# *his has already 4rought some significant 4enefits at home# *he offshore Sa%halin develo&ments
"ould not have 4een &ossi4le "ithout E onMo4il and Shell# !estern com&anies> interests inevita4ly 4ecome &art of their governments> considerations in a&&roaching )ussia# *here is no 4etter e am&le than Fermany, "here there has 4een little change in su4stance 4et"een Chancellor Ferhard Schrbder>s handling of )ussia and that of his successor, Angela Mer%el, des&ite their very different &olitical &ositions# ;oth have su&&orted the contentious Nord Stream &i&eline &roAect that "ill 4y&ass ;elarus, Poland and U%raine to 4ring )ussian gas directly to Fermany# ;oth have 4ac%ed the e &ansion of coo& eration 4et"een Ferman and )ussian energy com&anies# ;oth have tried to limit restrictions on asset ac=uisi tions 4y )ussian energy com&anies in EU countries and, to different degrees, have soft?&edalled concerns a4out )ussia>s &olitical direction and 4ehaviour in its &eri&hery# At the same time, Fermany>s E#oN )uhrgas and ;ASC0 !intershall have dee&ened "hat are the closest relation shi&s "ith Fa@&rom among Euro&ean com&anies, 4uilt u& over decades "ith considera4le s%ill and &ersistence#

And, sustained &'('#Russian relations are vital to preventing nuclear war and de# escalating global conflict Allison F -lac"will, 611 PFraham, director of the ;elfer Center for Science and International Affairs at $arvard>s
Kennedy School, former assistant secretary of defense in the Clinton administration, )o4ert D#, $enry A# Kissinger senior fello" for U#S# foreign &olicy ?? Council on Coreign )elations, served as U#S# am4assador to India and as de&uty national security adviser for strategic &lanning in the ;ush administration, 4oth co?chairmen of the *as% Corce on )ussia and U#S# National Interests, co? s&onsored 4y the ;elfer Center and the Center for the National Interest, 'D?1D?'' Politico, 2'D reasons "hy )ussia still matters,5 htt&600dyn#&olitico#com0&rintstory#cfmUuuidZ'R'EC7H7?(7C8?JDJH?H;8C?C/;118RCADERQ *hat central &oint is that )ussia matters a great deal to a U#S# government see%ing to defend and advance its national interests# Prime Minister Xladimir Putin>s decision to return ne t year as &resident ma%es it all the more critical for !ashington to manage its relationshi& "ith )ussia through coherent, realistic &olicies# No one denies that )ussia is a dangerous, difficult, often disa&&ointing state to do 4usiness "ith# !e should not overloo% its many human rights and legal failures# Nonetheless, )ussia is a &layer "hose choices affect our vital interests in nuclear security and

energy' %t is "ey to supplying 122,222 &'(' troops fig$ting in Afg$anistan and preventing %ran from ac!uiring nuclear weapons' *en realities re=uire U#S# &olicyma%ers to advance our nation>s interests 4y engaging and "or%ing "ith Mosco"# Cirst, )ussia remains t$e only nation t$at can erase t$e &nited (tates from t$e map in 32 minutes' As every &resident since .ohn C# Kennedy has recogni@ed, Russias cooperation is critical to averting nuclear war. Second, )ussia is our most conse!uential partner in preventing nuclear terrorism' T$roug$ a com4ination of more than V'' 4illion in U#S# aid, &rovided through the Nunn?Bugar Coo&erative *hreat )eduction &rogram, and im&ressive )ussian &rofessionalism, t"o decades after the colla&se of the 2evil em&ire,5 not one nuclear "ea&on has 4een found loose# *hird, Russia plays an essential role in preventing the proliferation of nuclear weapons and missile?delivery systems# As !ashington see%s to sto& Iran>s drive to"ard nuclear "ea&ons, )ussian choices to sell or "ithhold sensitive technologies are the difference 4et"een failure and the &ossi4ility of success# Courth, )ussian su&&ort in s$aring intelligence and cooperating in operations remains essential to the U.S. war to destroy Al aeda and combat other transnational terrorist groups. Cifth, )ussia &rovides a vital su&&ly line to 'DD,DDD U#S# troo&s fighting in Afghanistan# As U#S# relations "ith Pa%istan have deteriorated, the )ussian lifeline has gro"n ever more im&ortant and no" accounts for half all daily deliveries# Si th, )ussia is the "orld>s largest oil &roducer and second largest gas &roducer# <ver the &ast
decade, )ussia has added more oil and gas e &orts to "orld energy mar%ets than any other nation# Most maAor energy trans&ort routes from Eurasia start in )ussia or cross its nine time @ones# As citi@ens of a country that im&orts t"o of every

three of the 7D million 4arrels of oil that fuel U#S# cars daily, Americans feel )ussia>s im&act at our gas &um&s# Seventh, Mosco" is an im&ortant &layer in today>s international system# It is no accident that )ussia is one of the five veto?"ielding, &ermanent mem4ers of the U#N# Security Council, as "ell as a mem4er of the F?H and F?7D# A Moscow more closely aligned wit$ &'(' goals would be significant in the balance of power to sha&e an environment in "hich China can emerge as a glo4al &o"er wit$out overturning t$e existing order' Eighth, )ussia is the largest country on Earth 4y land area, a4utting China on the East, Poland in the !est and the United States across the Arctic# *his territory &rovides transit corridors for su&&lies to glo4al mar%ets "hose sta4ility is vital to the U#S# economy# Ninth, )ussia>s 4rain&o"er is reflected in the fact that it has "on more No4el Pri@es for science than all of Asia,
&laces first in most math com&etitions and dominates the "orld chess masters list# *he only "ay U#S# astronauts can no" travel to and from the International S&ace Station is to hitch a ride on )ussian roc%ets# *he co?founder of the most advanced digital com&any in the "orld, Foogle, is )ussian?4orn Sergei ;rin# *enth, Russias potential as a spoiler is difficult to

exaggerate. Consider "hat a )ussian &resident intent on frustrating U#S# international o4Aectives could do E from sto&&ing the su&&ly flo" to Afghanistan to selling S?1DD air defense missiles to *ehran to Aoining China in &reventing U#N# Security Council resolutions# So ne t time you hear a &olicyma%er dismissing )ussia "ith rhetoric a4out 2"ho caresU5 as% them to identify nations that matter more to U#S# success, or failure, in advancing our national interests#

)ac solves energy diplo


(trengt$ening oil sector development is "ey to development of energy governance and cooperation +e"uta 13 -)o4ert C# Ce%uta Princi&al De&uty Assistant Secretary, ;ureau of Energy )esources <ffshore *echnology Conference $ouston, *L May 8, 7D'1 htt&600"""#state#gov0e0enr0rls0rem07D'107D8'8'#html ? ;)!9 Bet me 4egin 4y than%ing the <ffshore *echnology Conference and the U#S# De&artment of Commerce for organi@ing this event and for offering this o&&ortunity to discuss our &ers&ectives on the im&ortance of the oil and gas sector in Myanmar, as "ell as U#S# engagements in this area# !e are all here 4ecause "e share a sense of the tremendous &otential in the regionG "e all sense the o&&ortunity to turn the corner in a lasting and res&onsi4le manner# President <4ama>s historic tri& in Novem4er highlighted the continued &rogress Myanmar is ma%ing on %ey reforms, including "ith regard to human rights# *he United States Fovernment is "or%ing hard to su&&ort President *hein Sein, others in his government, and all those loo%ing to hel& the country as it continues do"n the &ath of democratic reform# A vital element of these reforms "ill 4e to strengthen and moderni@e the countryIs management of its natural resources, in &articular "ithin the oil and gas sector# !e continue to "or% closely "ith the government to identify "here "e can 4e of assistance in hel&ing Myanmar reach the ultimate goal of creating a trans&arent, "ell?managed energy sector that can attract the many res&onsi4le, highly regarded oil and gas com&anies that are re&resented here in this room# *urning &articularly
to U#S# oil and gas com&anies ?? "e are certain that, given all of your e &ertise and ca&a4ilities, you have &roven around the "orld that your &artici&ation "ill set a model for res&onsi4le investment and 4usiness o&erations as "ell as contri4ute to further reform and &romote economic develo&ment and contri4ute to the "elfare of the &eo&le# *he U#S# government is dedicated to doing everything it can to "or% "ith you to encourage and su&&ort res&onsi4le investment# !e "ant U#S# com&anies to invest and to do so in a socially and environmentally res&onsi4le manner that can serve as a model for others and 4enefit all of the &eo&le in the community# !ith that said, "e have &aired our actions to ease sanctions "ith &utting in &lace re&orting re=uirements for U#S# com&anies that encourage res&onsi4le investing, including "ith regard to &romoting trans&arency and res&ect for human and la4or rights, as "ell as su&&orting sound environmental &ractices, and land use# Although the country has one of the "orld>s oldest oil sectors, "ith &roduction stretching 4ac% into the mid?'HDDs, it also contains si@a4le undiscovered oil and gas resources and &roduction &otential, &articularly in the dee& "ater# *he o&&ortunities for &otentially massive additional revenue from these resources are very &romising, 4ut "e have to recogni@e instances of conflict and human rights a4uses associated "ith the e tractive industries ma%e sound energy

sector governance and trans&arency a &riority for our 4ilateral engagement# In order to hel& sha&e the dee&"ater licensing round no" under"ay, last Decem4er the State

De&artment, under the aus&ices of our Energy ;ureau>s Energy Fovernance and Ca&acity Initiative -EFCI9 hosted the Ministers of Energy and of Mines, as "ell as the Managing Director of the state?o"ned hydrocar4on com&any, M<FE, in Ne" <rleans and in !ashington to tal% a4out the countryIs governmentIs &lans and a4out 4est &ractices in trans&arent oil and gas sector licensing and to "itness an offshore lease sale for the Fulf of Me ico# *he Energy Fovernance and Ca&acity Initiative has 4een a tool used

"ith a num4er of countries around the "orld to &rovide targeted hel& on &articular matters &ertaining "ith ho" governments deal "ith &articular legal, regulatory, or other matters in overseeing their oil and gas sectors# *he tri& "as very "ell received and "e ho&e that some of the &ractices and ideas

o4served and discussed here in the United States "ill &rove useful and ma%e their "ay into the licensing &ractices under"ay no"# *his "as not a one?off event, and "e "ill continue to engage "ith the government under our EFCI &rogram# Moving for"ard "e loo% to engage "ith the Ministry of Energy and M<FE on legal reforms, sector management, and financial accounta4ility &rocesses# *here are of course many ongoing international efforts to enhance trans&arency and strengthen energy governance "ithin the country, and "e ma%e every effort to have our efforts com&lement those 4roader international &rograms# *he most &rominent e am&le is the E tractive Industries *rans&arency Initiative -EI*I9# !e su&&ort and encourage the country>s &rogress to"ards EI*I im&lementation, and are encouraged that they &lan to send a large, high level delegation to the EI*I Flo4al Conference in Sydney in May# -And let me add a note here that as a mem4er of the EI*IIs ;oard, I &articularly ho&e "e "ill have a chance to tal% further in Sydney "ith your countryIs delegation#9 Energy relations 4et"een our t"o governments "ill not, and should not,

4e limited to the oil and gas sector# Indeed, the oil and gas sector should not and cannot 4e isolated from the larger

energy sector in the country# As &rotests in )angoon made clear last year, the e &ectation of citi@ens that their government "ill &rovide electricity to a greater &ortion of the country is of &aramount im&ortance# *he country has Asia>s lo"est electrification rate at only 7( &ercent# Its significant gas resources can hel& meet gro"ing demand, 4ut the country

currently lac%s the legal, regulatory, and &hysical infrastructure to utili@e effectively and to

o&timi@e this resource# *he U#S# government, therefore, is "or%ing "ith the !orld ;an% and the Asian Develo&ment ;an% to develo& &o"er sector and rural electrification investment &lans , in coordination "ith
the UN>s Sustaina4le Energy for All initiative# It is our &rofound ho&e that the gas that your com&anies "ill find and develo& "ill not only ma%e your investments "orth"hile, 4ut "ill also hel& &o"er a more inclusive and self?sustaining electrical

&o"er grid "ithin the country *he State De&artment and Em4assy are here to assist and &artner "ith the country in order to act
u&on the ne" and e citing o&&ortunities that are 4eing generated through the ongoing &olitical and economic reforms# Fovernments, the &rivate sector, and most im&ortantly the &eo&le "ill 4enefit from sound, sustaina4le develo&ment of the countryIs hydrocar4on resources# In the com&le and ne" environment 4efore us , it is critically im&ortant that "e thin% ho"

4est to &artner to ensure sta4ility and hel& achieve &ros&erity in the years to come# U#S# investors, &roducers, su&&ly com&anies come "ith unmatched e &erience, technological %no"? ho", creativity and driveG they come "ith a record of achievement and success in dealing "ith challenges in the energy
sector around the "orld# *hey are interested in 4ringing this e &erience, this e &ertise, this s&irit to hel& Myanmar and its &eo&le ca&ture the 4enefits of the countryIs resources# *here are great o&&ortunities for mutual 4enefit, and I %no" the U#S# com&anies here "ill do their due diligence and invest res&onsi4ly for the &ros&erity of all of the &eo&le, restoring the country to its traditional role at the crossroads 4et"een East and South Asia#

)ac impact filter


nergy .iplomacy is an impact filterGit6s reverse casual and prevents t$e escalation of conflict +linton 1) former Secretary of State -$illary )odham Clinton, 2 Energy Di&lomacy in the 7'st Century5 <cto4er 'H, 7D'7,
htt&600"""#state#gov0secretary0rm07D'70'D0'8811D#htm9 00K: ;ut let me start "ith the 4asics# Energy matters to America>s

foreign &olicy for three fundamental reasons# Cirst, it rests at the core of geo&olitics, 4ecause fundamentally, energy is an issue of "ealth and &o"er, "hich means it can 4e 4oth a source of conflict and coo&eration# *he United States has an interest in resolving dis&utes over energy, %ee&ing energy su&&lies and mar%ets sta4le through all manner of glo4al crises, ensuring that countries don>t use their energy resources or &ro imity to shi&&ing routes to force others to 4end to their "ill or forgive their 4ad 4ehavior, and a4ove all, ma%ing sure that the American &eo&le>s access to energy is secure, relia4le, afforda4le, and sustaina4le # Second, energy is essential to ho" "e "ill &o"er our economy and manage our environment in the 7'st century# !e therefore have economic develo&ment and &olitical sta4ility# And "e have an interest in hel&ing the '#1 4illion &eo&le "orld"ide "ho don>t have access to energy# !e 4elieve the more they can access &o"er, the 4etter their chances of starting 4usinesses, educating their children, increasing their incomes, Aoining the glo4al economy O all of "hich is good for them and for us# And 4ecause corru&tion is often a factor in energy &overty as "ell as &olitical insta4ility , "e have an interest in su&&orting leaders "ho invest their nations> energy "ealth 4ac% into their economies instead of hoarding it for themselves#

an interest in &romoting ne" technologies and sources of energy O es&ecially including rene"a4les O to reduce &ollution, to diversify the glo4al energy su&&ly, to create Ao4s, and to address the very real threat of climate change# And third, energy is %ey to

)ac iran
nergy diplomacy solves %ranian 5roliferation +linton 1) -Energy Di&lomacy in the 7'st Century )emar%s *illary Rod$am +linton Secretary of State
Administration# I>m sure you %no" that the United

Feorgeto"n University !ashington, DC <cto4er 'H, 7D'7 htt&600"""#state#gov0secretary0rm07D'70'D0'8811D#html ?;)!9 Security is also at the heart of &erha&s the most im&ortant energy di&lomacy "e have conducted in the <4ama

States and the Euro&ean Union and other li%eminded countries, as "ell as the United Nations, have im&osed sanctions on Iran as &art of our dual?trac% di&lomatic effort to &ersuade or com&el Iran to sto& its &ursuit of a nuclear "ea&on # :ou may also

%no" that a maAor target of these sanctions is Iran>s oil industry# !hat you may not %no", 4ecause it doesn>t ma%e headlines, is ho" much &ainsta%ing di&lomacy "ent into ma%ing these sanctions first, ado&ted, and then, effective# Cirst, "e needed to convince consumers of Iranian oil to sto& or significantly reduce their &urchases# At a time "hen demand for energy is high,

many countries understanda4ly "ere "orried that reducing their &urchases "ould &ut them in a very difficult &osition# So at the same time, "e reached out to other maAor oil &roducers to encourage them to increase &roduction

so countries "ould 4e a4le to find alternative sources of oil# *hat "as further hel&ed 4y the fact that here in the United States "e increased oil &roduction 4y nearly (DD,DDD 4arrels a day# And "e engaged countries on the 4enefits of diversifying their energy su&&ly as a national security matter# *he a&&roach has "or%ed# *he EU &ut an oil em4argo into &lace in .uly, and "e have certified that every single one of Iran>s oil im&orters have either significantly cut or com&letely ended their &urchases of Iranian oil# !e>ve 4een a4le to &ut un&recedented economic &ressure on Iran, "hile minimi@ing the 4urdens on the rest of the "orld# No" this strategy influenced our engagement in other &laces too O for e am&le, Sudan and South Sudan, "here the oil had sto&&ed flo"ing and getting it going again mattered to 4oth of them and to us# ;oth countries> economies de&end on oil# No" most of the oil lies in the ne" country of South Sudan# ;ut in order to e &ort that oil, South Sudan needs &i&elines and &orts, "hich Sudan controls# *he t"o countries "ere fighting over ho" much money South Sudan "ould &ay to Sudan to use that infrastructure# *hey "ere so far a&art, a com&romise seemed im&ossi4le# So the United States ste&&ed u& our engagement in su&&ort of the African Union and the United Nations to avoid a return to "ar 4et"een the t"o countries, to hel& 4oost their economies, and to restart oil &roduction at a critical moment for the "orld>s oil su&&ly# *his &ast August I fle" to .u4a, the ca&ital of South Sudan, to urge the &arties to recogni@e that a &ercentage of something is 4etter than a &ercentage of nothing# And a month later, they signed a coo&eration agreement, and it "as ratified 4y the t"o &arliaments this "ee%# No" the situation is still fragile, and there are many other difficulties that they have to "or% out 4et"een themselves# ;ut this "as a ste& for"ard, and I "ant to commend 4oth sides for their leadershi& and courage# !e>ve also "or%ed intensively to su&&ort Ira=>s energy sector# In 7D'D, Ira= &roduced a4out 7#1 million 4arrels of oil each day# *oday, that num4er is 1#7 million# And Ira= is no" the num4er t"o oil &roducer in <PEC, sur&assing Iran# *his is a maAor Ira=i success story, hel&ed 4y the De&artments of State and Energy# !e "or%ed "ith the Ira=is to identify 4ottlenec%s in their energy infrastructure, to im&rove their investment &lans, and get more oil to the mar%et# And there>s no =uestion that Ira=>s increased &roduction has hel&ed sta4ili@e oil mar%ets at this &ivotal moment, and it &rovides a foundation for a stronger economy to 4enefit the Ira=i &eo&le# I "ant to mention one additional di&lomatic challenge "e>re focused on6 ho" to manage resources that cross national 4oundaries# ;oundaries are not al"ays clearly delineated, es&ecially at sea# If oil or gas is discovered in an area t"o countries share or "here 4oundaries are ine act, ho" "ill they develo& itU Earlier this year, after a long negotiation led 4y the State De&artment, the United States and Me ico reached a ground4rea%ing agreement on oil and gas

resources in the Fulf of Me ico, and "e "ill 4e sending it to Congress for action soon# *he agreement clearly lays out ho" the United States and Me ico "ill manage the resources that transcend our maritime 4oundary# No", in addition to these e am&les of energy di&lomacy, "e>re also focused on our second area of engagement6 energy transformation O hel&ing to &romote ne" energy solutions, including rene"a4les and energy efficiency, to meet rising demand, diversify the glo4al energy su&&ly, and address climate change# *he transformation to cleaner energy is central to reducing the "orld>s car4on emissions and it is
the core of a strong 7'st century glo4al economy# ;ut "e %no" very "ell that energy transformation cannot 4e accom&lished 4y governments alone# In the ne t 7/ years, the "orld is going to need u& to V'/ trillion in investment to generate and transmit electricity# Fovernments can and "ill &rovide some of it, 4ut most "ill come from the &rivate sector# No", that>s not only a huge challenge, 4ut a huge o&&ortunity# And I "ant to ma%e sure that American com&anies and American

"or%ers are com&eting for those %inds of &roAects# After all, American com&anies are leaders across the field of energy O leaders in rene"a4les, high?tech, smart?grid energy infrastructure, 4ioenergy, energy efficiency# And in the coming decades, American com&anies should have the chance to do much more 4usiness "orld"ide, and 4y doing so, they "ill hel& to create American Ao4s# No", governments can do several things to &romote energy transformation, li%e educate our
citi@ens a4out the value of energy efficiency and clean technology# ;ut &erha&s the most im&ortant thing "e can do is enact &olicies that create an ena4ling environment that attracts investment and &aves the "ay for large?scale infrastructure#

%ranian 5roliferation is a uni!uely bad instance of proliferation 3 causes /5T collapse and terrorist ac!uisition of nu"es Hantor, 12, ''0107D'D -Moshe, President of the International Bu em4ourg Corum on Preventing Nuclear Catastro&he, 2*he
!orld !ith A Nuclear Iran5, *he !all Street .ournal, htt&600online#"sA#com0article0S;'DDD'J7JD/7(JH(DJ'J''DJ/(//HH77D8DD8R8/8J#html, MM9 <nly days ago, Iran 4egan loading uranium fuel rods into the core of its first nuclear &o"er &lant at ;ushehr# !hile many in the international community &layed do"n the significance of ;ushehr, it is em4lematic of an illegal nuclear that could

&olicy s&ell the end of the Nuclear Non?Proliferation *reaty -NP*9E&erha&s the most im&ortant &illar of glo4al security# An %ranian bomb must be stopped not only for w$at it could p$ysically wrea" on its neig$bors and t$e world at large, but for t$e paradigm#brea"ing order t$at could result if %ran is able to ac$ieve nuclear weaponi:ation' Many neigh4oring governments have already said that they "ill fast?trac% their o"n nascent nuclear programs toward weapons capability if Iran ac=uires the 4om4# *his domino effect could spread furt$er around t$e globe, thus tearing the NP* to shreds# Nuclear "ea&ons "ould 4ecome so common&lace that any of the more t$an 122 current conflicts around t$e world could come to a devastating conclusion wit$ t$e flic" of a switc$' *he nations soon to ac=uire nuclear "ea&ons "ill not 4e decent democracies# As
recent history has sho"n, itIs countries li%e North Korea, SaddamIs Ira=, Iran, and Bi4ya that have attem&ted to 4uild the atom 4om4# )e&ressive regimes are see%ing to &rovide the im&etus for a ne" glo4al regime "here radicals, terrorists and serial human?rights a4users "ill hold the 4alance of &o"er# *he greater the num4er of nuclear &o"ers, the

more li%ely t$at terrorist organi:ations will be able to ac!uire atomic weapons'
*he &ossi4ility of Wdirty 4om4sW e &loding in a maAor metro&olitan area "ould 4ecome more real# Al 3aeda and other Islamic e tremists ma%e no secret that they hold such intentions# *he e &losion of Aust one Wdirty 4om4W in a maAor city "ould have devastating effects, "hich "ould 4e measured not Aust in human casualties 4ut in the long?term health of the "orldIs economies and &olitical institutions# Such an act "ould turn inha4itants of the !estern "orld into fearful hostages of terrorists, resulting in

the moral and &sychological colla&se of our civili@ation#

)ac c$ina
nergy .iplomacy is "ey to solving +$inese energy aggression 3 prevents &'(' +$ina conflict t$roug$ cooperation Rumley 12 - Dr Dennis )umley O CDI associate ? a%a 2 Dr# Dud )um4les5 is an $onorary Senior )esearch Cello" at the
University of !estern Australia, ? Australia and the Ne" Feo&olitics of Energy *hursday, '7 August 7D'D ? htt&600"""#futuredirections#org#au0&u4lications0energy?security07H?australia?and?the?ne"?geo&olitics?of?energy#html ?;)!9 Energy di&lomacy on the &art of the "orld>s most energy im&ort?de&endent country, the United States , has ta%en four

&rinci&al directions in the ne" international energy order# Cirst, the United States has 4een aggressively com&eting for energy su&&lies, es&ecially 2hemis&herically5 in the energy?niche states of Canada, Mexico and Xene@uela# Second, the United States has used various means of dissuasion to"ards states entering its

N&erceived s&here of energy influence># Any 2intrusion5 into the 2American Ba%e5, therefore, 4y an Asian energy com&etitor, es&ecially in the form of a 4ilateral agreement, is condemned and o&&osed# *hus, the United States &laced considera4le &ressure u&on .a&an "hen it o&ted to develo& the A@adegan oil field in Iran# Curthermore, India>s agreement "ith Iran to 4uild a gas &i&eline through ;aluchistan -the so?called 2&eace &i&eline59 "as &erceived as a Nchallenge to American authority> in the region and thus, according to Klare, elicited N!ashington>s hysterical reaction># *hird, US di&lomacy to"ards energy?niche

economies and those of its allies involving a variety of inter?state agreements is encouraged# <n the other hand, regional

grou&ings, or N&roto?4locs>, as Klare refers to them, such as the Shanghai Co?o&eration <rgani@ation -SC<9, "hich com&rises China, )ussia and Central Asian states, are condemned 4ecause of their Ndecidedly anti?American character> and their increasing involvement in energy security# Curthermore, the United States "ould li%ely o&&ose the construction of any other ne" 4ilateral or regional energy arrangement that "ould involve any other maAor Asian energy im&ort?de&endent state, such as India# <n the contrary, sole US 2o"nershi&5 of such 4ilateral agreements is much &referred and is realised 4y

sufficient economic and &olitical &ressure on energy?niche economies and energy im&ort? de&endent states# Courth, the geo&olitical strategy of the United States in the ne" international energy order essentially comes do"n to one of t"o contrasting scenarios directed towards its most feared energy threat, +$ina# *he first is a future ho&e that &( energy diplomacy wit$ +$ina will move from a context of competition to one of collaboration' *he second and more immediate scenario involves an

encirclement strategy designed to contain China# In contrast to the SC<, Klare argues that there e ists a nascent grou&ing "ith an Nanti?Chinese cast> centred on the United States and .a&an, 4ut "hich also includes Australia, South Korea and others# $e notes, ho"ever, that6 NAustralia, India, Indonesia and Xietnam have not committed to Aoining the United States and .a&an in an e &licitly anti?Chinese alliance># Crom an Australian &ers&ective, there is clearly no significant desire to 4e involved in a

2containment of China5 energy &olicy# Indeed, in a 7DDH survey, R7 &er cent of Australians 4elieved that China>s

gro"th "as good for their country, "hile the sam&le "as almost evenly divided on "hether Australia should Aoin "ith other countries to limit China>s influence# *his is &artly 4ecause Australia is no" in the midst of its 2regional5 international trading &hase, "ith China 4eing its largest trading &artner, and 4ecause Australia, as an energy?niche economy, "ill aim to e &loit this advantage "ith all energy im&ort?de&endent states, including China#

&(#+$ina relations are comparatively t$e most important for solving every existential t$reat +o$en and 7reenberg E -!illiam S# Cohen is chairman and CE< of *he Cohen Frou&, a strategic 4usiness consulting

firm 4ased in !ashington, D#C# Secretary Cohen served as U#S# secretary of defense, Maurice )# Freen4erg is chairman and CE< of C#X# Starr _ Co#, Inc# Mr# Freen4erg retired four years ago as chairman and CE< of American International Frou& -AIF9 after more than JD years of leadershi&, creating the largest insurance com&any in history, 2Smart Po"er in U#S#?China )elations,5 &g online c htt&600csis#org0files0media0csis0&u4s0D8D1D8TmcgiffertTuschinasmart&o"erT"e4#&df 00ef9 *he evolution of (ino#&'(' relations over the ne t months, years, and decades has t$e potential

to $ave a greater impact on global security and prosperity t$an any ot$er bilateral or multilateral arrangement# In this sense, many analysts consider the US#?China di&lomatic relationshi& to 4e the most influential in the "orld# !ithout =uestion, strong and sta4le U#S# alliances &rovide the foundation for the &rotection and &romotion of U#S# and glo4al interests# :et "ithin that 4road frame"or%, the traAectory of &'('#+$ina relations will determine t$e success, or failure, of efforts to address t$e toug$est global c$allengesA global financial stability, energy security and climate c$ange, nonproliferation, and terrorism, among ot$er pressing issues# She&herding that traAectory in the most

constructive direction &ossi4le must therefore 4e a &riority for !ashington and ;eiAing # Xirtually no ma;or global c$allenge can be met wit$out &'('#+$ina cooperation' *he uncertainty of that future traAectory and the Wstrategic mistrustW 4et"een leaders in !ashington
and ;eiAing necessarily concerns many e &erts and &olicyma%ers in 4oth countries# Although some U#S# analysts see China as a strategic com&etitorEdeli4erately vying "ith the United States for energy resources, military su&eriority, and international &olitical influence ali%eE analysis 4y the Center for Strategic and International Studies -CSIS9 has generally found that China uses its soft &o"er to &ursue its o"n, largely economic, international agenda &rimarily to achieve its domestic o4Aectives of economic gro"th and social sta4ility#' Although ;eiAing certainly has an eye on !ashington, not all of its actions are underta%en as a counter&oint to the United States# In addition, CSIS research suggests that gro"ing Chinese soft &o"er in develo&ing countries may have influenced recent U#S# decisions to engage more actively and reinvest in soft? &o"er tools that have atro&hied during the &ast decade# *o the e tent that there e ists a com&etition 4et"een the United States and China, therefore, it may 4e mo4ili@ing 4oth countries to strengthen their a4ility to solve glo4al &ro4lems# *o 4e

sure, U#S# and Chinese &olicy decisions to"ard the res&ective other &o"er "ill 4e determined in large &art 4y the choices that leaders ma%e a4out their o"n nations interests at home and overseas, "hich in turn are sha&ed 4y their res&ective domestic conte ts# ;oth &arties must recogni@eEand acce&tEthat the other "ill &ursue a foreign &olicy a&&roach that is in its o"n national interest# :et, in a glo4ali@ed "orld, c$allenges are increasingly transnational, and so too must be t$eir solutions' As demonstrated by the ra&id s&read of SA)S from China in 7DD1, &andemic flu can 4e s&read ra&idly through air and via international travel# Dust &articulates from Asia settle in Ba%e *ahoe# An economic downturn in one country can and does trigger an economic slowdown in anot$er' T$ese c$allenges can no longer be addressed by eit$er containment or isolation' W$at constitutes t$e national interest today necessarily encompasses a broader and more complex set of considerations t$an it did in t$e past As a general &rinci&le, the United States see%s to &romote its national interest "hile it
simultaneously &ursues "hat the CSIS Commission on Smart Po"er called in its Novem4er 7DD( re&ort the Wglo4al good#W1 *his a&&roach is not al"ays &ractical or achieva4le, of course# ;ut neither is it &ure 4enevolence# Instead, a strategic

&ursuit of the glo4al good accrues concrete 4enefits for the United States -and others9 in the form of 4uilding confidence, legitimacy, and &olitical influence in %ey countries and regions around the "orld in "ays that ena4le the United States to 4etter confront glo4al and transnational
challenges# In short, the glo4al good com&rises those things that all &eo&le and governments "ant 4ut have traditionally not 4een a4le to attain in the a4sence of U#S# leadershi&# Des&ite historical, cultural, and &olitical differences 4et"een the United States and China, ;eiAingIs ne"found a4ility, o"ing to its recent economic successes, to contri4ute to the glo4al good is a matter for common ground 4et"een the t"o countries# *oday there is increasing recognition that no ma!or global

challenge can be addressed effectively" much less resolved" without the active engagement of#and cooperation between#the United States and China#

)ac scs
nergy diplomacy solves (out$ +$ina (ea conflict +linton 1) former Secretary of State -$illary )odham Clinton, 2 Energy Di&lomacy in the 7'st Century5 <cto4er 'H, 7D'7,
htt&600"""#state#gov0secretary0rm07D'70'D0'8811D#htm9 00K: Bet me s&ea% Aust 4riefly a4out the three &illars of our glo4al energy

strategy# Cirst, regarding the geo&olitics of energy, "e>re focused on energy di&lomacy# No" some of our energy di&lomacy is related to issues in the headlines# :ou may have read a4out heated dis&utes over territorial claims in the South China Sea # !ell, "hy do you thin% that>s ha&&eningU *here are &otentially significant =uantities of oil and gas resources right ne t door to countries "ith fast?gro"ing energy needs# And you can see "hy at times the situation is 4ecoming =uite tense# !e are su&&orting efforts 4y the &arties themselves to ado&t a clear code of conduct to manage those &otential resources "ithout conflict# (out$ +$ina (ea conflict also goes nuclear

Wesley 61) PMichael !esley, Non?)esident Senior Cello" at the ;roo%ings Institution and an AdAunct Professor at Friffith
University and *he University of Sydney, former E ecutive Director of the Bo"y Institute for International Policy, former Professor of International )elations and Director of the Friffith Asia Institute at Friffith University, and Senior Becturer in International )elations at the University of Ne" South !ales, .uly 7D'7, 2!hat>s at sta%e in the South China SeaU5 htt&600lo"yinstitute#cachefly#net0files0"esleyT"hatsTatTsta%eTsna&shot''#&dfQ *he South China Sea is enclosed 4y the "est coast of mainland Southeast Asia, ;orneo and the Phili&&ine archi&elago# )ich

in hydrocar4ons and fish stoc%s, it is traversed 4y over one?third of glo4al shi&&ing# Its "aters and sea4ed are su4Aect to si o&&osing territorial claims O 4y China, *ai"an, Xietnam, Malaysia, ;runei and the Phili&&ines O 4ut these confrontations are generally not regarded as seriously as the *ai"an Straits and the Korean &eninsula standoffs# ;ut the South China Sea is more un&redicta4le , and certainly "arrants much closer and more sustained attention 4y strategists and &olicy?ma%ers# It is in the South China Sea that the com&onents of Asia>s changing &o"er dynamics are most concentrated and on dis&lay6 China>s gro"ing strategic heft and &aranoid sense of entitlementG its Southeast Asian neigh4ours> ho&es and misgivings a4out China>s regional dominanceG and the United States> com&ulsion to meet China>s strategic challenge# *he South China Sea is a tangle of com&eting and mutually com&licating claims over territory, resources and navigation rights# Feo&olitically, it is li%e the ;ermuda triangle, reversing e &ected
alignments and sus&ending normal rules of the game# It &its Asia>s t"o most significant Communist countries, China and Xietnam, against each other, unites usually 4itter enemies China and *ai"an, and is dra"ing the United States 4ac% to a &artnershi& "ith Xietnam a generation after the fall of Saigon# *he South China Sea is the flash&oint in the Pacific "here

conflict is most li%ely to 4rea% out through miscalculation # It is a cro"ded maritime environment contested 4y some ine &erienced maritime forces "ith underdevelo&ed naval doctrine, among "hom there are no esta4lished and acce&ted rules for managing maritime incidents# And the com4ination of the claimant states> &o"er asymmetries, overla&&ing &rerogatives, and gro"ing nationalism mean that incidents, once they occur, are li%ely to escalate# *here are four reasons
"hy finding solutions to the South China Sea dis&utes should 4e given the highest &riority 4y strategic &olicy?ma%ers# '# Cor China it>s a4out security O and res&ect *he South China Sea sym4olises ;eiAing>s larger maritime dilemma# *he country>s maAor &o&ulation and &roductive centres cluster along China>s coastline, and are therefore vulnera4le to maAor attac% from the sea# Naval strategists see China as hemmed in along its sea coast 4y a chain of states or territories hostile to ;eiAing6 .a&an, Korea, the )yu%u Islands, *ai"an, and the Phili&&ines# *he overriding goal of Chinese naval strategy is to

esta4lish dominance over the "aters "ithin this Nfirst island chain ># At the southern end of the first island chain, the South China Sea is crucial to China>s commercial shi&&ing , energy flo"s, and the access of its $ainan island?4ased su4marines to the Pacific# ;ut the South China Sea>s southern and "estern access &oints O the Sunda, Bom4o%, Bu@on and Malacca Straits O are controlled 4y allies or &artners of the United States# *he 4est "ay to offset this vulnera4ility is to control the South China Sea itself O and there4y loosen the American &osition in Southeast Asia# Influential elites in China vie" the South China Sea as N4lue
territory> O that is, as much a &art of China>s sovereign territory as *i4et, LinAiang or *ai"an# *o this line of thin%ing, any surrender of its claims in the South China Sea "ould signal a "ea%ening of its rights to *i4et, LinAiang or *ai"an O and is therefore unthin%a4le# China>s '887 *erritorial Ba" classified the South China Sea as China>s internal "aters, meaning foreign naval vessels

and aircraft must first gain ;eiAing>s &ermission 4efore transiting, su4marines must surface, and that China retains the right to evict other countries> shi&&ing at any time# ;eiAing>s "illingness to enforce this la" has 4een gro"ing a&ace "ith its naval &o"er in the "estern Pacific# In recent "ee%s, ;eiAing has &laced the S&ratly and Paracel Islands and the Macclesfield ;an% under &refectural? level administration, esta4lished a J/?mem4er legislature to administer the ''DD &eo&le "ho live on the islands, and a&&roved the de&loyment of a Peo&le>s Bi4eration Army garrison to the islands# 7# Southeast Asia O avoiding the 4ad old days If

unaddressed, the dynamics in the South China Sea could return Southeast Asia to the 4ad old days of inter?state divisions, domestic insta4ility and com&etitive great?&o"er interventions# <n no other issue have the disagreements and rivalries 4et"een ASEAN mem4er states 4een so sustained and o4vious# *he Phili&&ines and Xietnam demand that the organisation su&&orts them in standing u& to ;eiAing# <n
the other side are Cam4odia, Baos and Myanmar, "ith no direct sta%e in the conflict and "hich refuse to endorse the Phili&&ines> and Xietnam>s confrontational stance# Indonesia, Malaysia and Singa&ore are concerned a4out the dis&ute, 4ut 4elieve that avoiding confrontation "ith China "ill im&rove the &ros&ects for &roductive negotiations# *he stand?off over the South China

Sea e &oses the hollo"ness of Asian institutions> reliance on the &rinci&le of unanimity O "hich means
that any mem4er>s o4Aection can %ee& an issue, no matter ho" &ressing, off the agenda# ;eiAing>s refusal to discuss the South China Sea in any regional meeting, and its im&licit threat to "ithdra" from any organisation that doesn>t res&ect this "ish, sho"s Southeast Asia>s confidence that it could Nsocialise> China 4y "elcoming it into regional institutions "as mis&laced# Asian institutions allo" ;eiAing to ma%e a&&arent concessions, such as its 7DD7 agreement "ith ASEAN to a Declaration of Conduct on the South China Sea, "ithout actually surrendering any &art of its &osition# As China and the United States increase the sta%es in the South China Sea, ASEAN>s cardinal &rinci&le of neutrality is threatened # *he Phili&&ines, Xietnam, Malaysia, Singa&ore and Indonesia are tightening their strategic relationshi&s "ith the United States, Aust as Cam4odia, Baos and *hailand dee&en their lin%s to China# And there are signs that the dis&utes have 4ecome entangled in domestic &olitics in the Phili&&ines and Xietnam, ma%ing their stances even more uncom&romising# In Manila, follo"ing allegations that ;eiAing used corru&t &ayments to soften the former Arroyo administration>s stance on the South China Sea, the current A=uino administration and its Parliamentary o&&osition are vying for the most uncom&romising &olicies on the issue# *o counter rumours circulating around $anoi that ;eiAing has N4ought> the Xietnam>s senior leadershi&, the Xietnamese government has &assed a la" claiming sovereignty over the S&ratly and Paracel Islands# 1# Cor the United States it>s a4out Credi4ility O "ithin limits It is in the South China Sea that Southeast Asia>s an ieties a4out China overla& "ith American an ieties a4out ;eiAing>s naval 4uildu&# <ver the &ast t"o years, the United States has ta%en an active interest and &osition in "hat had formerly 4een a dis&ute 4et"een China and the other claimants# *his means there are no" in effect t"o layers to this dis&ute6 a 4asic stand?off 4et"een the territorial claimantsG and an overarching strategic contest 4et"een ;eiAing and !ashington# Cor the United States, "hat>s at sta%e in the South China Sea is the

via4ility of its entire &resence in the "estern Pacific# *he US Navy>s access to the South China Sea is contested 4y ;eiAing# China claims it "ill res&ect the freedom of &assage of shi&s and aircraft through the area, on
the condition that they are en route to another destination, and do not conduct military e ercises or collect intelligence or militarily useful data# !ashington is adamant that the South China Sea>s sea lanes are international "aters, and

are therefore su4Aect to freedom of navigation, "hich in international la" allo"s the conduct of military e ercises and the collection of intelligence and militarily useful data# If !ashington surrenders its a4ility to navigate the South China Sea on its o"n terms, it "ill lose a maAor foothold in the "estern Pacific # *he South
China Sea in effect &its a Chinese e &ansive claim -sovereignty 4ased on historical usage9 against an American e &ansive claim, that freedom of navigation allo"s the collection of intelligence and military data# *he American claim is contested in other "aters 4y Malaysia, Indonesia and India, though su&&orted 4y other regional countries# China accuses the US of Nhy&ing> the freedom of navigation =uestion, arguing that it hides an intention to use the issue to 4uild a coalition against China# Cor the Southeast Asian states contesting China>s South China Sea claims, the United States> &resence and interest in the issue is a &rere=uisite for their &osition# !ashington is acutely a"are that it needs to 4e seen as a relia4le ally and &artner in the Pacific # It realises that its arms?length res&onse to the Asian Cinancial Crisis eroded its &osition in Asia and set China on its &ath to"ards 4uilding soft &o"er in the region# Cor Southeast Asians "orried that !ashington>s attention or "ill to stay in the region may erode, there is virtue in %ee&ing the South China Sea on the agenda# ;ut !ashington can>t give its allies and &artners a

4lan% che=ue "hich allo"s them to confront, and even &rovo%e, China from the comfort of the assum&tion that the United States "ill 4ac% them u&# And some in Southeast Asia are "atching !ashington>s moves very closely, sensitive that any concession could signal its acce&tance of China>s claims in the South China Sea# J# Solutions are Part of the Pro4lem Either multilateral mediation or international la" is most often used to resolve dis&utes of this sort O 4ut in the South China Sea they act to e acer4ate the situation# ;eiAing refuses to discuss the dis&ute in any multilateral conte t , fearing that it "ill facilitate the formation of a front against China# *he Southeast Asian claimants , ho"ever, are adamant that they must deal "ith China as a coalition, "ith Manila &articularly insistent that ASEAN must negotiate a common &osition 4efore negotiating "ith China# *he result is a stand?off6 the Phili&&ines insists that ASEAN must find a common &osition 4efore negotiating "ith China, "hile China "ill only negotiate if ASEAN a4andons the search for a common &osition# International la" also intensifies the dis&ute# *he United Nations Convention on the Ba" of the Sea does not recognise China>s historical claims, and therefore cannot serve as the 4asis for an adAudication of the dis&ute# !orse, 4ecause international la" relies on un4ro%en longevity of claims as the 4asis for adAudication, none of

the &arties to the South China Sea dis&ute can allo" others> claims to &ass uncontested, in case this is ta%en as evidence of its relin=uishing of its claim# *he result is a steady drum 4eat of hydrocar4on &ros&ecting, fishing, the occu&ation of islets, and maritime clashes# Policy Im&lications *here is a great deal at sta%e in the South China Sea# *he dynamics of this issue "ill im&act on China>s evolving international
&ersonality, the res&onse of its neigh4ours to its rising &o"er, and the longevity of the United States> &osition in the "estern Pacific# !ith the gro"th of trade and investment around Asia>s IndoPacific coast, the South China Sea "ill 4ecome ever more cro"ded "ith shi&&ing and commerce#

)ac arctic
Arctic conflict is coming now and goes nuclear (taples, E
PSteven, )ideau Institute Danish Institute for International Studies, Co&enhagen , 2P)ESEN*A*I<N N<*ES S*EPS *<!A)D AN A)C*IC NUCBEA) !EAP<N C)EE ^<NE5, Dans% Institut for Internationale Studier, H0'D, htt&600"""#diis#d%0gra&hics0Events07DD80Presentation[7DSta&les#&dfQ

*he fact is, the Arctic is 4ecoming an @one of increased military com&etition# )ussian President Medvedev has announced the creation of a s&ecial military force to defend Arctic claims# )ussian Feneral Xladimir Shamanov declared that )ussian troo&s "ould ste& u& training for Arctic com4at, and that )ussia>s su4marine fleet "ould increase its 2o&erational radius#5 *his "ee%, t"o )ussian attac% su4marines "ere s&otted off the U#S# east coast for the first time in '/ years# R In .anuary, on the eve of <4ama>s inauguration, President ;ush issued a National Security Presidential Directive on Arctic )egional Policy# As Michael $amel?Freene has &ointed out, it affirmed as a &riority to &reserve U#S# military vessel and aircraft mo4ility
and transit throughout the Arctic, including the North"est Passage, and foresa" greater ca&a4ilities to &rotect U#S# 4orders in the Arctic# *he ;ush administration>s disastrous eight years in office, &articularly its decision to "ithdra" from the A;M treaty and de&loy missile defence interce&tors and a radar in Eastern Euro&e, has greatly contri4uted to the insta4ility "e are seeing today# *he Arctic has figured in this rene"ed interest in Cold !ar "ea&ons systems, &articularly the u&grading of the *hule ;allistic Missile Early !arning System radar for 4allistic missile defence# *he Canadian government, as "ell, has &ut for"ard

ne" military ca&a4ilities to &rotect Canadian sovereignty claims in the Arctic, including &ro&osed ice?ca&a4le shi&s, a northern military training 4ase and a dee& "ater &ort# Denmar% last "ee% released an all?&arty defence &osition &a&er that suggests the country should create a dedicated Arctic military contingent that dra"s on army, navy and air force assets "ith shi&?4ased helico&ters a4le to dro& troo&s

any"here# Danish fighter &lanes could 4e &atrolling Freenlandic airs&ace# Bast year, Nor"ay chose to 4uy JH Boc%heed C?1/ fighter Aets, &artly 4ecause of their suita4ility for Arctic &atrols# In March, that country held a maAor Arctic military &ractice involving (,DDD soldiers from '1 countries in "hich a fictional country called Northland sei@ed offshore oil rigs# *he manoeuvres &rom&ted a &rotest from )ussia O "hich o4Aected again in .une after S"eden held its largest northern military e ercise since the end of the Second !orld !ar# A4out '7,DDD troo&s, /D aircraft and several "arshi&s "ere involved# .ayantha Dhana&ala, President of Pug"ash and former UN Under?Secretary for Disarmament Affairs, summari@es the situation 4luntly# $e "arns us that 2Crom those in the international &eace and security sector, dee& concerns are 4eing e &ressed over the fact that t"o nuclear

"ea&on states O the United States and the )ussian Cederation, "hich together o"n 8/ &er cent of the nuclear "ea&ons in the "orld O converge on the Arctic and have com&eting claims# *hese claims, together "ith those of other allied NA*< countries O Canada, Denmar%, Iceland, and Nor"ay O could, if unresolved, lead to conflict escalating into the threat or use of nuclear "ea&ons#5

nergy diplomacy resolves Arctic conflicts +linton 1) former Secretary of State -$illary )odham Clinton, 2 Energy Di&lomacy in the 7'st Century5 <cto4er 'H, 7D'7,
htt&600"""#state#gov0secretary0rm07D'70'D0'8811D#htm9 00K: No" some of our energy di&lomacy is focused on remote areas

li%e the Arctic, a frontier of une &lored oil and gas de&osits, and a &otential environmental catastro&he# *he melting iceca&s are o&ening ne" drilling o&&ortunities as "ell as ne" maritime routes , so it>s critical that "e no" act to set rules of the road to avoid conflict over those resources, and &rotect the Arctic>s fragile ecosystem# !e>re "or%ing to strengthen the Arctic Council, "hich includes all eight Arctic nations, including the United
States, so it can &romote effective coo&eration# Bast summer I "ent u& to *romso, a4ove the Arctic Circle, in Nor"ay, to "here the ne" Secretariat of the Arctic Council "ill 4e 4ased, in order to discuss these issues, "hich four years ago didn>t have much currency, 4ut today are

4eing seen as increasingly im&ortant#

)ac russian monopoli:ation


nergy diplomacy solves Russian monopoli:ationGt$at t$reatens urasian security +linton 1) former Secretary of State -$illary )odham Clinton, 2 Energy Di&lomacy in the 7'st Century5 <cto4er 'H, 7D'7,
htt&600"""#state#gov0secretary0rm07D'70'D0'8811D#htm9 00K: Another focus of our energy di&lomacy is hel&ing to &romote

com&etition and &revent mono&olies# Consider "hat>s 4een ha&&ening in Euro&e# Cor decades, many Euro&ean nations received much of their natural gas via &i&eline from one country6 )ussia# Ce" other sources "ere availa4le# ;ut that has no"

changed in &art 4ecause of the increased &roduction here in the United States, there>s a lot more natural gas in the glo4al mar%et loo%ing for a home# Plus, there>s natural gas in the Cas&ian and in Central Asia# *hey>d li%e to sell it,

and Euro&e "ould li%e to 4uy it# ;ut first, they need to 4uild &i&elines # And that>s the goal of a &roAect called the Southern Corridor, "hich "ould stretch across the Euro&ean continent# *he United States has 4een an active &artner to all those &artici&ants to hel& move this &roAect to fruition# No" "hy have "e done thisU !ell, "e "ant to see countries gro" and have stronger economies, 4ut also 4ecause energy mono&olies create ris%s# Any"here in the "orld, "hen one nation is overly de&endent on another for its energy, that can Aeo&ardi@e its &olitical and economic inde&endence# It can ma%e a

country vulnera4le to threats and coercion# And that>s "hy NA*< has identified energy security as a %ey security issue of our time# It>s also "hy "e created the U#S#?Euro&ean Union Energy Council to dee&en our coo&eration on strategic energy issues# It>s not Aust a matter of economic com&etition, as im&ortant as that is# It>s also a matter of national and international security#

T$at +auses urasian instability Asmus, 1 ? E ecutive Director of the *ransatlantic Center at the Ferman Marshall Cund of the United States, in ;russels, Crom
'88( to 7DDD, he served as U#S# De&uty Assistant Secretary of State for Euro&ean Affairs -)onald, 2 Euro&eIs Eastern PromiseG )ethin%ing NA*< and EU Enlargement,5 Coreign Affairs# Ne" :or%6 .an0Ce4 7DDH# htt&600"""#Astor#org#&ro y#li4#umich#edu0sta4le0&df&lus07DD7D7(D#&dfUacce&t*CZtrue9 IN *$E early '88DS, after the Iron Curtain lifted, !estern leaders sei@ed a historic o&&ortunity to o&en the doors of NA*< and the Euro&eanUnion -EU9to &ost communist central and eastern Euro&e# ;y consolidating democracy and ensuring

sta4ility from the ;altics to the ;lac% Sea, they redre" the ma& of Euro&e # As a result, the continent today is more &eaceful, democratic, and free# *his accom&lishment "as the result of a common U#S#?Euro&ean grand strategy that "as controversial and fiercely de4ated at the time# *he goal "as
to 4uild a &ost?Cold !ar Euro&e W"hole, free, and at &eaceWG to rene" the transatlantic allianceG and to re&osition the United States and Euro&e to address ne" glo4al challenges# ;ut as successful as the strategy of enlargement has 4een, the

"orld has changed dramatically since it "as forged# *he United States and Euro&e face ne" ris%s and o&&ortunities on Euro&eIs &eri&hery and need to recast their strategic thin%ing accordingly for a ne" era# Current &olicy to"ard Euro&eIs &eri&hery is increasingly out of date, for three reasons# Cirst, the !est has
changed# *he 80'' attac%s &ulled U#S# attention and resources a"ay from Euro&e and to"ard the Middle East# *he reservoir of transatlantic good"ill and &olitical ca&ital accumulated during the '88DS has eva&orated in the sands of )<NABD D# As MU s is E ecutive Director of the *ransatlantic Center at the Ferman Marshall Cund of the United States, in ;russels# Crom '88( to 7DDD, he served as U#S# De&uty Assistant Secretary of State for Euro&ean Affairs# P8/Q )onald D# Asmus Ira=# In Euro&e, enlargement fatigue has set in than%s to stum4ling institutional

reforms and the mounting e &ense of integrating ne" EU mem4ers # It "as "idely assumed that the

"estern ;al%an states -Al4ania and the former :ugoslav re&u4lics9 "ould all eventuallyA oin the EU and NA*<, 4ut even that can no longer 4e ta%en for granted# *ur%eyIs chances of gaining EU mem4ershi& are fading# Indeed, t$e window of

opportunity to expand t$e democratic world t$at opened wit$ t$e end of t$e +old War is now at ris" of closing' Second, the East has changed# *he challenge of the '88DS "as to consolidate democracy in central and eastern Euro&e along a north south a is from the ;altics to the ;lac% Sea# *odayIs even more difficult challenge is to sta4ili@e the countries of Eurasia, the region "here Euro&e and Asia meet, along a ne" a is e tending east"ard from the ;al%ans across the ;lac% Sea region# *he !ests &olicy to the southern Caucasus and including *ur%ey, to"ard Euro&e, U%raine, Feorgia, Armenia, and A@er4aiAan to"ard Euro&eIs Sand"iched

4et"een an unsta4le Middle &eri&hery cannot East to the south and a hostile )ussia to the north, these countries are the ne" flan% of remain on cruise the Euro?Atlantic community# <ld may still "or% in the ;al%ans, 4ut countries have changed such as Feorgia and U%raine?let alone Moldova and ;elarus, if and "hen the latter o&ens u& to the outside "orld?are "ea%er, &oorer, and more &olitically &ro4lematic than the central and eastern Euro&ean countries NA*< and the EU sought to integrate earlier # *heir claim to
4e &art of Euro&e is more tenuous, and the &erceived !estern im&erative to hel& is less o4vious# *he &olicy tools develo&ed for central and eastern Euro&e a decade ago are, accordingly, no longer as effective# Cinally, )ussia has changed# In the '88DS, it

nationalist, and less democratic Russia is c$allenging t$e West # Mosco" sees itself as an inde&endent Eurasian &o"er, offering its o"n authoritarian ca&italist model of develo&ment as an alternative to democratic li4eralism# It &ractices a form of mercantilist geo &olitical hard4all that many in Euro&e thought "as gone for
"as a "ea%, =uasi democratic state that "anted to 4ecome &art of the !est# No", a more &o"erful, good# No"here is this more clear than in its &olicies to"ard Euro&eIs P8RQ Euro&es Eastern Promise &eri&hery, "here it is see%ing to halt or roll 4ac% democratic 4rea%throughs in &laces such as Feorgia and U%raine# Mosco"Is "illingness to use its energy resources as a &olitical "ea&on has made

Euro&ean countries reluctant to confront )ussia over its antidemocratic 4ehavior# Until the EU can li4erali@e its energy mar%ets and diversify its su&&lies, Mosco" "ill have the u&&er hand# In this ne" strategic environment , !estern &olicy to"ard the nations on Euro&eIs &eri&hery cannot remain on cruise control as if nothing has changed# NA*< and the EU need to articulate a ne" strategic rationale for e &anding the democratic !est and devise a ne" a&&roach to dealing "ith )ussia# *here is another o&&ortunity today to advance !estern values and security and redra" the ma& of Euro&e and Eurasia once more# ;ut ne" ideas "ill 4e necessary to sei@e it?and to reinvent the transatlantic alliance in
the &rocess# <U* !I*$ *$E <BD *$E F)AND strategy of democratic enlargement that lay 4ehind the o&ening u& of NA*< and the EU early in the '88DS gre" out of the t"in im&eratives of reuniting Euro&e follo"ing communismIs colla&se and reinventing the transatlantic alliance for the &ost?Cold !ar era# T$e goal was to consolidate democracy across t$e

eastern $alf of t$e continent by anc$oring central and eastern uropean countries to t$e West' It reflected the vision of a &eaceful Euro&e e &anding its foreign &olicy hori@ons and sharing glo4al leadershi& and res&onsi4ility "ith the United States # At the time, !ashington concluded that the EU alone "as too "ea% to lead the enlargement &rocess# *hus NA*< too% the lead in
4ringing central and eastern Euro&e into the fold# NA*<IS mem4ershi& could more easily 4e e &anded, and e tending NA*<IS security um4rella to countries in those regions "as critical to the consolidation of democracy# NA*< also contri4uted to reform 4y raising its re=uirements for ne" mem4ers, a Wtough loveW &olicy designed to reinforce &ositive transformation# As NA*< &layed a %ey role in ta%ing the security issue off the ta4le and o&ening its doors to the East, the EU assumed most of the 4urden of transforming &ost?communist societies into li4eral democratic ones# E#U# enlargement &olicy "as an asymmetric negotiation# Candidate countries sim&ly had to accede to the EUIS e isting acquiscommunautaire the full range of its la"s, regulations, and institutions# *he ne"comers had little say in anything 4ut the timeline under "hich the EUIS

re=uirements "ould 4e im&lemented# Nevertheless, it "as this transformation that fundamentally tied these countries to the !est and thus created enduring security on the continent # Freat care "as
ta%en to ensure that countries not included in the initial round of enlargement "ould not 4e desta4ili@ed# *he !est did not "ant to re&eat the mista%e that U#S# Secretary of State DeaSn Acheson made in '8/D, "hen he a&&eared E &anding the reach to s%etch a ne" !estern security &erimeter and there4y invited the conclusion that of NA*< and the EU countries on the other side of the line "ere once again does not of no interest to the !est# *herefore, NA*< and EU Policy sought to 4lur the lines 4et"een mean starting a ne" mem4ers, &otential future mem4ers, and Cold !ar &artners# In &ractice, this meant finding ne" "ays to em4race and dee&en coo&eration "ith countries that did not see% mem4ershi& or "ere not yet realistic candidates for it# NA*< e &licitly left o&en the &ossi4ility of further e &ansion do"n the road# *he EU "as more circums&ect, 4ut it, too, e &anded its outreach to countries on Euro&eIs &eri&hery "hose future sta4ility and orientation it "anted to sha&e# *he !estIs desire to mitigate any negative fallout "as &erha&s most visi4le in its handling of )ussia# In different yet reinforcing "ays, the Americans and the Euro&eans signaled their strategic desire to &ull )ussia to"ard the !est in the ho&e that Mosco" "ould eventually evolve into a &artner and &erha&s even a de facto ally# NA*< and EU enlargement "ere accom&anied 4y an un&aralleled effort to engage Mosco" and "or% for )ussiaIs o"n democratic trans formation, "hile still ta%ing "hat "ere seen as its legitimate interests into account# *his strategy "as not a ne" effort to contain )ussia 4ut an attem&t to integrate it?al4eit in a looser form and on a different timeline than that of its smaller "estern neigh4ors# And it "as not merely rhetoric# NA*< rethought its military strategy and force &osture in order to underscore that it had no offensive intentions# Moreover, it offered to e &and &olitical and military coo&eration and

&lan for future Aoint military o&erations "ith )ussia# *he EU set out its o"n far?reaching &lans to dee&en coo&eration# *he !est too% such ste&s des&ite uncertainty over "here )ussia "as headed and des&ite the fear
that Mosco" "ould ta%e advantage of these o&enings to &araly@e !estern institutions rather than coo&erate "ith them# Boo%ing 4ac%, !estern &olicy achieved t"o of its goals?anchoring much of central and eastern Euro&e and &reventing insta4ility in those countries remaining outside NA*< and the E u?and "as &artially successful in dealing "ith )ussia# *hese successes "ere

not inevita4le, and their im&ortance should not 4e underestimated# $ad NA*< and the EU not acted, Euro&e today "ould 4e a messier, less sta4le, and more in"ard?loo%ing &lace# And

!ashington "ould have even fe"er allies in dealing "ith crises 4eyond Euro&e, such as Afghanistan and Ira=# *oday, it is only too easy to forget that a decade ago there "ere concerns that enlargement "ould create ne" and shar&er divisions 4et"een those countries Aoining NA*< and the EU and those remaining on the outside# It has done the o&&osite# *he success of NA*< and EU enlargement, and the inclusion of countries such as the ;altic states, set a &ositive &recedent for the former Soviet re&u4lics# Collo"ing the )ose and <range )evolutions, democratic leaders in Feorgia and U%raine 4ecame more serious a4out see%ing to tie their countries to the !est# After all, if the ;altic
states could do it, "hy should they not dare to do the sameU *he results in )ussia "ere mi ed, ho"ever# <n the one hand, the train "rec% that "as so fre=uently &redicted 4y enlargement critics never ha&&ened# Ne" arrangements for coo&eration

"ith NA*< and the EU "ere set u&, and a 4rea%do"n of relations "ith Mosco" "as avoided # ;ut the !estIs 4roader ho&es of esta4lishing dee&er relations "ith a more democratic )ussia never materiali@ed# Instead of 4ecoming more democratic and coo&erative, Moscow $as become more aut$oritarian and adversarial# $o&es that the !est and )ussia could find common strategic ground after 80'' have largely gone unfulfilled, and the t"o are even further a&art no" on issues such as Afghanistan, Iran, and Kosovo# *he <range and )ose )evolutions "ere inter&reted in Mosco" not as democratic 4rea%throughs 4ut as
threatening develo&ments that needed to 4e challenged and reversed# !ho or "hat is res&onsi4le for these trends is, of course, an issue of considera4le dis&ute# !as it a lac% of U#S# and Euro&ean imagination and "ill that allo"ed

)ussia to drift in this anti?!estern directionU <r "as it the result of internal )ussian dynamics over "hich the !est
had little, if any, influenceU Did NA*< and EU enlargement &ush )ussia in the "rong direction, or "as the !est fortunate to act "hen it did given "hat has follo"edU Enlargement has created more democratic sta4ility on )ussiaIs "estern 4order than at any time since Na&oleon# :et today, the KremlinIs s&in doctors are creating a ne" sta4?in?the?4ac% legend of ho" the !est 4etrayed Mosco" during the '88Ds# *he ga& in historical narratives mirrors the increasingly tense relationshi& 4et"een the !est and )ussia# ABB 3UIE* <N *$E EAS*E)N C)<N*U IN BIF$* of these ne" circumstances in )ussia, enlargement needs to 4e rethought from the ground u&, starting "ith its strategic rationale# P'ooQ C<)EIFN ACCAI)S XolumeH(No#i Euro&e>s Eastern Promise After the accession of a 4and of countries from the ;altic states in the north to ;ulgaria and )omania in the south, many in the !est assumed that the enlargement &roAect "as almost com&lete, "ith the "estern ;al%ans constituting the last &iece of unfinished 4usiness# *hey "ere sur&rised to suddenly find ne" countries from Eurasia, and

s&ecifically the "ider ;lac% Sea region, starting to %noc% on the doors of NA*< and the EU?and unsure ho" to res&ond# In dealing "ith these ne" candidate countries, the !est must stic% to the values and di&lomatic &rinci&les it laid do"n in the l88Ds, including the notion that countries are free to choose their alliances# ;ut that alone is unli%ely to 4e enough, 4ecause although these countries clearly consider themselves
Euro&ean, many Euro&eans do not feel the same historical or moral commitment to them or see a com&elling strategic need to integrate them# *hus, in addition to moral and &olitical arguments, the United States and Euro&e need to

articulate a strong strategic rationale for anchoring them to the !est# *hat argument is straight for"ard# T$e c$allenge of securing uropeIs eastern border from t$e -altics to t$e -lac" (ea $as been replaced by t$e need to extend peace and stability along t$e sout$ern rim of t$e uro Atlantic community#from t$e -al"ans across t$e -lac" (ea and furt$er into urasia, )ussia needs friends region that connects Euro&e, )ussia, and the Middle East and involves core security and allies and the interests, including a critical energy corridor# United States and !or%ing to consolidate democratic change and 4uild sta4ility in this area is as im&ortant Euro&e can
and for !estern security today as consolidating should 4e among them# Democracy in central and eastern Euro&e "as in the '88Ds# %t is not

only critical to expanding t$e democratic peace in urope but also vital to repositioning t$e West vis#a#vis bot$ +entral Asia and t$e Middle ast# *his strategy &resents an o&&ortunity to redra" the strategic ma& of Euro&e
and Eurasia in a "ay that enhances the security of countries on Euro&eIs &eri&hery as "ell as that of the United States and Euro&e# *he United States and Euro&e also need to rethin% "hat anchoring means in &ractice# In the '88Ds, it meant &ursuing mem4ershi& in NA*< and the EU roughly in &arallel# No" the !est needs to 4e more fle i4le and ta%e a long?term vie"# *he goal is to tie these countries as closely to the !est as &olitics and interests on 4oth sides allo"# Cor some countries, this may mean eventual mem4ershi& in 4oth NA*< and the EUG for others, it may mean mem4ershi& only in NA*<G and for the rest, it may mean mem4ershi& in neither 4ut sim&ly much closer relations# Policy "ill have to 4e much more Wala carte than &ri fi e# *he lin% 4et"een NA*< mem4ershi& and EU mem4ershi& should 4e rela ed, if not dro&&ed# *he EU has enough on its &late sustaining its commitments to the "estern ;al%ans and *ur%eyG anything 4eyond that is &ro4a4ly a nonstarter for the time 4eing# NA*< "ill once again have to ta%e the lead in anchoring countries such as Feorgia and others in the "ider ;lac% Sea region# *he !est must also rethin% ho" it should engage and reach out to these countries# If mem4ershi& is less &lausi4le as a short?term o&tion, then the =uality of ties short of mem4ershi& must 4e im&roved to com&ensate# <utreach must gro" in im&ortance and may increasingly 4ecome the center&iece of U#S# and Euro&ean strategy# At the moment, the fear of future enlargement is one factor actually holding allies 4ac%, "ith institutions afraid of ta%ing even small ste&s do"n "hat some fear could 4e a sli&&ery slo&e# :et &recisely 4ecause the countries in =uestion are "ea%er and more endangered, NA*< and the EU should actually 4e reaching out and engaging them earlier# *hey need the security um4rella and engagement of the !est as much, if not more, than the countries of central and eastern

Euro&e did# *he "ay out of this dilemma is to consider mem4ershi& a long?term goal and focus in the meantime on strengthening !estern outreach and engagement# *his means recasting &olicy tools to address the different needs of the countries that are less develo&ed &olitically and economically# *ools such as NA*<IsW mem4ershi& action &lanW should 4e e tended earlier and tied less closely to actual mem4ershi& commitments, thus allo"ing these countries to 4enefit from guidance and engagement "hile do"n&laying the =uestion of the end goal# At the same time, the EU needs to enhance its o"n tools, such as the Common Coreign and Security Policy and the Euro&ean Neigh4orhood Policy, as "ell as reach out to these countries more directly 4y offering them &olitical and economic su&&ort# !hen communism colla&sed, NA*< and the EU had little idea ho" to reach out to &ost?communist countries P'D7Q Euro&e>s Eastern Promise and anchor them to the !est# ;ureaucrats in 4oth institutions said it could not 4e done# ;ut &olitical "ill and strategic imagination &revailed, and fresh a&&roaches "ere develo&ed# Political "ill can do the same today# As for )ussia, neither !ashington nor ;russels "ants a confrontation "ith Mosco" at a time "hen they face daunting challenges 4eyond Euro&e#

;ut this does not mean the !est should a4andon its 4elief that the s&read of democracy along )ussiaIs 4orders contri4utes to &eace and sta4ility Aust 4ecause the current authoritarian rulers in Mosco" disagree# Nor should the !est a4andon its &rinci&les and succum4 to the s&here?of?influence thin%ing currently emanating from Mosco"# If the United States and Euro&e still ho&e that democracy "ill eventually ta%e root in )ussia, they must recogni@e that consolidating a &ro?!estern, democratic U%raine "ould indirectly encourage democrati@ation in )ussia# <f course, antidemocratic forces in )ussia "ill o&&ose such a move# After all, Mosco" only ac=uiesced in &revious rounds of NA*< and EU enlargement 4ecause it
concluded that the United States and Euro&e "ere determined to carry them out and that its efforts to o&&ose the !est "ould 4e futile# !estern unity on issues such as the future of U%raine is therefore of the utmost im&ortance# Still, holding true to NA*<IS and the EUIS core &rinci&les and e &anding these organi@ationsI reach does not mean starting a ne" Cold !ar# *he !est and Mosco" should loo% for other areas in "hich their interests are more aligned, such as e &anding trade and investment or controlling nuclear &roliferation and 4uilding a ne" arms control regime# *he %ey =uestion is "hether )ussia??"hen faced "ith a unified !est?"ill start to loo% for common ground# As strong as )ussia may a&&ear at the moment, it remains a country "ith real long?

terms structural "ea%nesses and &ro4lems# It, too, needs friends and allies, and the United States and Euro&e should 4e among them# UNCE)*AIN CU*U)ES *$)EE XE): different scenarios for the future
of !estern &olicy to"ard Euro&eIs &eri&hery reveal Aust ho" high the sta%es are in this region# In the 4est?case scenario, the United States and Euro&e "ould regrou& under the ne t U#S# &resident and launch a ne" era of transatlantic o&eration 4y overcoming differences on Ira=, avoiding disagreements over Iran, and sta4ili@ing Afghanistan# *his renaissance "ould include a

ne" and am4itious democratic?enlargement strategy, and the results "ould 4e significant# Securing inde&endence for Kosovo "ithout turning Ser4ia against the !est "ould facilitate the successful integration of the "estern ;al%ans into NA*< and the EU # In *ur%ey, the AKP?led government
"ould continue democratic reforms, 4ringing the country closer to EU accession# Feorgia and U%raine "ould continue to move closer to the !est as "ell# *hat &ros&ect "ould hel& create &ositive &ressure for democratic change in A@er4aiAan and encourage ArmeniaIs reorientation to"ard the !est# ;y 7D'7, a reunified West would $ave begun to build an arc

of democratic stability eastward into urasia and especially t$e wider -lac" (ea region# )eali@ing that its real adversaries lie else"here, )ussia "ould eventually have no choice 4ut to reassess its &olicy and
see% a ne" ra&&rochement "ith the !est# A less o&timistic scenario is stagnation# In this case, the United States and Euro&e "ould regain some &olitical momentum after 7DDH 4ut fail to achieve any significant democratic 4rea%throughs# A ne" U#S# administration "ould manage to sta4ili@e and then e tricate itself from Ira=, 4ut transatlantic tensions over Iran and other Middle Eastern issues "ould &ersist# Kosovo "ould achieve inde&endence, 4ut in a manner that leaves Ser4ia alienated and una4le to find its "ay 4ac% onto the &ath to"ard EU accession# In the "estern ;al%ans, only Croatia "ould remain on trac% for 4oth EU and NA*< mem4ershi&# *ur%eyIs &ros&ects for Aoining the EU "ould fade, and reforms in Feorgia and U%raine "ould stall# A@er4aiAan "ould remain an autocratic &ro?!estern ally increasingly vulnera4le to gro"ing radicali@ation from "ithin# ;y 7D'7, the !est "ould

have &atched u& relations across the Atlantic 4ut "ithout 4rea%throughs in the ;al%ans or *ur%ey?let alone in U%raine or the "ider ;lac% Sea region# All of this "ould lead to a more com&etitive relationshi& "ith )ussia, resulting in stalemate and a ne" chill in relations "ith Mosco"# In the "orst?case scenario, rather than the !est consolidating ne" democratic 4rea%throughs, Russia would succeed in a strategy P'DJQ Euro&eI Eastern Promise of roll4ac%# *he United States and Euro&e "ould not achieve a meaningful ra&&rochement, and they "ould fail to consolidate democracy in the "estern ;al%ans# Kosovo "ould 4ecome inde&endent, 4ut "ithout agreement from all sides# *his "ould launch Ser4ia on a ne" nationalist traAectory, 4ringing further insta4ility to the region# U#S# failure in Ira= "ould lead to &artition, estranging *ur%ey and &rom&ting An%ara to invade northern Ira= and further loosen its ties to the !est# *his, in turn, "ould 4adly damage *ur%eyIs already strained relations "ith 4oth !ashington and ;russels# U%raine "ould drift 4ac% to autocracy, and Feorgia, the one li4eral democratic e &eriment in the ;lac% Sea region, "ould lose reform momentum and teeter to"ard failure# Bast Novem4erIs declaration of a state of emergency in *4ilisi "as a reminder of ho" fragile and vulnera4le this

e &eriment is# Using

its energy su&&lies and influence, )ussia "ould emerge as an authoritarian ca&italist alternative to the !est, attracting autocratic leaders throughout Euro&e and Eurasia #
)ather than a renaissance of the transatlantic alliance, the result "ould 4e a retreat of democracy and a further s&lintering of the democratic !est# As these scenarios ma%e clear, the "estern ;al%ans, Feorgia, U%raine, and the

"ider ;lac% Sea region are less sta4le and more at ris% today than central and eastern Euro&e "ere a decade ago# And the sta%es are high# A "orld in "hich U%raine has successfully anchored itself to the !est "ould 4e
very different from one in "hich it has failed to do so# A "orld in "hich FeorgiaIs success has s&ar%ed democratic &rogress in the region and hel&ed sta4ili@e the southern flan% of the Euro?Atlantic community "ould 4e a much safer one than a "orld in "hich Feorgia has 4ecome an authoritarian state in )ussiaIs s&here of influence# And a world in w$ic$ t$e

democratic West is ascendant would be very different from one in w$ic$ an autocratic, nationalist Russia is on t$e rise' T$at results in /uclear War Mcdermott 11 ? s&eciali@es in )ussian and Central Asian defense and security issues and is a Senior Cello" in Eurasian
Military Studies, *he .amesto"n Coundation, !ashington DC, Senior International )esearch Cello" for the Coreign Military Studies <ffice -CMS<9, Cort Beaven"orth, Kansas, and Affiliated Senior Analyst, Danish Institute for International Studies, Co&enhagen# McDermott is on the editorial 4oard of Central Asia and the Caucasus and the scientific 4oard of the .ournal of Po"er Institutions in Post?Soviet Societies# $e recently "rote *he )eform of )ussia>s Conventional Armed Corces6 Pro4lems, Challenges and Policy Im&lications -)oger, 2Feneral Ma%arov $ighlights the 2)is%5 of Nuclear Conflict5, '70R0'', *he .amesto"n Coundation, htt&600"""#Aamesto"n#org0details0Ut T4@dstaffdirectoryT&i'[/;sho"Uid[/DZ'JD_t T4@dstaffdirectoryT&i'[/;4ac%Pid [/DZRD_noTcacheZ'9 In the current election season the )ussian media has s&eculated that the Defense re&laced, &ossi4ly 4y Dmitry )ogo@in, )ussia>s

Minister Anatoliy Serdyu%ov may 4e Am4assador to NA*<, "hich mas%s dee&er an iety a4out the future direction of the Armed Corces# *he latest rumors also &artly reflect uncertainty surrounding ho" the
s"itch in the ruling tandem may reshuffle the &ac% in the various ministries, as "ell as concern a4out managing com&le &rocesses in )ussian defense &lanning# <n Novem4er '(, )ussia>s Chief of the Feneral Staff, Army?Feneral Ni%olai Ma%arov,

offered "idely re&orted comments on the &otential for nuclear conflict eru&ting close to the country>s 4orders# $is %ey o4servation "as controversial, 4ased on estimating that the &otential for armed conflict along the entire )ussian &eri&hery $ad grown dramatically over the &ast t"enty years -Profil, Decem4er 'G Mos%ovs%iy Komsomolets, Novem4er 7HG Interfa , Novem4er '(9#
During his s&eech to the Defense Ministry>s Pu4lic Council on the &rogress and challenges facing the effort to reform and moderni@e )ussia>s conventional Armed Corces, Ma%arov lin%ed the &otential for local or regional conflict to escalate

into large?scale "arfare 2&ossi4ly even "ith nuclear weapons#5 Many )ussian commentators "ere 4e"ildered 4y this seemingly 2alarmist5 &ers&ective# $o"ever, they a&&ear to have misconstrued the general>s intention, since he "as actually discussing conflict escalation -Interfa , I*A)?*ASS, Novem4er
'(G Mos%ovs%iy Komsomolets, Krasnaya ^ve@da, Novem4er 'H9# Ma%arov>s remar%s, &articularly in relation to the &ossi4le

use of nuclear "ea&ons in "ar, "ere most senior military officer addressed the issue of a &otential ris% of nuclear conflict may serve to necessitate "ider dialogue a4out the dangers of escalation # *here is little in his actual assertion a4out the role of nuclear "ea&ons in )ussian security &olicy that "ould suggest Mosco" has revised thisG in fact, Ma%arov stated that this &olicy is outlined in the 7D'D Military Doctrine, though he understanda4ly made no mention of its classified addendum on nuclear issues -Kommersant, Novem4er 'H9#
=uic%ly misinter&reted# *hree s&ecific as&ects of the conte t in "hich )ussia>s )ussian media coverage "as largely dismissive of Ma%arov>s o4servations, focusing on the idea that he may have re&resented the country as 4eing surrounded 4y enemies# According to Kommersant, claiming to have seen the materials used during his &resentation, armed

confrontation "ith the !est could occur &artly 4ased on the 2anti?)ussian &olicy5 &ursued 4y the ;altic States and Feorgia, "hich may e=ually undermine Mosco">s future relations "ith NA*<# Military conflict may erupt in +entral Asia , caused 4y insta4ility in
Afghanistan or Pa%istanG or "estern intervention against a nuclear Iran or North KoreaG energy com&etition in the Arctic or foreign ins&ired 2color revolutions5 similar to the Ara4 S&ring and the creation of a Euro&ean ;allistic Missile Defense -;MD9 system that could undermine )ussia>s strategic nuclear deterrence also featured in this assessment of the strategic environment -Kommersant, Novem4er 'H9# Since the reform of )ussia>s conventional Armed Corces 4egan in late 7DDH, Ma%arov has consistently &romoted

ado&ting net"or%?centric ca&a4ilities to facilitate the transformation of the military and develo&

modern a&&roaches to "arfare# Keen to dis&lace traditional )ussian a&&roaches to "arfare, and harness military assets in a fully integrated net"or%, Ma%arov &ossi4ly more than any senior )ussian officer a&&reciates that the means and methods of modern "arfare have changed and are continuing to change -^avtra, Novem4er 71G Interfa , Novem4er '(9#
*he contours of this evolving and un&redicta4le strategic environment, "ith the distinctions 4et"een "ar and &eace often 4lurred, interface &recisely in the general>s e &ression of concern a4out nuclear conflict6 highlighting the ris%

of escalation# $o"ever, such &otential escalation is lin%ed to the reduced time involved in other actors deciding to intervene in a
local crisis as "ell as the &resence of net"or%?centric a&&roaches among "estern militaries and 4eing develo&ed 4y China and )ussia# Crom Mosco">s &ers&ective, NA*< 2out of area o&erations5 from Kosovo to Bi4ya 4lur the traditional red lines in escalationG further com&licated if any &o"er "ishes to &ursue intervention in com&le cases such as Syria# Potential escalation

resulting from local conflict, follo"ing a series of un&redicta4le second and third order conse=uences, ma%es Ma%arov>s comments seem more understanda4le G it is not so much a &ortrayal of )ussia surrounded 4y 2enemies,5 as a recognition that, "ith "ea% conventional Armed Corces, in certain crises Moscow may $ave few options at its disposal -Interfa , Novem4er '(9# *here is also the added com&lication of a &ossi4ly messy aftermath of the US and NA*< dra"do"n from Afghanistan and signs that the )ussian Feneral Staff ta%es Central Asian security much more seriously in this regard# *he Feneral Staff cannot %no" "hether the threat environment in the region may suddenly change# Ma%arov %no"s the rather limited conventional military &o"er )ussia currently &ossesses, "hich may com&el early nuclear first use li%ely involving su4?strategic "ea&ons, in an effort to 2de?escalate5 an escalating conflict close to )ussia>s 4orders# Mosco" no longer &rimarily fears a theoretical threat of facing large armies on its "estern or eastern strategic a esG instead the information?era reality is that smaller?scale intervention in areas vital to its strategic interests may 4ring the country face?to?face "ith a net"or%?centric adversary ca&a4le of ra&idly e &loiting its conventional "ea%nesses # As )ussia &lays catch?u& in this
technological and revolutionary shift in modern "arfare ca&a4ilities, the age?old &ro4lem confronts the Feneral Staff6 the fastest to act is the victor -See EDM, Decem4er '9# Conse=uently, Ma%arov once again critici@ed the domestic defense industry for offering the military inferior =uality "ea&ons systems# :et, as s&eed and harnessing CJIS) -Command, Control, Communications, Com&uters, Intelligence, Surveillance and )econnaissance9 4ecome increasingly decisive factors in modern "arfare, the ris%s for conflict escalation demand careful attention O es&ecially "hen the dis&arate actors &ossess varied ca&a4ilities# Unli%e other nuclear &o"ers, Russia $as to consider t$e proximity of several nuclear actors

close to its borders' In the coming decade and 4eyond, Mosco" may &ursue dialogue "ith other nuclear actors on the nature of conflict escalation and de?escalation# $o"ever, "ith a multitude of varia4les at &lay ranging from ;MD, US Flo4al Stri%e ca&a4ilities, uncertainty surrounding the 2reset5 and the emergence of an e &anded nuclear clu4, and several &otential sources of insta4ility and conflict, any dialogue must consider escalation in its "idest &ossi4le conte t# Ma%arov>s message during his &resentation, as far as the nuclear issue is concerned, "as therefore a muc$ toug$er bone than the old dogs of the Cold !ar "ould "ish to c$ew on#

)ac la stab
nergy diplomacy is "ey to 4atin American regional (tability -arbieri 11 -Energy Security6 *he Di&lomacy of South Korea in Batin America )ita ;ar4ieri O &u4lished in 7D''htt&600"""#international#ucla#edu0media0files0)itaT;ar4ieriTS)F?h1? J@o#&df?;)!9 Energy di&lomacy in this study is understood as the assurance of energy sources 4y 4uilding &artnershi&s through e change &rograms, esta4lishment of research institutes, forums and di&lomatic meetings as a &rere=uisite for KoreaNs economic develo&ment# Curthermore, the idea of energy security im&lies economic gro"th, develo&ment, regional integration, national security or the use of oil "ealth to influence events in other countries , leading to increase th e energy demand that induces diversification of su&&liers across the "orld# As a result, the consum&tion of fossil fuels "ill increase and they "ill continue to &rovide the vast maAority of energy although they are distri4uted unevenly around the "orld# ;e cause of this conte t , deficit resources countries li%e Korea com&elled to set strategic and &ragmatic &olicies in order to solve its energy security concerns# *hose concerns are conditioned 4y the energy source su&&lies # *he "ay that those &olicies "ould 4e carried out "ill determine "hether the country achieves the assurance of energy sources# *he e istent a&&roaches on the energy to&ic have 4een related to develo&ment and energy security, as a source of conflict among nations, rene"a4les, climate change, and environment# Cor e am&le Klare , Kalic%y / and Fold"in and :ergin R have focus
ed on the 4usiness of oil and gas and ho" governments are struggling geo&olitically in order to assure control over resources, and this has to do "ith the gro"ing de&endence of rising &o"ers su ch as China and India # *his is directly related to the

changing geo&olitics of energy that may affect the glo4al and regional order, including relatio nshi&s among the maAor &o"ers, sho"ing that the current energy field is 4ased on a di&lomatic and securit y &ers&ective# According to :ergin, the rene"ed focus on energy security is driven in &art 4y an e ceeding tight oil mar%et and 4y high oil &rices, "h ich have do u4led over the &ast three years# I t is also fueled one another, "hether 4ilaterally or "ithin multilateral frame"or%s# ( $ence, KoreaNs energy di&lomacy in Batin America is allocated "ithin this conte t # *he Bee Myng 4a% administration has made energy security a &rimary national aim and it has also outlined ne" action &lans of energy di&lomacy# *he seriousness of this energy di&lomacy "as tested "hen the government used &olitical &ersuasion to guarantee the nuclear energy deal "ith the United Ara4 Emirates# During the tough negotiation &rocess, the Korean &resident &ersonally
su&ervised the &roAect , o4tained the di&lomatic su&&ort from the US and even travelled all the "ay to A4u Dha4i to attend the signing ceremony of the deal he later called the d heaven sent national fortune# H *his e am&le the e tent to "hich energy

4y several as&ects including geo&olitical rivalries and countries N fundamental need for energy to &o"er their economic gro"th# *he scholar also noted that energy security "ill de&end much on ho" countries manage their relations "ith

has 4ecome im&ortant to the current government , and sho"s that di&lomacy is the main tool used in order to get a successful outcome' 4atin America strategic ally needs more investments in order to accelerate t$e pace of economic moderni:ation and to raise levels of domestic productivity # Cor <viedo, this has to do "ith de &rimari@ation goals for some Batin strategies, could 4e more difficult than e

American countries, &romoting industriali@ation and adding value to their &roducts # 8 Also it has to 4e noted that dealing "ith Batin American countries, "hich some of them im&lement energy &olicies ruled 4y resource nationalism &ected# *his is a challenge that the Korean g overnment and energy com&anies have to &onder # In fact, other nations com&eting "ithin this region also confront this &ro4lem, such as China , "hich is 4uilding great &artnershi&s "ith the energy a4undan t nations of ;ra@il and Xene@uela#

4atin American wars go global Roc$in E= O Professor of Political Science

-.ames, Professor of Political Science at <%anagan University College, Discovering the Americas6 the evolution of Canadian foreign &olicy to"ards Batin America, &&# '1D?'1'900;; !hile there "ere economic motivations for Canadian &olicy in Central America, security considerations "ere &erha&s more im&ortant# Canada &ossessed an interest in &romoting sta4ility in the face of a &otential decline of U#S# hegemony in the

Americas# 5erceptions of declining &'(' influence in t$e region O "hich had some credi4ility in '8(8?'8HJ due to the "ildly ine=uita4le divisions of "ealth in some U#S# client states in Batin America, in addition to &olitical re&ression, under?develo&ment, mounting e ternal de4t, anti?American sentiment &roduced 4y decades of su4Augation to U#S# strategic and economic interests, and so on O were lin"ed to t$e prospect of explosive events

occurring in t$e $emisp$ere# $ence, the +entral American imbroglio "as vie"ed as a fuse "hich could ignite a cataclysmic process t$roug$out t$e region' Analysts at t$e time worried t$at in a worst#case scenario, instability created by a regional war, beginning in +entral America and spreading elsew$ere in 4atin America, mig$t preoccupy Was$ington to t$e extent t$at t$e &nited (tates would be unable to perform ade!uately its important $egemonic role in t$e international arena O a concern e &ressed 4y the director of research for Canada>s Standing Committee )e&ort on Central America# It "as feared t$at suc$ a predicament could generate increased global instability and per$aps even a
$egemonic war# *his is one of the motivations "hich led Canada to 4ecome involved in efforts at regional conflict
resolution, such as Contadora, as "ill 4e discussed in the ne t cha&ter#

conomy

1ac u's' economy


Advantage JJ is t$e &'(' economyG

mployment low now Appelbaum, 13 -;IN:AMIN APPEB;AUM, (0/0'1, 2Cor the Em&loyment )ate, an U&tic%5, htt&600economi #4logs#nytimes#com07D'10D(0D/0for?the?em&loyment?rate?an?u&tic%0U TrZD900EM *he share of American adults "ith Ao4s rose slightly in .une, to /H#( &ercent# *hat matches the highest level since the end of the recession in 7DD8, 4ut remains "ell 4elo" the &revailing level 4efore the recession# *he chart sho"s the long?term trend6 a shar& dro&, a &rolonged stagnation and may4e, Aust may4e, the 4eginning of a recovery# *he em&loyment rate has not moved much in recent years 4ecause Ao4 gro"th since the end of the recession has 4asically %e&t &ace "ith &o&ulation gro"th# *he more familiar unem&loyment rate has declined significantly, 4ut it counts &eo&le as unem&loyed only if they are loo%ing for "or%# It has declined 4ecause &eo&le sto&&ed loo%ing, not 4ecause they started "or%ing# *hus the im&ortance of trac%ing the em&loyment rate# recovery is incom&lete#

Economists, including Cederal )eserve officials, say they e &ect that as the economy continues to gro", and the unem&loyment rate continues to decline, discouraged "or%ers "ill start see%ing O and finding O "or% again# Until that ha&&ens, ho"ever, the

T$e plan increases access to oil and natural gasGsolves t$e &'(' economy *+/R, 13 -$ouse Committee on Natural )esources, J0'H0'1, 2;ill Introduced to A&&rove *rans4oundary $ydrocar4on Agreement "ith Me ico5, htt&600naturalresources#house#gov0ne"s0documentsingle#as& UDocumentIDZ11DD1'900EM *his 4ill "ould amend the <uter Continental Shelf Bands Act, and &rovide the legal certainty needed for greater energy e &loration and develo&ment for resources that e tend across our maritime 4order "ith Me ico# *he Agreement "as signed in 7D'7 4y then?Secretary of State $illary Clinton and Me ican Coreign Minister Castellano at the F?7D summit in Bos Ca4os# It lifts the current moratorium on drilling along a section of the 4oundary, and &rovides a frame"or% for the safe management of trans4oundary hydrocar4ons along creating American Ao4s 4y safely o&ening u& more areas in the Fulf of Me ico for e &loration and &roduction# *his is a common sense a&&roach to "or% "ith our &artners south of the 4order to ma%e 4oth countries more

the "hole maritime 4order# 2*his 4ill is another ste& to"ards em4racing an all?of?the?a4ove a&&roach to energy that safely develo&s our natural resources to hel& achieve North American energy inde&endence# *his 4ill "ill hel& lo"er energy costs "hile

energy secure, "hile &rotecting our sovereignty# !e>re choosing to act instead of allo"ing the Administration to continue dragging its feet on energy develo&ment,5 said )e&# .eff Duncan# 2Congressional a&&roval of this agreement "ill &rovide much?needed certainty to U#S# energy com&anies that are interested in leasing and develo&ing these areas 4ut u& until no" have 4een una4le# It "ill create ne" o&&ortunities for e &anded American energy &roduction and ena4le Ao4 creation and economic gro"th,5 said Natural )esources Committee Chairman Doc $astings# 2A&&roval and im&lementation of this agreement is

un=uestiona4ly in the national interests of the U#S as a ste& to"ards energy security and Ao4 creation in the United States, as "ell as much needed energy reform in Me ico, and !estern $emis&here energy inde&endence# !e can

achieve energy inde&endence and 4etter energy coo&eration "ith our neigh4or and this is an im&ortant ste& in that direction,5 said Coreign Affairs Su4committee on !estern $emis&here Chairman Matt Salmon -A^?D/9

xpanding permits for drilling in t$e 7ulf is critical to t$e sustainability of t$e &'(' economy <uest, 11 -3uest <ffshore, .une 7D'', 2United States Fulf of Me ico <il and Natural Fas Industry Economic Im&act Analysis5, htt&600"""#a&i#org0e0media0Ciles0Policy0.o4s03uestFoMEconomicAnalysis(?''? 7D''#&df900EM *he &ositive economic im&acts of the offshore oil and natural gas industry investments0s&ending in the Fulf of Me ico are not restricted to the Fulf States or limited to the oil and natural gas industry# *hey are s&read over a "ide geogra&hic area and ri&&le through many sectors of the economy, from oil and natural gas
machinery manufacturers to marine and air trans&ort services to food service &roviders servicing offshore o&erations and financial com&anies that &rovide financial services and insurance to the industry# *he offshore Fulf of Me ico oil and natural

gas industry is estimated to have s&ent VR#( 4illion in 7D'D outside the Fulf Coast states# *his accounted for 1/ &ercent of annual investment0s&ending and su&&orted R/ thousand Ao4s in the
non?Fulf of Me ico Coast States# *he 7D'D s&ending "as J &ercent lo"er than in 7DDH "ith em&loyment ( &ercent lo"er# In 7D'1, 3uest &roAects s&ending in the non?Fulf States due to the offshore Fulf of Me ico activity to increase to V'D#H 4illion as o&erators invest heavily to 4ring for"ard delayed &roAects# *his estimated 78 &ercent increase in s&ending from 7D'D is &roAected to s&ur an e &ansion of non?Fulf State em&loyment to ''D thousand, a RR &ercent increase# !hile the industry remains

committed to develo&ing the natural resources located in the Fulf of Me ico, they "ill only 4e a4le to do so according to the s&eed "ith "hich offshore drilling &ermits are granted# 3uest>s &roAections of
domestic s&ending increasing 4y (' &ercent from 7D'D?7D'1, contri4utions to FDP increasing 4y (D &ercent, and em&loyment increasing (( &ercent are all &redicated on the assum&tion of a return to historical rates of &ermitting# Fro"th of the

offshore Fulf of Me ico oil and natural gas industry "ill 4e crucial for meeting U#S# energy needs over the coming decades, and for s&urring Ao4 creation and economic gro"th# In light of the &otential of the
offshore oil and natural gas industry to create Ao4s, enhance U#S# energy security, and increase U#S# FDP, the return to normal activity in the Fulf of Me ico in a safe and environmentally res&onsi4le manner is of utmost im&ortance to the United States#

conomic collapse incentivi:es war and conflict 3 t$is inevitably goes nuclear Royal, 12, director of Coo&erative *hreat )eduction at the U#S# De&artment of Defense, 7D'D -.edediah, Economics of !ar and
Peace6 Economic, Begal, and Political Pers&ectives, &g 7'1?7'/, ?;)!9 Bess intuitive is ho" &eriods of economic decline may increase the li%elihood of e ternal conflict# Political science literature has contri4uted a moderate degree of attention to the im&act of economic decline and the security and defense 4ehavior of interde&endent states# )esearch in this vein has 4een considered at systemic, dyadic and national levels# Several nota4le contri4utions follo"# Cirst, on the systemic level, Pollins -7DDH9 advances Models%i and *hom&son>s -'88R9 "or% on leadershi& cycle theory, finding that rhythms

in the global economy are associated wit$ t$e rise and fall of a pre#eminent power and t$e often bloody transition from one pre# eminent leader to t$e next# As such, e ogenous shoc%s such as economic crises could usher in a redistri4ution of relative &o"er -see also Fil&in, '8H'9 that leads to uncertainty a4out &o"er 4alances, increasing the risk of miscalculation -Cearon '88/9# Alternatively, even a relatively certain redistri4ution of &o"er could lead to a permissive environment for conflicts as a rising power may see" to c$allenge a declining power -!erner, '8889# Se&arately, Pollins -'88R9
also sho"s that glo4al economic cycles com4ined "ith &arallel leadershi& cycles im&act the li%elihood of conflict among maAor, medium and small &o"ers, although he suggests that the causes and connections 4et"een glo4al economic conditions and security conditions remains un%no"n# Second, on a dyadic level, Co&eland>s -'88R, 7DDD9 theory of trade e &ectations suggest that 2future e &ectation of trade5 is a significant varia4le in understanding economic

conditions and security 4ehavior of states# $e argues that interde&endent states are li%ely to gain &acific 4enefits from trade so long as they have an o&timistic vie" of future trade relations# $o"ever, if the e &ectations of future trade decline, particularly for difficult to replace item suc$ as energy resources , t$e li"eli$ood for conflict increases, as states will be inclined to use force to gain access to t$ose resources' Crises could potentially be the trigger for decreased trade expectations either on its own or because it triggers protectionist moves by interdependent states. *hird, ot$ers $ave considered t$e lin" between economic decline and external armed conflict at a national level' -lomberg and *ess C)22)@ find a strong correlation between internal conflict and external conflict, &articularly during
&eriods of economic do"nturn# *hey "rite, *he lin%ages 4et"een internal and e ternal conflict and &ros&erity are strong and mutually reinforcing# Economic conflict tends to s&a"n internal conflict, "hich in turn returns the

favor# Moreover, the &resence of a recession tends to am&lify the e tent to "hich international and e ternal conflicts self?reinforce each other# -;lom4erg and $ess, 7DD7, &# H89 Economic decline has also 4een lin%ed "ith an increase in t$e li"eli$ood of terrorism C-lomberg, *ess and Weerapana, )22=@, w$ic$ $as t$e capacity to spill across borders and lead to external tensions# Curthermore, crises generally reduce the &o&ularity of a sitting government# 2Diversionary theory5 suggests that, w$en facing unpopularity arising from economic decline, sitting governments $ave increased incentives to fabricate external military conflicts to create a 8rally around t$e flagD effect# !ang -'88R9, De)ouen -'88/9 and ;lom4erg, $ess and *hac%er -7DDR9 find su&&orting
evidence sho"ing that economic decline and use of force are at least indirectly correlated# Fel&i -'88(9, Miller -'8889, and Kisangani and Pic%ering -7DD89 suggest that the tendency to"ards diversionary tactics are greater for

democratic states than autocratic states due to the fact the democratic leaders are generally more susce&ti4le to 4eing removed from office due to lac% of domestic su&&ort # De De)ouen
-7DDD9 has &rovided evidence sho"ing that &eriods of "ea% economic &erformance in the United States and thus "ea% Presidential &o&ularity are statically lin%ed to an increase in the use of force# In summary, recent economic scholarshi& &ositively correlates economic integration "ith an increase in the fre=uency of economic crises, "hereas &olitical science scholarshi& lin%s economic decline "ith e ternal conflict at systemic, dyadic and national levels# *his im&lied connection 4et"een integration, crises and armed conflict has not featured &rominently in economic?security de4ate and deserves more attention# *his o4servation is not contradictory to other &ers&ectives that lin% economic interde&endence "ith a decrease in the li%elihood of e ternal conflict, such as those mentioned in the first &aragra&h of this cha&ter# *hose studies tend to focus on dyadic interde&endence instead of glo4al interde&endence and do not s&ecifically consider the occurrence of and conditions created 4y economic crises# As such the vie" &resented here should 4e considered ancillary to those vie"s#

)ac economy iKl


%ncreasing offs$ore oil and natural gas in t$e gulf is "ey to t$e &'(' economy <uest, 11 -3uest <ffshore, .une 7D'', 2United States Fulf of Me ico <il and Natural Fas Industry Economic Im&act Analysis5, htt&600"""#a&i#org0e0media0Ciles0Policy0.o4s03uestFoMEconomicAnalysis(?''? 7D''#&df900EM *he offshore oil and natural gas industry is instrumental to the United States 4oth from an energy su&&ly &ers&ective and due to its contri4ution to U#S# FDP and Ao4 creation # In 7D'D, over 1D &ercent of the oil and '' &ercent of the natural gas &roduced in the U nited States "as &roduced in the Fulf of Me ico -FoM9# *his &roduction is crucial to U#S# energy security# In addition, ca&ital investment and &urchases of intermediate in&uts of the oil and natural gas industry stimulate its entire value chain and ri&&le through many sectors of the economy, creating Ao4s, contri4uting to FDP and generating ta revenue at all levels of government# <il and natural gas industry activity su&&orts em&loyment across a "ide s"ath of industries in manufacturing and services, including oil and natural gas machinery, air and marine
trans&ort, legal and insurance services#

Key to economy, energy security, and coo&eration (immons, 13 -Daniel Simmons, J01D0'1, 2U#S#?Me ico *rans4oundary $ydrocar4ons Agreement6 A )are Xictory for <il and Fas in the <4ama Era5, htt&600"""#masterresource#org07D'10DJ0u?s?me ico?trans4oundary?hydrocar4ons? agreement0900EM

Conclusion *he energy and economic "elfare of the United States and Me ico are intert"ined 4y our shared geogra&hy, geology, and &eo&les# *he *rans4oundary $ydrocar4on Agreement "ill hel& to tie our countries together and

gro" our economies# North America does not lac% energy resources, 4ut "hat "e do lac%, at times, is the necessary &olitical "ill that could lead to greater economic gro"th and &ros&erity# North America is an energy rich continent# P'Q <ur energy issues are not issues of a lac% of su&&ly, 4ut a lac% of access to energy resources# *he *rans4oundary $ydrocar4on Agreement is one "ay the federal government should 4e
moving for"ard to grant more access to ta &ayer?o"ned energy resources# *he agreement is a good agreement and should e &editiously move for"ard, 4ut it should not have ta%en more than a year for the Administration to su4mit *rans4oundary $ydrocar4on Agreement to Congress# Afforda4le, relia4le energy is critical for the "elfare of all Americans and Me icans# $o&efully our countries "ill "or% 4etter together in the future to enhance our energy security and our economic "elfare as "ell#

5 M ?

1ac pemex
Advantage JJ is 5 M ?G

5 M ? liberali:ation necessary -oman, 13 -Karen ;oman, /07(0'1, 2!ill *he Promise of Me ican Energy )eform ;e )eali@edU5, htt&600"""#rig@one#com0ne"s0oilTgas0a0'7RRR80!illT*heTPromiseTofTMe icanTEnergyT)e formT;eT)eali@ed0UallZ$F7900EM !ill *he Promise of Me ican Energy )eform ;e )eali@edU Me icoIs current &residential administration see%s to reform the nationIs oil and gas sector to encourage more &rivate foreign investment, 4ut Me ico li%ely faces a long road ahead in achieving meaningful energy reform# Me icoIs &revious government "as severely critici@ed

for not accom&lishing significant energy reform# *he much?antici&ated energy reform in 7DDH sought to strengthen cor&orate governance in state energy mono&oly Petroleos Me icanos -PEMEL9 and &rovide technical oversight of PEMELIs u&stream o&erations# WEnergy reform is considered the mother of all reforms, given that the sector is a huge driver for Ao4 creation and economic gro"th,W said Dr# Duncan !ood, director of the Me ico institute at the !oodro" !ilson International Center for Scholars, at the Hth Annual Mayer ;ro"n Flo4al Energy Conference in $ouston# Me ico is e &ected to again tac%le energy reform sometime in August of this year# An overhaul of Me icoIs Constitution "ill 4e re=uired to allo" greater investment 4y &rivate, foreign firms# *he additional investment and technologies "ill 4e needed to aid PEMEL in reaching its ultimate &roduction goal# PEMEL is see%ing to 4oost its &roduction to over 1 million 4arrels of oil &er day -4o&d9, u& from its current &roduction rate of 7#/ million 4o&d, through e &loration, ultra?dee&"ater and integrated &roAects, ;arclays Ca&ital analyst .ames C# !est said in a May 77 research note# Due to a lac% of investment and ne" technologies, the num4er of ne" discoveries in Me ico has declined, resulting in decreases in &roduction and reserves, said !ood# PEMEL crude &roduction declined from Aust over 1 million 4o&d in 7DD( to an estimated 7#/ million 4o&d in 7D'7# *his &roduction level is significantly lo"er than the 1#J million 4o&d that PEMEL &roduced in 7DD1?7DDJ# *he lo"er &roduction rate is 4ecoming a &ro4lem for the Me ican government as demand for social &rograms and government s&ending increases# Some fear that &roduction could decline further to 7 million 4o&d if reform is not im&lemented, !ood noted# WPEMEL is not as disastrous a com&any as &eo&le thin%,W !ood commented# W*heyIre great at hunting ele&hants, es&ecially "hen the ele&hant O Cantarell O "al%s out in front of them#W $o"ever, PEMEL and the Me ican government ignored the fact that the giant offshore oil field Cantarell, "hich "as discovered in '8(8, "ould eventually e &erience a &roduction decline, he added# Instead of investing in ne" e &loration efforts and technology, the Me ican government stri&&ed financial resources from PEMEL to fund social and government s&ending &rograms, !ood said# *he re&lacement rate for reserves only recently hit the 'DD &ercent mar% in the &ast year and a half, and some analysts have dis&uted "hether PEMEL is really fully re&lacing its reserves, !ood noted# *he declines in &roduction sho" a clear need for investment in ne" e &loration and infrastructure, 4ut the =uestion remains "hether PEMEL can tac%le these challenges alone# Des&ite having a4undant shale gas and associated

gas resources onshore and offshore, Me ico is a net im&orter of natural gas# Me

ico im&orted a&&ro imately 7#' 4illion cu4ic feet &er day in 7D'7, u& 7' &ercent from 7D'', the U#S# Energy Information Administration -EIA9 re&orted May 'R# Natural gas flo"s from U#S# &i&elines accounted for HD &ercent of Me icoIs overall gas im&orts in 7D'7# Since 7DDR, li=uefied natural gas -BNF9 has met the remainder of Me icoIs im&orted gas needs, "ith most BNF im&orts to Me ico coming from Nigeria, 3atar and Peru, EIA re&orted# Des&ite increased im&orts, Me ico has 4een e &eriencing gas shortages over the &ast '7 to 'H months# PEMEL has scaled 4ac% gas &roduction 4ecause Me icoIs gas &rice, "hich is lin%ed to the U#S# $enry $u4 &rice, has declined# *his decision comes at a time "hen Me icoIs federal electricity utility CCE and PEMEL have increased gas consum&tion for refining and electricity generation, and the &rivate sector "ants to increase its use of natural gas# *he shortage has created a tense &olitical situation in Me ico 4et"een the &rivate sector and the government as the &rivate sector lo44ies for access to more gas, !ood noted# !ith a shortage of &i&elines to im&ort needed su&&lies from the United States, Me ico is loo%ing to increase im&orts of li=uefied natural gas -BNF9 to meet domestic demand, des&ite having to &ay significantly higher costs right no"# At least one cargo delivered into Man@anillo "as &riced a4ove V7D0MM4tu# <ver the &ast year, some &rivate consumers are &aying significantly higher costs, 4et"een V'R to V'H0MM4tu for BNF, a dramatic Aum& from &rices for regular gas that &u4lic customers are &aying#

W*hereIs a clear need for investment in the shale sector, a clear need for investment in infrastructure of &i&elines,W !ood commented# *he =uestion remains "hether PEMEL can forge ahead "ith these

develo&ments alone# !hile the eastern &ortion of Me ico is "ell?served 4y oil and gas &i&elines, the "estern &ortion of the country is almost 4arren, !ood commented, meaning that customers in the region have little if no access to natural gas# *he &revious &residential government of Celi&e Calderon &ro&osed a multi?year, VH 4illion &roAect to e &and the nationIs &i&eline net"or% and add &i&eline ca&acity to 4ring more gas from the United States# !or% is under"ay on this infrastructure e &ansion, 4ut "ill ta%e time, !ood noted# Small, agile com&anies are 4est suited to tac%le shale, 4ut PEMEL is a large oil

com&any that doesnIt do gas "ell# Cor this reason, energy reform discussions have focused on o&ening u& Me

icoIs shale sector for &rivate initiative, &articularly from U#S#?4ased com&anies "ith e &erience in U#S# shale &lays, said !ood# Me ico Energy

)eform a $ot *o&ic <ver Past Decade Energy reform in Me ico has 4een a hot to&ic for the &ast decade , said Pa4lo Cerrante, a $ouston?4ased &artner "ith Mayer ;ro"nIs Cor&orate and Securities &ractices# *hat fact that the &olitical &arty Institutional )evolutionary Party -P)I9, "hich "as res&onsi4le for nationali@ing Me icoIs oil and gas industry many years ago, is finally endorsing energy reform ma%es it more li%ely that reform "ill occur#

,ailure to implement T-A causes 5 M ? liberali:ation efforts to fail +,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E *)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*? ''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM Cirst, the *;A "ill, for the first time, allo" U#S#?listed I<Cs to "or% in &artnershi& "ith PEMEL, not including service contracts# Many o4servers are o&timistic that the *;A is the meta&horical camelIs nose under the tent, &aving the "ay to 4roader reform in Me ico# *here is no guarantee of such an outcome, ho"ever, failure for t$e &'(' to approve t$e T-A may put a drag on Me ican domestic energy reform momentum# *he *;A hel&s demonstrate that Me icoIs oil &atrimony can 4e &rotected in a Aoint &roduction regime "ith U#S# com&anies# It "as suggested 4y some senior officials that &assage of the *;A
could hel& &rom&t 4roader domestic energy reform in Me ico#

Additionally, t$e plan solves 5 M ? expertise +,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E *)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*? ''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM !hy the *;A Matters *he center&iece of the *;A is the mandate to esta4lish so? called ]]uniti@ationII agreements 4y "hich com&anies licensed 4y the United States and Me icoIs state oil com&any PEMEL
"ould Aointly develo& oil and gas reservoirs that have 4een discovered to e tend across the maritime 4oundary# In effect, uniti@ation agreements "ould "or% similarly to more "ell?%no"n &roduction sharing agreements -PSAs9, "here4y com&anies involved "ill Aointly develo& a &roAect in order to s&read ris% given that dee& "ater develo&ments "ill cost 4illions of dollars each# Fiven PEMELIs lac% of e &erience in dee& "ater, the most li%ely outcome is that I<Cs licensed 4y the United States "ould o&erate the develo&ments and utili@e infrastructure 4ased on the United States side of the 4order, "hich is more e tensive than that of Me ico near to the area of o&eration# $o"ever, the United States does have an interest in PEMEL gaining e &ertise in o&eration

in dee& "ater in order to im&rove the integrity of &otential PEMEL o&erated develo&ments e clusively in Me ican territory# A %ey difference 4et"een the uniti@ation agreements envisioned under the *;A and
traditional PSAs is that &hysical 4arrels &roduced "ill 4e allocated to the legal Aurisdictions of the United States and Me ico, &resuma4ly in &ro&ortion to the amount of reserves found on their res&ective sides of the 4order# *he Me ican 4arrels, &resuma4ly, "ill 4e &ro&erty of PEMEL as a state entity and the U#S# 4arrels "ill 4e treated under standard terms of U#S# licensing in the Fulf of Me ico# It is unli%ely that, from the U#S# &ers&ective, the *;A "ill meaningfully increase U#S# domestic oil &roduction in the near term# *he maritime 4order area is dee& "ater and "ould re=uire massive investments# Such investments are &ossi4le and should 4e encouraged 4y the U#S# government, ho"ever, it "ill ta%e years to get through regulatory hurdles and normal &roAect develo&ment needs# $o"ever, the *;A "ould unloc% the maritime 4order region from moratoria, there4y offering long?term o&&ortunities to increase U#S# domestic &roduction# *he *;A should 4e seen as a net &ositive to hel&ing reduce U#S# de&endence on im&orts from trou4lesome regions and 4oosting domestic economic activity, and therefore the *;A should 4e vie"ed as a 4enefit for U#S# energy security# ;enefits of &hysical 4arrels of oil &roduced are &otentially much greater in relative im&ortance on the Me ican side of the 4order, "hich is e &eriencing decline in %ey fields, and that "ould 4e su4stantially 4eneficial to U#S# interests in Me ican economic gro"th# As discussed a4ove, Me

ico needs ne" oil &roduction# Develo&ing dee& offshore &roduction "ould hel& diversify the Me ican oil &ortfolio, &roviding economic 4enefit to the Me ican state "hether that oil is sold for e &ort mar%ets or used domestically# Moreover, having I<Cs "or%ing "ith PEMEL to 4oost domestic Me ican &roduction "ill &rovide useful commercial o&&ortunities and, im&ortantly, 4oost confidence that Me ico "ill have significant oil availa4le to e &ort to the United States# As a relia4le, &ro imate, and friendly neigh4or, Me ican oil im&orts su&&ort U#S# energy security#

5 M ? liberali:ation is "ey to /ieto6s agendaGeducation, telecommunications, local debt *ernande:, 13 -Maria .ose $ernande@, R07D0'1, 2Politics and <il6 Me icoIs )oad to )eform5, htt&600eurasia#foreign&olicy#com0&osts07D'10DR07D0&oliticsTandToilTme icosTroadTtoTrefor m900EM
Is Me ico finally on the verge of a historic reform &ushU E &ectations are on the rise, and for good reason# In office Aust over si months, President Enri=ue PeMa Nieto has ta%en ste&s that suggest he is serious a4out &ushing through

&olicy changes meant to, among other things, im&rove the =uality of an education system that &roduces students "ho score lo"er than their counter&arts in all other <ECD countries in reading, math, and science, and to o&en the countryIs lucrative telecommunications sector, "hich could lo"er &rices for millions of Me ican consumers# *he government is also &ushing for a state and local fiscal res&onsi4ility la" intended to &revent governors and local authorities from ta%ing on too much de4t# PeMa NietoIs financial reform could also hel& &romote &u4lic access to credit# According to data from the !orld ;an%, credit as a &ercentage of FDP
remains at a4out 7R &ercent -in 7D''9, much lo"er than in Batin American &eers li%e ;ra@il -R' &ercent9 and Chile -(' &ercent9# -ut t$e $ig$est $urdle, energy reform, has not yet 4een cleared# In the &ast decade, Me icoIs energy sector has suffered from deteriorating o&erational, financial, and technological ca&a4ilities, shar&ly lo"ering &roduction for a vital source of state revenue# Production has fallen from a record 1#J million 4arrels &er day in 7DDJ to a4out 7#/ million today# Caced "ith rising &ensions and health?care 4ills, the governmentIs high de&endency on oil revenues -around 1D &ercent of total revenues9 is 4ecoming increasingly "orrisome# Fiven the o&&ortunities it might create and its im&act on the 4roader economy, su4stantive reform of Me icoIs energy sector has also ca&tured the attention of foreign investors# In &articular, Me ico may have the "orldIs fourth?largest shale de&osits, e citing intense investor interest in o&&ortunities for &rivate &artici&ation in 4oth offshore and shale &lays through &rofit?sharing agreements -&ossi4ly a variant of &roduction?sharing agreements9# Energy reform "ould also offer PeMa Nieto an im&ortant &olitical victory, since he "ill

have succeeded "here so many of his &redecessors have failed# Past attem&ts have 4een defeated 4y a
&o&ulist commitment to nationali@ed energy that is "ritten into the Me ican Constitution, limits on investments 4y state?o"ned oil com&any Peme , the a4ility of state governments to gra4 a large share of the industryIs resources, Peme Is la4yrinthine 4ureaucracy, assertive la4or unions, and &oliticians "ho "ere un"illing to acce&t the costs and ris%s that come "ith change#

ducation "ey to decrease drug cartel recruitingG"ey to t$eir overall operations llingwood and Wil"inson, 12 -Ken Elling"ood and *racy !il%inson, '70'H0'D, 2Me ican drug cartels find youths to 4e easy &rey5, htt&600articles#latimes#com07D'D0dec0'H0"orld0la?fg? me ico?foot?soldiers?7D'D'7'8900EM
:ouths Idivert from their destinyI EdgarIs arrest "as one more shoc%ing t"ist in Me icoIs J?year?old drug "ar6 Could a 4oy "ho stands 4arely chin high to a gro"n man 4e a 4loodthirsty cartel assassinU *he case has sha%en Me ico, &ossi4ly 4ecause the ans"er is so clear# Caced "ith an a4ysmal education system and even "orse Ao4 &ros&ects E and lured 4y easy drug

money and the clout that comes "ith it E thousands of ever?younger youths are Aoining the ran%s of violent cartels# *he virtually endless su&&ly of young foot soldiers %ee&s the cartels "ell?stoc%ed "ith thugs, gunmen, mules, &eddlers and loo%outs # As vulnera4le %ids fall through the crac%s, Me ico ris%s losing &art of a generation# W*hese %ids are victimi@ers, 4ut they are also victims,W said Miguel ;arrera, a former gangster
"ho no" "or%s to rescue violent teens from the streets# A4out a million youths are considered at ris% and easy &rey for cartels, according to studies 4y the National Autonomous University of Me ico in Me ico City# It is a &recarious and &ro4a4ly short life# *he young foot soldiers are little more than cannon fodder# As much as /[ of the more than 1D,DDD &eo&le %illed in the drug "ars in the last four years "ere minors, according to civic grou&sG some "ere innocents caught u& in the violence, 4ut many "ere active &artici&ants# Police and military officials say they are ca&turing a larger num4er of youths in o&erations against cartels# *"o sus&ects in the August massacre of (7 Central and South American immigrants in northern Me ico "ere '( and 'J# In Ce4ruary, officials in the state of *a4asco announced the ca&ture of a '1?year?old girl "ho they said had 4een recruited 4y drug traffic%ers and trained to %ill# *he &henomenon has crashed into a legal system un&re&ared for youths charged "ith grave offenses, s&urring a movement to lo"er the age at "hich sus&ects can 4e tried and &unished as adults# In terms of &revention, ho"ever, there are only a fe"

&rograms aimed at sto&&ing cartel recruitment and little &olitical "ill to tac%le the &ro4lem# Linsert impact from drugs fileM

%ndependently, 5 M ? failure crus$es t$e Mexican economy (amples* and Bittor**, 1) *associate in the $ouston office of $ogan Bovells US BBP "ho focuses on transactions in Batin American AND **&artner in the $ouston office of $ogan Bovells US BBP "ho focuses on 4usiness la" in Batin America -*im ) Sam&les and .os, Buis Xittor, R07'0'7, 2ENE)F: )EC<)M AND *$E CU*U)E <C MELIC<>S <IB INDUS*):6*$E PEMEL ;IDDINF )<UNDS AND IN*EF)A*ED SE)XICE C<N*)AC*S5, htt&600tAogel#org0"&?content0u&loads07D'70D(0Sam&les?CormattedTCinalT.une'1#&df900EM +urrent declines in &roductivity "ill have maAor conse=uences for the Me ican government# Peme is Me ico>s largest ta &ayer and has ty&ically accounted for 1D[OJD[ &ercent of federal government revenues#7H As one of the three largest su&&liers of foreign oil to the United States, Me ico>s declining
&roduction carries conse=uences north of the 4order as "ell#78 ;# Peme Is ;urdened 4y $eavy *a <4ligations to the Me ican Fovernment Peme does not &erform "ell in com&arison "ith &eer com&anies in economic

efficiency and other %ey indicators#1D *he most difficult issue facing Peme

is its heavy ta 4urden#1' $istorically, this ta 4urden routinely amounts to "ell over half of the com&any>s revenues#17 Peme recently recorded a =uarterly loss of H' 4illion Me ican &esosEone of its "orst =uarterly results in recent yearsE"ith ta &ayments re&resenting //[ of income#11 *hough recent reforms have eased Peme >s ta 4urden slightly, distur4ing the status =uo remains &olitically daunting#1J Additionally, Peme em&loys roughly 'JD,DDD &eo&le, a &ayroll "hich some have suggested is far too large#1/ Peme is under immense

&ressure to finance the Me ican government, s&onsor social &rograms, and &rovide for Me ico>s energy needsEall "hile remaining a maAor em&loyer of the Me ican &eo&le#1R In many "ays, Peme
has succeeded in accom&lishing these goals#1( $o"ever, the sustaina4ility of the current model has 4een 4rought into =uestion#1H Peme is suffering the conse=uences of a &rolonged strategy focused on ma imi@ing immediate

revenues for the government at the e &ense of research and develo&ment, ne" e &loration, technical innovation, infrastructure s&ending, and ca&ital reinvestment #18 In other "ords, Peme has
4een focused on sustaining immediate &roduction rather than e &loration and future develo&ment# During the most 4ountiful years of the su&ergiant Cantarell field, significant investments in e &loration and ne" develo&ment "ere not necessary to sustain high levels of &roduction#JD $o"ever, shar& declines at Cantarell have e &osed "ea%nesses in the Peme 4usiness model#J' Peme is ho44led 4y factors 4eyond its ta 4urden, such as high de4t and &ension lia4ilities, cum4ersome internal governance, com&licated administrative and &olitical relationshi&s "ith the federal government, the Petroleum !or%ers Union of Me ico -the Peme Union9, and deficiencies in ca&ital and technology# )eversing the tide of declining &roduction "ill re=uire changes "ithin Peme as "ell as a dee&er overhaul of the e isting regulatory frame"or% constraining Peme # C# +ontinued .eclines Will *ave

,ar#Reac$ing +onse!uences for Mexico As the most im&ortant com&any in Me ico, a source of national &ride, and a sym4ol of sovereignty, 5emex6s troubles are Mexico6s troubles' *hough it is clear that declining &roduction must 4e reversed, =uestions remain as to ho" Me ico "ill a&&roach its &roduction conundrum# *he most immediate =uestion facing Peme is "hether e isting fields can 4e effectively managed to e tend &roduction and slo" decline through various recovery strategies#J7 In order to 4oost long?term &roduction, Me ico "ill li%ely need to loo% to the Chiconte&ec ;asin and to dee&?sea reserves in the Fulf of Me ico#J1 All of the a4ove scenariosEand &articularly the long?term solutionsE re=uire advanced technology and ca&ital investments 4eyond "hat Peme is currently ca&a4le of &roviding #JJ

(ustaining Mexican growt$ eliminates t$e incentive for immigration +apobres, 1) -Kacy Ca&o4res, 707R0'7, 2Me ico>s Strengthening Economy Could ;ode !ell for Immigration )eform5, htt&600latino#fo ne"s#com0latino0money07D'10D707R0me icos? strengthening?economy?could?4ode?"ell?for?immigration?reform0900EM *han%s to an im&roving economy in their country , Me icans are staying home# A Fallu& &oll released Monday said Aust 'J &ercent of Me icans say they "ould emigrate from the country, com&ared to 7' &ercent in 7DD(# In an interesting t"ist, the current num4ers are almost identical to the '' &ercent of Americans "ho say they "ould
leave the U#S# if given the o&&ortunity# Since ta%ing office, Me icoIs ne" &resident, Enri=ue PeMa Nieto, has made it a &oint to stress that his country W"ill "or% to im&rove the =uality of life and o&&ortunities in Me ico so that migration is a &ersonal decision and not a necessity#W Due to 4urgeoning economic o&&ortunities , the United StatesI largest immigrant grou& already has

fe" reasons to cross the 4order# As the United States continues to struggle to gain economic momentum follo"ing the
7DDH recession, the Me ican unem&loyment rate has dro&&ed to Aust / &ercent# U#S# $is&anics still have one of the highest unem&loyment rates in the country, at 8#H &ercent# Antonio Far@a, a former U#S #Am4assador to Me ico, says the &oll 2is a sna&shot of a trend that you have seen in the country over the last several years#5 2An e &anding middle class in Me ico

means more &eo&le are "or%ing here,5 he said# Me

ico>s economic &erformance is closely lin%ed to the U#S#, "here it

sends almost HD &ercent of its e &orts# ;ut than%s to a s&i%e in the agriculture industry, Me ico>s economy gre" 4y close to J &ercent last year, com&ared to Aust 7 &ercent in the U#S# 2More Ao4s are 4eing created in Me ico "hich means there is

less &ressure for &eo&le to emigrate,5 Manuel Sufre@?Mier, a Me ican national and economist at American University>s School of International Service, told Co Ne"s Batino# *he im&lications of these findings could affect
the recent &ush for com&rehensive immigration reform in the U#S# 2It>s good ne"s in the sense that it might hel& the U#S# government to come u& "ith sensi4le immigration reform,5 Sufre@?Mier said# $e said 4oth sides can 4enefit from the economic gro"th in Me ico# 2It>s a good moment for the U#S#?Me ico 4ilateral relationshi&,5 Sufre@?Mier said#

Linsert impact from /A%, affM

)ac atA cir turns immigration


+%R doesn6t solveGeconomy is t$e root cuase 0ng *ing, 11 Professor of Ba", University of San Crancisco -;ill <ng $ing, 707H0'', 2Me icoIs Economy Is the Pro4lem *hat Anti?Immigrant Ba"s !onIt Solve5, htt&600"""#huffington&ost#com04ill?ong?hing0me icos?economy?is?the? &rT4TH781((#html900EM

Everyone agrees that "e need immigration reform# Cor years, Congress has attem&ted to stri%e a &rinci&led 4alance 4et"een greater enforcement and a fair "ay to adAust the status for the 'D to '7 million undocumented immigrants in the country# $o"ever, even immigrant rights advocates must ac%no"ledge that legali@ation "ill not solve undocumented migration &ermanently# An e &ansion of visas "ill certainly hel&, 4ut if the &ac%age does not include at least the first ste&s to"ard hel&ing Me ico im&rove its economy and infrastructure, undocumented Me ican migration "ill continue, and the tension over undocumented migration "ill resurface do"n the road# *o truly understand undocumented migration, "e have to do "hat Americans have thus far 4een un"illing to do6 Boo%

4eyond the sim&le e &lanation that migrants cross the 4order in search of "or%# !e have to as% "hy they cannot find "hat they "ant in Me ico # In '88J, "e "ere told that NAC*A

"ould solve the undocumented &ro4lem 4ecause ne" Ao4s "ould 4e created in Me ico# ;ut NAC*A ultimately contri4uted to huge Ao4 losses in Me ico# Me ican corn farmers could not com&ete "ith heavily?su4sidi@ed U#S# corn farmers, and no" Me ico im&orts most of its corn from the U#S# ;ecause of glo4ali@ation, 'DD,DDD Ao4s in Me icoIs domestic manufacturing sector "ere lost from '881 to 7DD1# !here do those unem&loyed "or%ers loo% for "or%U El Norte# An economic turnaround in Me ico is

central to solving the undocumented migration challenge in the United States# Conservatives should understand that#
And li4erals should recogni@e that reducing undocumented migration is in Me icoIs interest as "ellG the &ersistent loss of a4le? 4odied "or%ers needed to 4uild its infrastructure and economy only hurts Me ico# All of us understand that economic investment in Me ico "ill not and, &ro4a4ly, should not 4e done "ithout close monitoring#

)ac interaction
T*A provides t$e opportunity for cooperation wit$ 5emex Martin and Wood 13 O *Director of the Energy Program at the Institute of the Americas at the University of California, San DiegoG **Director of the Me ico Institute at the !oodro" !ilson International Center for Scholars, &rofessor for '( years in Me ico and &reviously "as director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de M, ico -I*AM9 in Me ico City -.eremy M# and Duncan, 2U#S# ShoUld Act 3Uic%ly on trAnS4oUndAry hydrocAr4on Agreement !ith me ico,5 !orld Politics )evie", May 1, 7D'1, htt&600"""#iamericas#org0ne"s0!P)TUSTMe icoTD/D17D'1#&df900;"ang
*hird, then?Secretary

of State $illary Clinton "as correct to em&hasi@e the commercial o&&ortunity and energy security element of the accord "hen it "as first announced# *he agreement &rovides the &ossi4ility for U#S# firms to Aoin "ith Me ico>s national oil com&any, Peme , to e &loit dee&? "ater oil resources in the Fulf of Me ico along the countries> maritime 4oundaries# *his could &rovide im&ortant o&&ortunities for U#S# com&anies, including e citing Aoint venture o&&ortunities "ith Peme long thought im&ossi4le#

)ac expertise
T$e plan provides 5 M ? wit$ necessary expertise and tec$nology Reuters, 1) -)euters, 707D0'7, 2Me ico, US sign cross?4order oil deal for dee& "ater5, htt&600"""#reuters#com0article07D'70D707D0me ico?oil?us?idUSB7EHDKD:B7D'7D77D900EM B<S CA;<S, Me ico, Ce4 7D -)euters9 ? Me ico and the United States signed an agreement on Monday to hel& U#S# firms and Me ican oil mono&oly Peme e &loit dee& "ater oil resources in the Fulf of Me ico that

straddle the countriesI maritime 4oundaries# *he deal, negotiated last year, "ill lift the moratorium on oil e &loration and &roduction in the "estern ga& &ortion of the Fulf and sets u& legal guidelines for com&anies to Aointly develo& any trans?4oundary reservoirs# W*hese reservoirs could hold considera4le reserves ### 4ut they donIt necessarily sto& neatly at our maritime 4oundary# *his could lead to dis&utes,W U#S# Secretary of State $illary Clinton said at a ministerial meeting of Frou& of 7D nations in Bos Ca4os Me ico# W*he agreement "e are signing today "ill hel& &revent such dis&utes#W Me ico ? the "orldIs No# ( oil &roducer ? is far 4ehind the United States in e &loring for dee& "ater oil reserves and has drilled less than 7D "ells in its territorial "aters in the Fulf# Peme estimates there are more than 78 4illion 4arrels of crude e=uivalent in the area, or /H &ercent of the countryIs &ros&ective resources# Carlos Morales, Peme Is director of e &loration and &roduction, told )euters in an intervie" on Monday that the com&any &lans to drill si or seven ne" dee& "ater "ells this year and has a &lan for eight annually over the ne t five years# So far most of the discoveries in Me icoIs dee& "aters have 4een natural gas# Me icoIs oil

industry regulator "orries Peme does not have the ca&a4ility or the safeguards in &lace to move into ultra?dee& drilling# Safety concerns loom large after the e &losion on ;PIs Dee&"ater $ori@on rig in A&ril 7D'D that
%illed '' "or%ers and s&e"ed more than J million 4arrels of oil into the Fulf# Me ico is ho&ing to attract hel& from &rivate com&anies to e &lore for oil in the region "ith a 7DDH oil reform that allo"s for incentive 4ased o&erating contracts, 4ut no &roAects have yet 4een announced W*his agreement also creates ne" o&&ortunities for our 4usinesses# American

energy com&anies "ill 4e a4le ? for the first time ? to colla4orate "ith Peme

, their Me ican counter&art,W said Clinton# *he country, "hich relies on oil revenues to fund a third of the federal 4udget, closely guards its oil resources nationali@ed since '81H# W*his agreement "as negotiated invaria4ly under the &rinci&le of res&ecting sovereign rights# Me ican oil "ealth is and "ill continue to 4e of the Me icans,W President Celi&e Calderon said at the event#

)ac economy add#on


Mexico is "ey to t$e &'(' economy Roseman 1) O )esearch Associate at the Council on $emis&heric Affairs -Ethan, 2EN$ANCED )ECIP)<CI*: C<) *$E U#S#?MELIC< )EBA*I<NS$IPU5 Coha, '70'(0'7, htt&600"""#coha#org0enhanced?reci&rocity?for?the?u?s?me ico?relationshi&0900;"ang

*o com4at this &ending struggle, President PeMa Nieto 4egan his tenure 4y stating that he "ill 2launch a series of &olitical and economic reforms5 ranging from social issues, such as education and social security, to reforms 4ased on im&roving energy &roduction and national security# Me ico is already the United States> third largest im&orter, and is

forecasted to 4e the largest one 4y 7D'H# In reality "ith these reforms, 2e &erts from the financial industry, including Foldman Sachs and Nomura, &redict that, 4y 7D7D, Me ico>s economy "ill 4e among the ten largest in the "orld#5PJQ !ith such an economic &otential as a result of effective trade agreements, Me ico has the a4ility to not only advance the "elfare of its citi@ens, 4ut to also 4e a &otential solution for the economic "oes of the United States # Curthermore, President PeMa Nieto>s 4old and o&timistic reforms, com4ined "ith Me ico>s &roAected economic gro"th, could &otentially act as the vessel that transforms Me ico out of the culture of violence that &ersists in the country today#

)ac oil add#on


PEMEL li4erali@ation solves high oil &rices *argreaves, 1) -Steve $argreaves , H0'(0'7, 2Me icoIs 4ig oil &ro4lem5, htt&600money#cnn#com07D'70DH0'(0ne"s0economy0me ico?oil0inde #html900EM Me ico, one of the largest su&&liers of oil to the United States, has a 4ig &ro4lem6 Its &roduction of crude is falling fast# In 7DDH, the countryIs &roduction &ea%ed at 1#7 million 4arrels a day, according to the U#S# Energy Information Administration# Bast year, it didnIt even &roduce 1 million a day# *he reason6 aging oil fields and years of underinvestment# Industry e &erts say Me ico could revive &roduction if it allo"ed more investment from international oil com&anies# ;ut under current &olicy, EIA says Me ico "ill have to start im&orting oil 4y 7D7D# production one place could mean $ig$er prices worldwide # *he loss of Me

Cor the United States, the decline in Me icoIs oil industry means it "ill li%ely 4e 4uying more oil from Canada and Saudi Ara4ia, the No# ' and No# 7 sources of U#S# oil im&orts# Me ico is no" third# And 4ecause oil is a glo4al mar%et, any drop in icoIs current e &orts of a4out ' million 4arrels a day "ould 4e greater than the amount lost due to sanctions on Iran ?? al4eit over a longer time &eriod# Many e &erts 4lame the structure of Me icoIs oil industry for the decline# Me ico nationali@ed its

oil industry in '81H# Since then com&anies such as E on Mo4il -L<M, Cortune /DD9, )oyal Dutch Shell -)DSA9 and ;P -;P9 have 4een &rohi4ited from ta%ing a meaningful sta%e in the countryIs oil o&erations# *he state oil giant, Petroleos Me icanos, or PEMEL, has run the sho"# PEMEL is one of the largest com&anies in the "orld, and &rovides the Me ican government "ith 17[ of its revenues, according to the EIA# ;ut oil e &loration re=uires 4ig investments and Me ican la"ma%ers have long resisted giving the firm the money it needs to go out and find ne" sources of crude# *he difference 4et"een U#S# and Me ican oil e &loration is stri%ing, said .ose
Xalera, a &artner in the energy &ractice at the $ouston la" office of Mayer ;ro"n# *he num4er of "ells drilled in the U#S# Fulf of Me ico and the Eagle Cord shale in *e as is Whundreds to oneW "hen com&ared to the Me ican side# Indeed, the United States has 4een undergoing a resurgence in oil &roduction, largely 4ecause of these t"o areas# W*here is a4solutely no geological reason to 4elieve the Eagle Cord ends at the 4order, or the Me icans got the dry side of the Fulf,W Xalera said# W*here is su4stantial &otential that has not 4een develo&ed#W Me ico has ta%en some small ste&s to li4erali@e its oil industry over the last fe" years, including allo"ing foreign firms to 4id for contracts "ith PEMEL# A s&o%es"oman for PEMEL said these efforts, along "ith a recent dou4ling of its 4udget, "ill ena4le the com&any to soon 4oost &roduction# ;ut industry analysts feel that unless international

com&anies are given o"nershi& sta%es in the oil fields, investment "ill remain lo" and &roduction "ill continue to decline# *hereIs also 4een recent tal% of 4roader industry li4erali@ation, 4ut it faces strong
o&&osition from the countryIs unioni@ed oil "or%ers, government agencies that rely on PEMEL &roceeds and Me ican consumers, "ho 4enefit from gasoline su4sidies# Said AleAandra Be+n, an oil analyst at the consultancy I$S CE)A in Me ico City6 <il is Wstill a sensitive to&ic and &olitics &lay a critical role#W

)ac government funding


5 M ? liberali:ation "ey to sustain funding for development initiatives 7uilllermo, 13 -Fuillermo, MA# International Energy Master, Sciences Po Paris, (0'70'1, 2Partial li4erali@ation of PEMEL6 more efficient energy e &enditures and revenues5, htt&600%ither#org0&olitics?governance0&artial?li4erali@ation?of?&eme ?more?efficient?energy? e &enditures?and?revenues900EM !ith Me ico>s main offshore fields declining, a &olitical consensus has emerged that the country>s most &romising ne" frontiers ?the dee&"ater Fulf of Me ico and shale resources? are too com&licated and e &ensive for Peme to tac%le on its o"n # Moreover, des&ite Peme 4eing one of the "orld>s largest crude oil
e &orters, it im&orts 4ac% RD[ of its crude oil e &orts to the US once it is a refined &roductP7Q 4ecause of the lac% of refineries# And

4ecause Peme &rovides roughly one?third of the Me ican government>s revenue, the oil com&any>s decline has made it difficult for the state to &ursue other develo&ment &riorities P1Q# la4or and ca&ital efficiencyPJQ, generate lo"er revenue, are less &rofita4le, and &roduce a significantly lo"er annual &ercentage of their u&stream reserves than Private <"n Com&anies -P<Cs9

Curthermore, since Peme must give a large &ortion of its revenues to the governmentER7[ in 7DDREit has generally had less cash flo" availa4le to allocate to u&stream investments -Solache, 7DD(9# In general, National <il Com&anies -N<Cs9 e hi4it lo"er

-*ordo, *racy, _ Arfaa, 7D''9# Such efficiency ga&s have 4een &artly Austified 4y the com&le ity of o4Aectives &ursued 4y N<Cs com&ared to the sim&le ma imi@ation of shareholders> return on ca&ital &ursued 4y P<Cs# Peme g value creation for Me icans is far from trivial, ho"ever, the current mono&olistic structure has &roven to 4e not at its ma imum &otential#

Manufacturing

1ac manufacturing
Mexican manufacturing slowing now Reuters, 13 -)euters, (0'0'1, 2Me ico .une manufacturing gro"th di&s to over 7?year lo"5, htt&600"""#reuters#com0article07D'10D(0D'0me ico?factories? idUSE'NDDLDDS7D'1D(D'900EM -)euters9 ? Me ican manufacturing sector gro"th slo"ed in .une to a 7( month?lo" on "ea%ness in ne" orders and out&ut, a survey sho"ed on Monday, suggesting Batin AmericaIs no# 7 economy remains sluggish# *he $S;C Me ico Manufacturing Purchasing ManagersI Inde -PMI9 fell to /'#1 in .une after adAusting for seasonal variation, do"n from /'#( in May to the "ea%est &ace of e &ansion since data collection 4egan in A&ril 7D''#

*he reading a4ove /D, ho"ever, sho"ed continued gro"th# W*his confirms that the loss of steam in the manufacturing sector "ill &revail in the second =uarter,W $S;C economist Sergio Martin said in a statement# $o"ever, Martin added that he e &ected gross domestic &roduct -FDP9 gro"th to &ic% u& in the second half of the year# Cactory out&ut rose only slightly in .une, at its slo"est &ace since data collection 4egan# *he rate of gro"th in ne" orders also eased to a ne" 7(?month lo", "hile ne" e &ort orders contracted for the second month running to notch a survey lo"# Manufacturing e &orts e=uate to a4out 7/ &ercent of

Me icoIs FDP and the country had 4een shielded from a "ea% glo4al economy 4y continued U#S# demand for goods such as cars and televisions# Me icoIs gro"th is seen slo"ing this year to around 1#' &ercent from 1#8 &ercent last year# *he PMI
inde , com&iled 4y Mar%it, is com&osed of five su4?indices trac%ing changes in ne" orders, out&ut, em&loyment, su&&liersI delivery times and stoc%s of ra" materials and finished goods#

5 M ? liberali:ation is critical to increasing domestic natural gas productionG solves Mexican manufacturing +,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E *)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*? ''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM !hile oil &rovides vital government revenue, lac" of natural gas development t$reatens to stunt Me ican industry# It is re&orted that &arts of Me ico could face natural gas shortages in the coming year# Mean"hile, Me ico sits on a sea of unconventional natural gas reserves# *he current natural gas situation??"hich several

interlocutors identified as a ]]crisisII??results from Me ican natural gas 4eing &riced artificially lo" 4ecause it is lin%ed to the U#S# &rice, "hich has fallen "ith the ra&id e &ansion of shale gas su&&lies# :et the im&act of U#S# su&&ly on Me ican &rices e ists des&ite the limited &hysical integration of the t"o countriesI &hysical gas mar%ets# !hen com4ined "ith gas shortages in Me ico, this indicates the need 4oth for more &i&eline connections to the United States and for 4uilding out Me icoIs domestic gas infrastructure# Doing so is made difficult, ho"ever, 4y confusion in the Me ican mar%et "here the do"nstream natural gas sector has 4een relatively li4erali@ed "hile the u&stream remains under the mono&oly control of PEMEL# *he lac% of an a&&ro&riate &rice signal drives u& demand "hile, re&ortedly, causing PEMEL to ]]shut? inII some conventional &roduction due to lac% of &rofita4ility# Several interlocutors &ointed s&ecifically to the need for e &edited &i&eline construction to connect "ith

*e as# 3uic% U#S# federal and state actions to &ermit &i&elines could hel&fully reduce short?term su&&ly &ressures in Me ico and hel& o&en ne" mar%et o&&ortunities for U#S# gas# Bong?term economic gro"th in Me ico, ho"ever, is 4elieved to 4e 4etter served 4y develo&ment of its a4undant domestic resources# As an analyst said, ]]Nou cannot build a future in Mexico based on c$eap gas imports from t$e &'('I I *he United States government estimates that Me ico has one of the largest shale gas reserves in the "orld at

more than RHD trillion cu4ic feet -tcf9 of technically recovera4le reserves, although Me ico itself uses estimates as lo" as 'JD tcf# Much of that shale gas is thought to 4e contained in an e tension of the Eagle Cord formation that is already &roducing in *e as# PEMEL re&ortedly has drilled Aust a handful of e &loratory "ells, and "ith &rices 4eing held do"n 4y the United States gas 4oom, it has little economic incentive to invest heavily in shale in its o"n right, let alone the o&&ortunity cost of that ca&ital com&ared to much more lucrative oil# A4sent natural gas &ricing reform, it is unli%ely that PEMEL "ill choose to invest heavily into shale gas# A"areness of shale gas &otential is gro"ing in Me icoG at the time of the authorsI visit, for e am&le, the Me ican government "as hosting a meeting of shale gas e &erts# Many interlocutors "ere carefully "atching shale develo&ments in the United States 4oth in terms of direct Ao4 creation and in "ider economic o&&ortunities for &o"er generation, chemicals, and manufacturing# Develo&ment of shale could 4e &articularly hel&ful for economic gro"th in Me icoIs northern 4order region# *he authors found that develo&ing Me icoIs shale gas reserves, as "ith technologically challenging ne" oil frontiers, "ill

re=uire energy reform to galvani@e &rivate investment, technology, and e &ertise # At the same time, an
additional level of government ca&acity 4uilding "ill 4e useful to aid official understanding in the geology, economics, and

environmental &rotections necessary for shale &roduction# *he U#S# State De&artmentIs Unconventional Fas *echnical Engagement Program is "ell &ositioned to ena4le access to needed information, if the Me ican Fovernment chooses to &artici&ate#

T$at trades off wit$ +$inese manufacturing conomist, 1) -*he Economist, ''07J0'7, 2*he rise of Me ico5, htt&600"""#economist#com0ne"s0leaders07'/R(DH'?america?needs?loo%?again?its? increasingly?im&ortant?neigh4our?rise?me ico900EM MaMana in Me ico *he first &lace "here Americans "ill notice these changes is in their sho&&ing malls# China -"ith more than RD mentions in the &residential de4ates9 is 4y far the 4iggest source of America>s im&orts # ;ut "ages in Chinese factories have =uintu&led in the &ast ten years and the oil &rice has tre4led, inducing manufacturers focused on the American mar%et to set u& closer to home# Me ico is already the "orld>s 4iggest
e &orter of flat?screen televisions, ;lac%;errys and fridge?free@ers, and is clim4ing u& the ran%ings in cars, aeros&ace and more# <n &resent trends, 4y 7D'H America "ill im&ort more from Me ico than from any other country# 2Made in +$inaD is

giving way to 8*ec$o en MOxicoD' +$inese manufacturing is critical to +$inese military moderni:ation Reed, 1) -.ohn )eed, R0780'7, 2China Caught the U#S# in Manufacturing, $igh?*ech !ea&ons Might ;e Ne t5, htt&600defensetech#org07D'70DR0780china?caught?the?u?s?in?education?and? manufacturing?high?tech?"ea&ons?are?ne t0900EM It>s no secret that China -and many other nations9 are catching u& "ith the U#S# in education and manufacturing# A =uic% Foogle search can reveal the massive gains China>s manufacturing and education sectors have made over the last three decades# E &erts have long "arned that the U#S# fast sli&&ing far 4ehind it>s industriali@ed
&eers in terms of critical education sectorsG science, technology, engineering and math# *he "orst &art they sayG as the U#S# is sli&&ing, China is rising# Cirst, it mastered E some "ould argue, it still is mastering E 4asic manufacturing

and it has 4egun investing heavily in higher?end engineering and scientific education, &aving the "ay for it>s ra&id gains in high?tech manufacturing# No", +$ina is starting to turn t$is investment in engineering and scientific "nowledge toward producing high?end military gear#

Military moderni:ation causes &'('#+$ina war +arnegie, 9 -Carnegie Endo"ment, 70R0(, 2*he Im&lications of ChinaIs Military Moderni@ation5, htt&600carnegieendo"ment#org07DD(0D70DR0im&lications?of?china?s?military? moderni@ation07%=900EM *he PBA also designed its moderni@ation &rogram to &re&are for several contingencies# <&en?source data indicate that China is &re&aring for &ossi4le conflict "ith the United States, &otentially over *ai"an, and is also focused on 4eing a4le to defeat *ai"an# !ort@el argued that China is close to achieving that goal and is ca&a4le of dominating the militaries of other Asian &o"ers -e ce&ting .a&an9# *he fact that the United States treats China as an enemy in its strategic &lanning is a driver of Chinese military &lanning, according to !ort@el# Im&lications for the United States T$e &otential for miscalculation and misreading of intent are the 4iggest threats to the PBA and the U#S# armed forces, and as the PBA e &ands its area of control into &arts of the Pacific to "hich the U#S# has
traditionally had unfettered access the &otential "ill increase# Confidence?4uilding measures and regular defense consultations are the 4est "ay to reduce the threat &osed 4y the PBA# $o"ever, !ort@el and Cin%elstein agreed that as long as China>s decision? ma%ing &rocess remains o&a=ue the United States must maintain a sufficient deterrent# *he U#S# should also ensure that allies are not selling sensitive military technology to the PBA#

xtinction (traits Times )" -2No <ne Fains In !ar <ver *ai"an5, R?7/, Be is9 *$E D<<MSDA: SCENA)I< *$E high?intensity scenario &ostulates a cross?strait "ar escalating into a full?scale "ar 4et"een the US and China# If !ashington "ere to conclude that s&litting China "ould 4etter serve its national interests, then a full?scale "ar 4ecomes unavoida4le# Conflict on such a scale "ould em4roil other countries far and near and ?? horror

of horrors ?? raise the &ossi4ility of a nuclear "ar# ;eiAing has already told the US and .a&an &rivately that it considers any

country &roviding 4ases and logistics su&&ort to any US forces attac%ing China as 4elligerent &arties o&en to its retaliation# In the region, this means South Korea, .a&an, the Phili&&ines and, to a lesser e tent, Singa&ore# If China "ere to retaliate, east Asia "ill 4e set on fire# And the conflagration may not end there as o&&ortunistic &o"ers else"here may try to overturn the e isting "orld order# !ith the US distracted, )ussia may see% to redefine Euro&eIs &olitical landsca&e# *he 4alance of &o"er in the Middle East may 4e similarly u&set 4y the li%es of Ira=# In south Asia, hostilities 4et"een India and Pa%istan, each armed "ith its o"n nuclear arsenal, could enter a ne" and dangerous &hase# !ill a full?scale Sino?US "ar lead to a nuclear "arU According to Feneral Matthe" )idge"ay, commander of the US Eighth Army "hich fought against the Chinese in the Korean !ar, the US had at the time thought of using nuclear "ea&ons against China to save the US from military defeat# In his 4oo% *he Korean !ar, a &ersonal account of the military and &olitical as&ects of the conflict and its im&lications on future US foreign &olicy, Fen )idge"ay said that US "as confronted "ith t"o choices in Korea ?? truce or a 4roadened "ar, "hich could have led to the use of nuclear "ea&ons# If the US had to resort to nuclear "ea&onry to defeat China long 4efore the latter ac=uired a similar ca&a4ility, there is little ho&e of "inning a "ar against China /D years later, short of using nuclear "ea&ons# *he US estimates that China &ossesses a4out 7D nuclear "arheads that can destroy maAor American cities# ;eiAing also seems &re&ared to go for the nuclear o&tion# A Chinese military officer disclosed recently that ;eiAing "as considering a revie" of its Wnon first useW &rinci&le regarding nuclear "ea&ons# MaAor?Feneral Pan ^hang=iang, &resident of the military?funded Institute for Strategic Studies, told a gathering at the !oodro" !ilson International Centre for Scholars in !ashington that although the government still a4ided 4y that &rinci&le, there "ere strong &ressures from the military to dro& it# $e said military leaders considered the use of nuclear "ea&ons mandatory if the country ris%ed dismem4erment as a result of

should that come to &ass, we would see t$e destruction of civilisation# *here "ould 4e no victors in such a "ar# !hile the &ros&ect of a nuclear Armaggedon over *ai"an might seem inconceiva4le, it cannot 4e ruled out entirely, for China &uts sovereignty a4ove everything else#
foreign intervention# Fen )idge"ay said that

Mexican manufacturing protects %5RG+$ina destroys it 07, 1) -<ffshore Frou&, R080'7, 2Intellectual Pro&erty Protection6 China vs# Me ico5, htt&600offshoregrou&#com07D'70DR0D80intellectual?&ro&erty?&rotection?china?vs? me ico0900EM Ideas and %no"ledge are a central &art of creating the goods and services that com&rise the glo4al trade re&ertoire of countries li%e Me ico and China# *he &rotection of intellectual &ro&erty of a manufacturer might 4e the most im&ortant safeguard# Investing &ersonnel and fiscal resources in innovation

results in the idiosyncratic design, invention, method, re&ute or success or failure of a manufacturer in Me ico -or any"here else9, ena4ling it to achieve advantage over the firms "ith "hich it com&etes in the mar%et&lace# *hese items must 4e sufficiently &rotected so that a cor&oration is assured that its com&etitive lead "ill not 4e stolen, counterfeited, or used "ithout its authori@ation# Many countries recogni@e the value of &atents and trademar%s in "orld mar%ets and have ta%en ste&s to im&lement stringent intellectual &ro&erty &rotection la"s and measures# America>s intellectual &ro&erty industries, "hich de&end on IP defense for their revenues, greatly contri4ute to the vitality of the U#S# economy, and em4ody a rising &ercentage of our gross domestic &roduct# *his sector includes not only the co&yright industries, such as movies, musical recordings, and 4oo% &u4lishing, 4ut also 4usinesses that rely on the value of their trademar%ed 4rands# It also includes &atent industries, such as the &harmaceutical industry and many manufacturers# Protection of intellectual &ro&erty varies from country to country, and "hen considering the la"s of other countries, es&ecially "hen considering host countries for offshore manufacturing and management, it is im&ortant to learn the intellectual &ro&erty &rotection la"s that are in &lace# In Me ico, the NAC*A &rotects certain intellectual &ro&erties such as6

co&yright of data, co&yright of sound recordings, trademar%s, &atents or inventions, industrial designs, trade secrets,
and geogra&hical indications# *hese are the minimum standards of &rotection of intellectual &ro&erty that the U#S#, Canada, and Me ico must &rovide in their domestic la"s, 4ut they may &rovide more &rotection than is re=uired under NAC*A# Me ican

courts ty&ically res&ect and enforce com&anies> rights to intellectual &ro&erty and the guarantee of these minimal &rotections gives some significant &eace of mind "hen considering the &ossi4ility of initiating manufacturing o&erations in Me ico# China, &erha&s Mexico6s primary competitor in the com&etition for direct foreign investment, has very different la"s# China has 4een "idely =uestioned for 4oth the content of its intellectual &ro&erty &rotection la"s, as "ell as their enforcement# China>s legal system still has many ga&s, it is still "ea%, and it is still develo&ing# Counterfeits are common in Asia and courts have 4een slo" to enforce or recogni@e intellectual &ro&erty rights#

(olves a laundry list of impactsGdisease, food production, and warming 7%5+, E -Flo4al Intellectual Pro&erty Center, '707H08, 2!hy Are Intellectual Pro&erty )ights Im&ortantU5, htt&600"""#theglo4ali&center#com0"hy?are?intellectual?&ro&erty?rights? im&ortant0900EM Intellectual Pro&erty $el&s Fenerate ;rea%through Solutions to Flo4al Challenges Nearly all of the 1DD &roducts on the !orld $ealth <rgani@ation>s Essential Drug Bist, "hich are critical to saving or im&roving

&eo&le>s lives around the glo4e, came

from the )_D?intensive &harmaceutical industry that de&ends on &atent &rotections# Innovative agricultural com&anies are creating ne" &roducts to hel& farmers &roduce more and 4etter &roducts for the "orld>s hungry "hile reducing the environmental im&act of agriculture# IP?driven discoveries in alternative energy and green technologies "ill hel& im&rove energy security and address climate change# Mutations ensure diseases cause extinction .arling 1) -David, Astronomer, 28 Strange !ays the !orld )eally Might End5, SeattleIs ;ig ;log, 1?'H, htt&6004log#seattle&i#com0the4ig4log07D'70D10'H08?strange?"ays?the?"orld?really? might?end0Uf4T dTfragment, !ashington State University9 <ur 4ody is in constant com&etition "ith a di@@ying array of viruses, 4acteria, and &arasites, many of "hich treat us sim&ly as a source of food or a vehicle for re&roduction# !hat>s trou4ling is that these micro4es can mutate and evolve at fantastic s&eed O the more so than%s to the 4urgeoning human &o&ulation O confronting our 4odies "ith ne" dangers every
year# $IX, E4ola, 4ird flu, and anti4iotic?resistant 2su&er 4ugs5 are Aust a fe" of the &athogenic threats to humanity that have surfaced over the &ast fe" decades# <ur soaring num4ers, u4i=uitous international travel, and the increasing

use

of chemicals and 4iological agents "ithout full %no"ledge of their conse=uences, have increased the ris% of unstoppable pandemics arising from mutant viruses and their il%# ;u4onic &lague, the ;lac% Death, and the S&anish Clu are vivid e am&les from history of ho" micro4ial agents can decimate &o&ulations# ;ut the conse=uences aren>t limited to a high 4ody count# !hen the death toll gets high enough, it can disru&t the very fa4ric of society# According to U#S# government studies, if a glo4al &andemic affecting at least half the "orld>s &o&ulation "ere to stri%e today, health &rofessionals "ouldn>t 4e a4le to co&e "ith the vast num4ers of sic% and succum4ing &eo&le# *he result of so
many deaths "ould have serious im&lications for the infrastructure, food su&&ly, and security of 7'st century man# !hile an untreata4le pandemic could stri"e suddenly and &otentially bring civili:ation to its "nees

in

wee"s or months, degenerative diseases might do so over longer &eriods# *he most common degenerative disease is cancer#
Every second men and every third "omen in the "estern "orld "ill 4e diagnosed "ith this disease in their lifetime# Degeneration of our environment through the release of to ins and "astes, air &ollution, and inta%e of unhealthy foods is ma%ing this &ro4lem "orse# If cancer, or some other form of degenerative disease, "ere to 4ecome even more common&lace and stri%e 4efore re&roduction, or 4ecome infectious -as seen in the transmitted facial cancer of the *asmanian Devil, a carnivorous marsu&ial in Australia9 the very survival of our s&ecies could 4e t$reatened#

)ac ipr solves economy


(olves t$e economy 7%5+, E -Flo4al Intellectual Pro&erty Center, '707H08, 2!hy Are Intellectual Pro&erty )ights Im&ortantU5, htt&600"""#theglo4ali&center#com0"hy?are?intellectual?&ro&erty?rights? im&ortant0900EM **!e do not endorse gendered language Intellectual &ro&erty -IP9 contri4utes enormously to our national and state economies# Do@ens of industries across our economy rely on the ade=uate enforcement of their &atents, trademar%s, and co&yrights, "hile consumers use IP to ensure they are &urchasing safe, guaranteed &roducts # !e 4elieve IP rights are "orth &rotecting, 4oth domestically and a4road# *his is "hy6 Intellectual Pro&erty Creates and Su&&orts $igh? Paying .o4s IP?intensive industries em&loy over // million Americans, and hundreds of millions of &eo&le "orld"ide# .o4s in IP?intensive industries are e &ected to gro" faster over the ne t decade than the national average# *he average "or%er in an IP?intensive industry earned a4out 1D[ more than his counter&art in a
non?IP industry *he average salary in IP?intensive industries &ay V/D,/(R &er "or%er com&ared to the national average of V1H,(RH# Intellectual Pro&erty Drives Economic Fro"th and Com&etitiveness America>s IP is "orth V/#H

trillion, more than the nominal FDP of any other country in the "orld# IP?intensive industries account for over '01O or 1H[O of total U#S# FDP# *hese industries also have (7#/[ higher out&ut &er "or%er than the national average, valued at

V'1R,//R &er "or%er# IP accounts for (J[ of all U#S# e &orts? "hich amounts to nearly V' trillion# *he direct and indirect economic im&acts of innovation are over"helming, acounting for more than JD[ of U#S# economic gro"th and em&loyment#

(olvency

1ac solvency
Aff increases ;oint &'('#Mexico oil production Myers et' Al 1)-!illiam C# Danvers, Staff Director Kenneth A# Myers, .r#, Staff Director U#S# F<XE)NMEN* P)IN*INF
<CCICE ((?/R( !AS$INF*<N 6 7D'7 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E USE <C *$E C<MMI**EE <N C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E O;)!9 *he center&iece of the *;A is the mandate to esta4lish socalled ]]uniti@ationII agreements 4y "hich

com&anies licensed 4y the United States and Me icoIs state oil com&any 5 M ? would ;ointly develop oil and gas reservoirs that have 4een discovered to e tend across the maritime 4oundary# In effect, uniti@ation agreements "ould "or% similarly to more "ell?%no"n &roduction sharing

agreements -PSAs9, "here4y com&anies involved "ill Aointly develo& a &roAect in order to s&read ris% given that dee& "ater develo&ments "ill cost 4illions of dollars each# Fiven PEMELIs lac% of e &erience in dee& "ater, the most li%ely outcome is that I<Cs licensed 4y the United States "ould o&erate the develo&ments and utili@e infrastructure 4ased

on the United States side of the 4order, "hich is more e tensive than that of Me ico near to the area of o&eration# $o"ever, the United States does have an interest in PEMEL gaining e &ertise in o&eration in dee& "ater in order to im&rove the integrity of &otential PEMEL o&erated develo&ments e clusively in Me ican territory# A %ey difference 4et"een the uniti@ation agreements envisioned under the *;A and traditional PSAs is that
&hysical 4arrels &roduced "ill 4e allocated to the legal Aurisdictions of the United States and Me ico, &resuma4ly in &ro&ortion to the amount of reserves found on their res&ective sides of the 4order# *he Me ican 4arrels, &resuma4ly, "ill 4e &ro&erty of PEMEL as a state entity and the U#S# 4arrels "ill 4e treated under standard terms of U#S# licensing in the Fulf of Me ico# It is unli%ely that, from the U#S# &ers&ective, the *;A "ill meaningfully increase U#S# domestic oil &roduction in the near term# *he maritime 4order area is dee& "ater and "ould re=uire massive investments# Such investments are &ossi4le and should 4e encouraged 4y the U#S# government, ho"ever, it "ill ta%e years to get through regulatory hurdles and normal &roAect develo&ment needs# $o"ever, the *;A "ould unloc% the maritime 4order region from moratoria, there4y offering long?term o&&ortunities to increase U#S# domestic &roduction# *he *;A should 4e seen as a net &ositive to hel&ing reduce U#S# de&endence on im&orts from trou4lesome regions and 4oosting domestic economic activity, and therefore the *;A should 4e vie"ed as a 4enefit for U#S# energy security# ;enefits of &hysical 4arrels of oil &roduced are &otentially much greater in relative im&ortance on the Me ican side of the 4order, "hich is e &eriencing decline in %ey fields, and that "ould 4e su4stantially 4eneficial to U#S# interests in Me ican economic gro"th# As discussed a4ove, Me ico needs ne" oil &roduction# Develo&ing dee& offshore &roduction "ould hel& diversify the Me ican oil &ortfolio, &roviding economic 4enefit to the Me ican state "hether that oil is sold for e &ort mar%ets or used domestically# Moreover, having I<Cs "or%ing "ith PEMEL to 4oost domestic Me ican &roduction "ill &rovide useful commercial

o&&ortunities and, im&ortantly, boost confidence t$at Mexico will $ave significant oil available to export to t$e &nited (tates # As a relia4le, &ro imate, and friendly neigh4or, Mexican oil imports support &'(' energy security' *he *;A contains numerous &rovisions in
antici&ation of dis&utes on allocation of resources under a uniti@ation agreement and im&lementation of those agreements# Begal analysis of these &rovisions is 4eyond the sco&e of this re&ort# $o"ever, it is a&&arent that lac% of clarity on the legal status of the dis&ute resolution mechanisms should 4e of concern to the U#S# Congress# *he <4ama administration contends that the agreementIs ar4itration mechanism is not intended to &roduce 4inding decisions, ho"ever, that is not s&ecifically &rovided for in the te t of the agreement and "ould 4e different from ar4itration mechanisms in many other international agreements# *he *;A further contains re=uirements of data sharing and notification of li%ely reserves 4et"een the United States and Me ico, o&ening the o&&ortunity for increased government?togovernment colla4oration on strategic energy &olicy choices# Me ico and the United States are relatively less advanced in effective communication and lin%ages of our energy systems than "e are in less &olitically?controversial economic areas# Im&roved ties can im&rove understanding and galvani@e coo&eration in often une &ected "ays# In the immediate term, closer oil sector communication "ill 4e 4eneficial in case of accidents in the Fulf of Me ico or in case of significant disru&tions to glo4al oil su&&lies# <n issues of environmental &rotection and safety, the *;A envisions that the U#S# and Me ico in the geogra&hic area under the agreement "ill have common standards and that regulators from 4oth countries "ill have access to oil and gas develo&ment facilities "ith the a4ility to order shutdo"ns in 4oth Aurisdictions if necessary# *he <4ama administration contends that means that Me ican environmental and safety standards, and enforcement, "ill have to rise to U#S# levels# *here is no guarantee that &assage of the *;A "ill &reci&itate systemic im&rovement in Me ican environmental and safety enforcement, 4ut any im&rovement is "elcome 4y the Me ican safety regulator and should 4e "elcomed in the United States given &ossi4le im&acts of a s&ill on U#S# economic interests and =uality of life# Perha&s the most im&ortant U#S#?s&ecific 4enefits of the *;A are three?fold# Cirst, the *;A "ill, for the first time, allo"

U#S#?listed I<Cs to "or% in &artnershi& "ith PEMEL, not including service contracts# T-A is t$e metap$orical camelIs nose under t$e tent , &aving the "ay to 4roader reform in Me ico# *here is no guarantee of such an outcome, ho"ever, failure for t$e &'(' to approve t$e T-A may put a drag on Mexican domestic energy reform momentum' *he *;A hel&s demonstrate that Me icoIs oil &atrimony can 4e &rotected in a Aoint &roduction regime "ith U#S# com&anies# It "as suggested 4y some senior officials that &assage of the *;A could hel& &rom&t 4roader domestic energy reform in Me ico# Second, it is unli%ely that the U#S# maritime 4order areas "ould 4e develo&ed
Many o4servers are o&timistic that t$e

"ithout the *;A, "hereas a PEMEL official indicated desire to 4egin e &loration on the Me ican side of the 4order# Potential U#S# o&&onents of the *;A may argue that given PEMELIs limited a4ility to e &lore in dee& "ater, the real effect of the *;A "ill 4e to reduce I<CsI com&etitive advantages# In other "ords, the o&&osition argument could state, the U#S# should sim&ly move for"ard "ith e &loration since our com&anies have the ca&ital and technology to move more =uic%ly than PEMEL# *hat criticism neglects the reality that, over the long?term, the I<Cs have a greater interest in investing throughout Me ican territory than they do in a sliver of U#S# area along the maritime 4order# *herefore, those I<Cs "ould not ris% enraging the Me ican government 4y, &otentially, draining Me ican resources from U#S# territory# *hus, U#S# interests in increased safe and secure

domestic oil production along the 4order will be best met wit$ t$e T-A# Cinally, &assage of the
*;A "ould 4oost U#S#?Me ico relations on energy issues, "hich have traditionally lagged# Me ican officials roundly e &ressed su&&ort for the *;A and e &ectation for U#S# ratification in conversation "ith the authors# T$e political impact of

not

approving and implementing t$e T-A would set bac" &'('#Mexican relations on energy s&ecifically and more 4roadly# Each of our countries $as $ot button domestic political issues t$at ta"e courage for political leaders to address # In Me ico, oil is one such issue, and
mem4ers of 4oth the PAN and P)I &ut their &olitical "eight 4ehind ratification in Me ico# *he U#S# not fulfilling its side of the agreement "ould, therefore, 4e seen as a violation of trust and could erode confidence# In the e treme, although unli%ely, if Me ico &roceeds "ith domestic energy reforms, U#S# com&anies could 4e shut out of certain o&&ortunities until the *;A is ratified# $o"ever, 4ilateral 4enefits of a&&roving the agreement do not re=uire immediate &assageG U#S# commitment can 4e demonstrated 4y the <4ama administration formally su4mitting the *;A for Congressional a&&roval and commencement of Congressional hearings#

T$e plan allows for a revitali:ation of 5 M ?, increases /ort$ American oil production, increases relations, and economies Harl, 13 PhD in International )elations from USC and President of the Asia Strategy Initiative -David Karl, /0(0'1, 2*ime for a North American Energy Initiative5, htt&600monstersa4road#"ord&ress#com0author0davidA%arl0900EM Me ico &ossesses energy reserves so large that they rival Ku"ait>s and it is the third?largest oil su&&lier
-follo"ing Canada and Saudi Ara4ia9 to the United States# Sitting on to& of "hat may 4e the "orld>s fourth?largest reserves of shale gas, it is also "ell &ositioned to 4enefit from the shale revolution# :et due to nationalistic restrictions that shut out

foreign ca&ital and technology, PEMEL has e &erienced shar& &roduction declines in recent years and is una4le to e &loit dee&?"ater reserves in the Fulf of Me ico or onshore resources that re=uire hydraulic
fracturing -2frac%ing59 to e tract# Indeed, a ;a%er Institute re&ort t"o years ago "arned that "ithout maAor ne" investments in e &loration and &roduction the com&any could lose its entire ca&acity to e &ort crude oil "ithin a decade# PEMEL>s ne" head sees shale develo&ment as a %ey to the country>s economic future 4ut ac%no"ledges that foreign &artnershi&s are a critical factor# *he regional payoff "ould 4e &rofound if Me ico is a4le to re&licate the energy renaissance no" unfolding in the other NAC*A countries and act in concert "ith them to ma imi@e its 4enefits# A recent Citigrou& re&ort argues that surging oil and natural gas out&ut in the three countries 2"ill eventually turn the glo4al geo&olitics of energy on its head5 and that 2the gro"ing continental sur&lus of hydrocar4ons &oints to North America effectively 4ecoming the ne" Middle East 4y the ne t decade#5 A study 4y the Manhattan Institute concurs, noting that 2the total North American hydrocar4on resource 4ase is

more than four times greater than all the resources e tant in the Middle East #5 It also estimates that a NAC*A?style colla4oration in the hydrocar4on sector could yield as muc$ as V( trillion in value to the North American economy over 7D years# Pros&ective gains li%e these should start &olicyma%ers in !ashington, <tta"a and Me ico City thin%ing in imaginative and coo&erative directions# A first ste& is the im&lementation of the U#S#?Me ico *rans4oundary $ydrocar4ons Agreement -*;$A9, signed a year ago and =uic%ly ratified 4y Me ico 4ut no" a"aiting &assage 4y the U#S# Congress#*** *he accord "ill foster Aoint coo&eration in the e &loration and develo&ment of oil and gas fields sitting astride the maritime 4order# ;ut an even more im&ortant conse=uence might 4e sym4olic O sending a concrete message a4out the advantages of 4ilateral &artnershi& Aust as Me ico 4egins to de4ate the Pena Nieto energy reforms#

)ac solvency ev
T*A s$ould progress legislatively (immons 13 O )egulatory and state affairs director at the Institute for Energy )esearch -Daniel, 2IE)>s Simmons to *estify on $ydrocar4ons Agreement,5 IE), J07J0'1, IE), htt&600"""#instituteforenergyresearch#org07D'10DJ07J0testimony?of?daniel?simmons? su4committee?on?energy?and?mineral?resources0900;"ang
North America is an energy rich continent# <ur energy issues are not issues of a lac% of su&&ly, 4ut a lac% of access to energy resources# *he *rans4oundary $ydrocar4on Agreement is one "ay the federal government should

4e moving for"ard to grant more access to ta &ayer?o"ned energy resources# *he agreement is a good agreement and should e &editiously move for"ard, 4ut it should not have ta%en more than a year for the Administration to su4mit *rans4oundary $ydrocar4on Agreement to Congress# &( s$ould ratify T*A (now 13 O <il and Fas .ournal Editor -Nic%, 2$ouse &anel as%s <4ama to ta%e energy ste&s "ith Me ico, Canada,5 <F., 10'J0'1, htt&600"""#ogA#com0articles07D'10D10house?&anel?as%s? o4ama?to?ta%e?energy?ste&s?"ith?me ico??canada#html900;"ang )atifying *;$A also "ould encourage US inde&endents and Me ico>s state?o"ned Petroleos Me icanos -Peme 9 to Aointly develo& resources in the gulf, noted Kyle Isa%o"er, American Petroleum
Institute>s vice?&resident for regulatory and economic &olicy#

2*his agreement "ill &rovide legal certainty to US Pinde&endentsQ, "hich "ill encourage investment in ne" energy develo&ment, creating Ao4s and s&urring economic gro"th ,5 he said# *he &resident should resolve lingering uncertainty over "hether he intends *;$A to 4e a treaty or an e ecutive agreement, Isa%o"er added# 2A&&ro&riate legislative action should then =uic%ly 4e ta%en to ratify the treaty, if a&&lica4le, and &ass im&lementing legislation ,5 he said#

Add#ons

)ac biofuels

)ac iKl
(witc$ to et$anol coming nowGnew c$eap fuel is necessary to prevent t$is Tibbles, P N;C Ne"s Corres&ondent -Kevin *i44les, J0'70R, 2)efineries slo"ly s"itch to ethanol5, htt&600"""#n4cne"s#com0id0'77H881H0ns0n4cTnightlyTne"sT"ithT4rianT"illiams0t0refineri es?slo"ly?s"itch?ethanol0`#Uf&vv8BXCSo900EM In the la4, it>s a clear li=uid, and at the &um& itIs li=uid gold6 Ethanol is the corn 4ased?clean air additive U#S# refiners are scram4ling to add to the nationIs fuel su&&ly# As President ;ush e &lained it to a Mil"au%ee audience on Ce4# R, 2*he more ethanol "e use, the less crude oil "e consume#5 It "ill also 4e a 4oon for
farmers, li%e )on Cluegel of Bena, Ill# 2*he rene"a4le fuel is a "in?"in situation for everyone,5 he says# ;ut critics charge ethanol is a money gra4# ItIs 4ig 4usiness for agricultural giants li%e Archer Daniels Midland, "hose television ad says, 2*he "orldIs demand for energy "ill never sto&, "hich is "hy ADM "ill never sto&#5 Bast summerIs energy 4ill mandated ethanolIs use

and, 4y May /, many refineries "ill s"itch# *hat ne" demand has &ushed ethanol to V7#HD a gallon E more than t"ice
"hat it costs to ma%e#

laundry list impact


-iofuels destroy ecosystemsGpesticides, monocultures, deforestationGalso causes deforestation, decreases fuel production, and $urts small farms 7,+, 12 -Flo4al Corest Coalition, last u&dated '707J0'D, 2;iofuels6 A Disaster in the Ma%ing5, htt&600"""#glo4alforestcoalition#org0nl0"&? content0u&loads07D'D0'70;iofuelsadisasterinthema%ing#&df900EM Mean"hile, international trade in 4iofuels is already causing a negative im&act on food sovereignty, rural livelihoods, forests and other ecosystems, and these negative im&acts are e &ected to accumulate ra&idly# Barge?scale, e &ort?oriented &roduction of 4iofuel re=uires large?scale monocultures of trees, sugarcane, corn, oil&alm, soy and other cro&s# *hese monocultures already form the num4er one cause of rural de&o&ulation and deforestation "orld"ide# *he ra&idly increasing demand for these cro&s as a source of 4iofuel "ill lead to6 increased land com&etition leading to further land concentration, the marginali@ation of small? scale agriculture and the "ides&read conversion of forests and other ecosystemsG ara4le land that is currently used to gro" food 4eing used to gro" fuel, leading to staggering food &rices and causing hunger, malnutrition and im&overishment amongst the &oorest sectors of societyG rural unem&loyment and de&o&ulationG the destruction of the traditions, cultures, languages and s&iritual values of Indigenous Peo&les and rural communitiesG the e tensive use of agro?chemicals, "hich deteriorate human health and ecosystems the destruction of "atersheds and the &ollution of rivers, la%es and streamsG droughts and other local and regional climatic e tremesG and the e tensive use of genetically
modified organisms leading to un&recedented ris%s# *hese effects "ill have &articularly a negative im&act on "omen and Indigenous Peo&les, "ho are economically marginali@ed and more de&endent on natural resources li%e "ater and forests# ;iofuels are a

disaster in the ma%ing# E

isting legally 4inding standards, regulations and enforcement mechanisms in the -&otential9 &roduction countries are a4solutely insufficient to &revent the a4ove?mentioned im&acts# International demand for 4iofuels is already sur&assing su&&ly in %ey countries li%e Malaysia and ;ra@il, giving an im&ortant &ush to the e &ansion of destructive cro&s li%e oil &alm and sugar cane# Initiatives to &roduce these monocultures 2res&onsi4ly5 are reAected 4y many NF<s 7 and social movements in the &roduction countries themselves, "ho have em&hasi@ed that the a4ove?mentioned negative social and environmental im&acts are inherent to the large?scale &roduction of monocultures#

5esticides cause endocrine disruption, culminating in extinction ### can6t reproduce /Q nvironment 3 -2Pesticides,5 htt&600"""#nAenvironment#org0&esticides#htm9 Not only are current gardening &ractices harmful to local ecosystems, 4ut also e &anding pesticide use a&&ears to t$reaten t$e fertility and viability of $uman life # *heo Co4urnIs e tensive research in <ur Stolen Cuture suggests that the declining s&erm count "orld"ide and the a4errations in animal se uality may 4e the result of endocrine disru&ting chemicals in our environment # Many &esticides mimic human hormones
there4y sending inaccurate signals to our endocrine systems# W*hey 4ind to intracellular rece&tor &roteins for steroid hormones and evo%e hormonal effects in animals and humans#W *hese hormone?mimic%ing chemicals tric% the estrogen rece&tors disru&ting normal endocrine res&onse# *his disru&tion has 4een lin%ed to the alarming increase in the U#S# of

re&roductive organ cancers# Information a4out endocrine system disru&ters "as not availa4le to EPA "hen these
&esticides "ere registered -not a&&roved9# *he chemical industry is resisting testing for EDs -endocrine system disru&ters9# $o"ever, it is interesting to note that Fer4erI 4a4y foods tolerate D[ &esticide residues in 4a4y food and have 4anned the use of genetically altered seed in their foods#

.eforestation causes extinction (antos EE -Miguel A#, Professor of Ecology and Environmental Science O ;aruch College, 2*he Environmental Crisis,5 &g# 1/?1R9 In addition, natural forests &rovide recreation and uni=ue scenic 4eauty "hile at the same time serving as the 4asis for natural communities that &rovide life su&&ort to organisms -including &eo&le9# As mentioned, one vital 4y?&roduct of &lant &hotosynthetic activity is oxygen, "hich is essential to $uman existence# In addition, forests remove &ollutants and odors from the atmos&here# *he "ilderness is highly effective in meta4oli@ing

many to ic su4stances# *he atmos&heric concentration of &ollutants over the forest, such as &articulates and sulfur dio

ide, are measura4ly 4elo" that of adAacent areas -see Cigure 7#1 9# In vie" of their ecologic role in ecosystems, the im&act of s&ecies e tinction may 4e devastating# *he rich diversity of s&ecies and the ecosystems that su&&ort them are intimately

connected to t$e long#term survival of $uman"ind # As the historic conservationist Aldo Beo&old stated
in '8J8, *he outstanding scientific discovery of the t"entieth century is not television or radio 4ut the com&le ity of the land organisms#### *o %ee& every cog and "heel is the first &recaution of intelligent tin%ering# '' An endangered s&ecies may have a significant role in its community# Such an organism may control the structure and functioning of the community through its activities# *he sea otter, for e am&le, in relation to its si@e, is &erha&s the most voracious of all marine mammals# *he otter feeds on sea mollus%s, sea urchins, cra4s, and fish# It needs to eat more than 7D &ercent of its "eight every day to &rovide the necessary energy to maintain its 4ody tem&erature in a cold marine ha4itat# *he e tinction of such %eystone or controller s&ecies from the

ecosystem "ould cause great damage# Its e tinction could have cascading effects on many s&ecies, even causing secondary e tinction# *raditionally, s&ecies have al"ays evolved along "ith their changing environment# As disease organisms
evolve, other organisms may evolve chemical defense mechanisms that confer disease resistance# As the "eather 4ecomes drier, for e am&le, &lants may develo& smaller, thic%er leaves, "hich lose "ater slo"ly# *he environment, ho"ever, is no" develo&ing and changing ra&idly, 4ut evolution is slo", re=uiring hundreds of thousands of years# If s&ecies are allo"ed to 4ecome e tinct, t$e

total 4iological diversity on art$ will be greatly reducedG therefore, the &otential for natural ada&tation and change also "ill 4e reduced, thus endangering the diversity of future $uman life?su&&ort systems# Monocultures cause extinction ,owler and Mooney, E2 -Cary and Pat, 2)ural Advancement Cund International, Shattering6 Cood, Politics, and the Boss of Fenetic Diversity5, '88D, &g# i 9
!hile many may &onder the conse=uences of glo4al "arming, &erha&s the 4iggest single environmental catastro&he in human history is unfolding in the garden# !hile all are rightly concerned a4out the &ossi4ility of nuclear "ar, an e=ually

devastating time 4om4 is tic%ing a"ay in the fields of farmers all over the "orld# 4oss of genetic diversity in agricultureEsilent, ra&id, ine ora4leEis leading us to a rende@vous "ith extinctionEto the doorste& of hunger on a scale "e refuse to imagine# *o sim&lify the environment as "e have done "ith agriculture is to destroy the com&le interrelationshi&s that hold the natural "orld together# )educing the diversity of life, "e narro" our o&tions for the future and render our o"n survival more &recarious# It is life at the end of the
lim4# *hat is the su4Aect of this 4oo%# Agronomists in the Phili&&ines "arned of "hat 4ecame %no"n as southern corn leaf 4light in 'DR'#I *he disease "as re&orted in Me ico not long after# In the summer of '8RH, the first faint hint that the 4light "as in the United States came from seed gro"ers in the Mid"est# *he danger "as ignored# ;y the s&ring of '8(D' the disease had ta%en hold in the Clorida corn cro&# ;ut it "as not until corn &rices lea&t thirty cents a 4ushel on the Chicago ;oard of *rade that the "orld too% noticeG 4y then it "as AugustEand too late# ;y the close of the year, Americans had lost fifteen &ercent of their most im&ortant cro& Emore than a 4illion 4ushels# Some southern states lost half their harvest and many of their farmers# !hile consumers suffered in the grocery stores, &roducers "ere out a 4illion dollars in lost yield# And the disaster "as not solely domestic# U#S#

seed e &orts may have s&read the 4light to Africa, Batin America and Asia# (mall farms solve extinction -oyce = -.ames, Professor of Economics O University of Massachusetts?Amherst, 2A Cuture for Small CarmsU5, .uly, htt&600"""#&eri#umass#edu0fileadmin0&df0"or%ingT&a&ers0"or%ingT&a&ersT/'? 'DD0!PHR#&df9 *here is a future for small farms# <r, to 4e more &recise, there can 4e and should 4e a future for them# Fiven the de&endence of Nmodern> lo"?diversity agriculture on Ntraditional> high?diversity agriculture, the long?term food security of human%ind "ill de&end on small farms and their continued &rovision of the environmental service of in situ conservation of cro& genetic diversity# Policies to su&&ort small farms can 4e advocated, therefore, not merely as a matter of sym&athy, or nostalgia, or e=uity# Such &olicies are also a matter of $uman survival # *he diversity that under&ins the sustaina4ility of "orld agriculture did not fall from the s%y# It "as 4e=ueathed to us 4y the JDD generations of farmers "ho have carried on the &rocess of artificial selection since &lants "ere first domesticated# Until
recently, "e too% this diversity for granted# *he ancient reservoirs of cro& genetic diversity, &lant geneticist .ac% $arlan -'8(/, &# R'89 "rote three decades ago, Nseemed to most &eo&le as ine hausti4le as oil in Ara4ia#> :et, $arlan "arned, N the s&eed "hich

enormous cro& diversity can 4e essentially "i&ed out is astonishing#>

+ultural survival is "ey to $uman survival +lec$ 4am )" -Maivan, Xisiting Associate Professor O American University !ashington College of Ba", 2At *he Edge of the State6 Indigenous Peo&les and Self?Determination5, &g# 7D/? 7DR9
Nevertheless, as anthro&ologists %no", ethnicity is 4oth an ena4ling and an inesca&a4le condition of human e istence# It is a collective system of meaning that generates social energy "hich can 4e &ut to constructive and destructive uses e=ually# Stavenhagen "rites6 Cultures are com&le &atterns of social relationshi&s, material o4Aects, and s&iritual values that give meaning and identity to community life and are a resource for solving the &ro4lems of everyday life# *hat some very ugly cam&aigns in modern history, usually unleashed 4y the destructive economic and military &olicies of the "orld>s &o"erful states, have ta&&ed, frighteningly successfully, into ethnic energy is undenia4le# ;ut it is Aust as undenia4le that "nowledgeE of the universe, of a s&ecific &art of it, of "or%a4le social relationshi&s, of human natureEt$at

is crucial to the &roAect of $uman survival remains se&arately encoded in the distinctive cultures of ethnic grou&s# No human community or ethnic grou& can construct an informed and meaningful future if it is cut off from its cultural &ast# And alienation from meaning, as much as e &loited meaning, can lead to violence#

T$at destroys t$e biosp$ere and causes groundwater contamination 5ec", 9 -.ohn Pec%, ''0J0(, 2*he *hreat of Agrofuels Industriali@ed FM< Monocultures !ill <nly $urt Carmers in Agrofuels5, htt&600"""#n"rage#org0content0threat?agrofuels? industriali@ed?gmo?monocultures?"ill?only?hurt?farmers900EM As concerns a4out &ea% oil mount, many &eo&le are declaring agrofuels to 4e the latest &anacea for saving civili@ation from its im&ending colla&se# Pro&elling this 4and"agon is a "hole gaggle of venture ca&italists, free trade advocates,
farm commodity grou&s, agri4usiness giants, 4iotech outfits, and yes the oil giants and car ma%ers# As detailed in the .uly 7DD( issue of Seedling -availa4le online at """#grain#org9, many of the 4iggest agrofuel 4oosters are familiar o&&onents to those no" struggling for glo4al Austice, food sovereignty, and land reform# At the to& of the list one finds such names as6 ADM, Cargill, ;unge, ConAgra, Dreyfus, DuPont, Syngenta, Monsanto, Maru4enAi, *ate _ Byle, !yerhauser, *em4ec, ;ritish Petroleum, Misui, )oyal Dutch Shell, Chevron, Mitsu4ishi, Petro4ras, *otal, ;arclays, Morgan Stanley, Foldman Sachs, Societe Fenerale, and the Carlyle Frou&# Not sur&risingly, the InterAmerican Ethanol Commission is also led 4y other neoli4eral glo4ali@ation cheerleaders such as Clorida governor, .e4 ;ushG ;ra@ilIs former Minister of Agriculture, )o4erto )odriguesG and Buis Moreno, the &resident of the Inter? American Develo&ment ;an%# Contrary to their green"ashed image, 7'st century agrofuels 4ear little

groundwater impact

resem4lance to the homegro"n energy sources of yesteryear # It is one thing to fill your car tan% "ith used
vegeta4le oil and =uite another to 4e 4ulldo@ing rainforests and dis&lacing &easants for the sa%e of glo4etrotting commodities# !ood, &eat, and other 4iomass have 4een 4urned for eons, "hile the utility of &lant?derived li=uid fuels "as first reali@ed in the mid '8th century, "ell 4efore &etroleum# In fact, "hen )udolf Diesel first demonstrated his ne" fangled engine at the !orld E hi4ition in Paris in 'H8H he ran it on &eanut oil# $enry CordsI early cars "ere designed to run on ethanol derived from hem&, 4ut 4y the '81Ds ;ig <il had cons&ired to s=uash grassroots alternatives# *oday, if you "ant energy free from cor&orate control you have to do it yourself, such as Amish farmers "ho coo% "ith "ood stoves or ;ougainville re4els that run their vehicles on coconut oil# Modern cor&orate outfits demand high volume su&&ly from industrial monocultures of corn, soy4eans, sugar cane, and increasingly &alm oil# Most ironic is to see the vehicles of organic co?o&s driving around the Mid"est &o"ered 4y 4iotech agrofuels# Fiven ho" reluctant most &eo&le are to consume genetically engineered foods directly, the only other outlet for these du4ious W"onderW# cro&s is as high fructose corn syru&, factory farm livestoc% rations, or agrofuel feedstoc%s# In the research &i&eline are agrofuels derived from yet other food sources cassava, "heat, 4arley, as "ell as cellulosic ethanol derived from s"itchgrass, cro& residue, and even 4iotech trees# Some scientists are also "or%ing on genetically engineered algae for agrofuel &roduction# *he maAority of agrofuels also

come from industrial refineries that are Aust as fossil fuel intensive and ecologically destructive as any &etroleum counter&art# !e are not tal%ing a4out grand&aIs old moonshine still# *he notorious Fo&her State
Ethanol Plant in St# Paul, MN, "hich finally closed in 7DDJ, "as emitting a 71D tons of volatile organic com&ounds -X<Cs9 from drying corn mash into densely &o&ulated neigh4orhoods each year seven times the legal limit# Bocal "ater ta4les have dro&&ed 4y 1D feet since the U!FP ethanol &lant 4egan its o&eration in Criesland, !I, consuming a "ho&&ing '(R million gallons annually# Much of this is dum&ed as H8C "aste"ater 4ac% into a local stream# Many critics e &ect ethanol &lants to eventually

cause "ides&read ground"ater contamination as occurred in CA "ith methyl tertiary 4utyl ether -M*;E9# )ec%less M*;E &roduction affected the drin%ing "ater su&&ly of J/ million &eo&le and led to a successful 7DD' la"suit
against 'H energy com&anies see%ing V1DD million in damages# *he lesson the agrofuel industry too% a"ay from the M*;E case, though, "as not to clean u& its act 4ut to see% a lia4ility "aiver, similar to "hat the U#S# nuclear industry enAoys, in the last federal energy 4ill# Cortunately, this &loy as &art of the last federal energy 4ill de4ate "as narro"ly defeated 4y a coalition of consumer advocates, local governments, and environmental grou&s#

7roundwater contamination destroys biodiversity -erg"amp, 2P O head of the !ater Programme at UCN, fello" at IUCN>s Flo4al !ater Programme on ground"ater and river 4asin management -Fer, 2Fround"ater and Ecosystem Services6 to"ards their sustaina4le use5, International Sym&osium on Fround"ater Sustaina4ility, March 'D, 7DDR, htt&600aguas#igme#es0igme0ISF!AS0Ponencias ISF!AS0'1? ;erg%am&#&df900.Kahn
Fround"ater is an im&ortant com&onent to &roviding ecosystem services# Cor e am&le, a=uifers are connected to a greater ecological and hydrological landsca&e that includes adAacent ri&arian areas, u&land terrestrial ecosystems, and surrounding river 4asins -N)C, 7DDJ9# Ecosystems that de&end on ground"ater include terrestrial vegetation, river 4ase

flo" systems, a=uifer and cave ecosystems, "etlands, terrestrial fauna, and estuarine and near? shore ecosystems -Sinclair Knight Mer@, 7DD'9# Fround"ater associated ecosystem services &rovide su&&ort to a "ide range of
&roduction and consum&tion &rocesses, "hich have high economic value -Emerton and ;os, 7DDJ9# In this section, "e discuss the "ays in "hich ground"ater &rovides ecosystems in the form of &rovisioning, regulating, su&&orting and cultural services# Cor e am&le, discharge to streams and rivers may &rovide essential nutrients to a=uatic life and su&&ort do"nstream users of "ater for drin%ing or irrigation -N)C, '88(9# *hese ecosystems de&end on several ground"ater characteristics, "hich include the =uality of "ater, discharge flu from an a=uifer, and the level of &ressure of ground"ater -Sinclair Knight Mer@, 7DD'9# Small changes

can &otentially cause e tensive damage to de&endent ecosystems# In addition "e e

amine ho" ecosystem

*he challenge is to use ground"ater and interrelated ecosystem services in a sustaina4le manner to &rovide for the &resent "ithout com&romising the needs of future generations# *he MEA classifies fresh "ater -including ground"ater9 as a
services, such as climate regulation and land?use are critical to maintaining ground"ater systems# &rovisioning service, "hich is defined as 2&roducts o4tained from ecosystems5 -MEA, 7DD/, &#JD9# Most fresh"ater is not in la%es and rivers, 4ut in a=uifers# In fact, ground"ater is the earth>s largest accessi4le store of fresh "ater

-e cluding ice sheets and glaciers9 and constitutes a4out 8J[ of all fresh "ater -!ard and )o4inson,
'88D9# Fround"ater is also an integral com&onent of regulating, su&&orting and cultural ecosystem services# <ne of the critical functions of ground"ater as a &rovisioning service is its storage and retention for domestic, industrial and agricultural uses# As

many as t"o 4illion &eo&le de&end directly u&on a=uifers for drin%ing "ater, and JD[ of the "orld>s food is &roduced 4y irrigated agriculture that relies heavily on ground"ater -Morris et al#,
7DD19#

xtinction Noung, 12 O Ph#D# in costsal marine evology, mem4er of the Academy of Natural Sciences, -)uth, 2;iodiversity6 "hat it is and "hy it>s im&ortant5, Ce4ruary 8, 7D'D, *al%ingNature, htt&600"""#tal%ingnature#com07D'D0D704iodiversity04iodiversity?"hat?and?"hy0900.Kahn Different s&ecies "ithin ecosystems fill &articular roles, they all have a function, they all have a niche# *hey interact "ith each other and the &hysical environment to &rovide ecosystem services that are vital for our survival# Cor e am&le &lant s&ecies convert car4on dio ide -C<79 from the atmos&here and energy from the sun into useful things such as food, medicines and tim4er# Pollination carried out 4y insects such as 4ees ena4les the &roduction of H of our food cro&s# Diverse mangrove and coral reef ecosystems &rovide a "ide variety of ha4itats that are essential for many fishery s&ecies # *o ma%e it
sim&ler for economists to com&rehend the magnitude of services offered 4y 4iodiversity, a team of researchers estimated their value O it amounted to VUS11 trillion &er year# 2;y &rotecting 4iodiversity "e maintain ecosystem services5 Certain s&ecies &lay a

2%eystone5 role in maintaining ecosystem services# Similar to the removal of a %eystone from an arch, the removal of these s&ecies can result in the colla&se of an ecosystem and the su4se=uent removal of ecosystem services# *he most "ell %no"n e am&le of this occurred during the '8th century "hen sea otters "ere almost hunted to e tinction

4y fur traders along the "est coast of the USA# *his led to a &o&ulation e &losion in the sea otters> main source of &rey, sea urchins# ;ecause the urchins gra@e on %el& their 4ooming &o&ulation decimated the under"ater %el& forests# *his loss of ha4itat led to declines in local fish &o&ulations# Sea otters are a %eystone s&ecies once hunted for their fur -Image6 Mi%e ;aird9 Eventually a treaty &rotecting sea otters allo"ed the num4ers of otters to increase "hich inturn controlled the urchin &o&ulation, leading to the recovery of the %el& forests and fish stoc%s# In other cases, ecosystem services are maintained 4y entire functional grou&s, such as a&e &redators -See .eremy $ance>s &ost at Monga4ay9# During the last 1/ years, over fishing of large shar% s&ecies along the US Atlantic coast has led to a &o&ulation e &losion of s%ates and rays# *hese s%ates and rays eat 4ay scallo&s and their out of control &o&ulation has led to the closure of a century long scallo& fishery# *hese are Aust t"o e am&les demonstrating ho" 4iodiversity can maintain the services that ecosystems &rovide for us, such as fisheries# <ne could argue that to maintain ecosystem services "e don>t need to &rotect 4iodiversity 4ut rather, "e only need to &rotect the s&ecies and functional grou&s that fill the %eystone roles# $o"ever, there are a cou&le of &ro4lems "ith this idea# Cirst of all, for most ecosystems "e don>t %no" "hich s&ecies are the

%eystones\ Ecosystems are so com&le

that "e are still discovering "hich s&ecies &lay vital roles in maintaining them# In some cases its grou&s of s&ecies not Aust one s&ecies that are vital for the ecosystem# Second, even if "e did com&lete the enormous tas% of identifying and &rotecting all %eystone s&ecies, "hat 4ac%?u& &lan "ould "e have if an unforseen event -e#g# &ollution or disease9 led to the demise of these N%eystone> s&eciesU !ould there 4e another s&ecies to save the day and ta%e over this roleU Classifying some s&ecies as N%eystone> im&lies that the others are not im&ortant# *his may lead to the non? %eystone s&ecies 4eing considered ecologically "orthless and su4se=uently over?e &loited# Sometimes "e may not even %no" "hich s&ecies are li%ely to fill the %eystone roles# An e am&le of this "as discovered on Australia>s Freat ;arrier )eef# *his research e amined "hat "ould ha&&en to a coral reef if it "ere over?fished# *he 2over?fishing5 "as simulated 4y fencing off coral 4ommies there4y e cluding and removing fish from them for three years# ;y the end of the e &eriment, the reefs had changed from a coral to an algae dominated ecosystem O the coral 4ecame overgro"n "ith algae# !hen the time came to remove the fences the researchers e &ected her4ivorous s&ecies of fish li%e the &arrot fish -Scarus s&&#9 to eat the algae and ena4le the reef to s"itch 4ac% to a coral dominated ecosystem# ;ut, sur&risingly, the shift 4ac% to coral "as driven 4y a su&&osed Nunim&ortant> s&ecies O the 4at fish -Plata &innatus9# *he 4at fish "as &reviously thought to feed on inverte4rates O small cra4s and shrim&, 4ut "hen offered a 4ig &atch of algae it turned into a hungry her4ivore O a co" of the sea O gra@ing the algae in no time# So a fish &reviously thought to 4e Nunim&ortant> is actually a %eystone s&ecies in the recovery of coral reefs overgro"n 4y algae\ !ho %no"s ho" many other s&ecies are out there "ith un%no"n ecosystem roles\ In some cases it>s easy to see "ho the %eystone s&ecies are 4ut in many ecosystems seemingly unim&ortant or redundant s&ecies are also ca&a4le of changing niches and maintaining ecosystems# *he more

4iodiverse an ecosystem is, the more li%ely these s&ecies "ill 4e &resent and the more resilient an ecosystem is
to future im&acts# Presently "e>re only scratching the surface of understanding the full im&ortance of 4iodiversity and ho" it hel&s maintain ecosystem function# *he sco&e of this tas% is immense# In the meantime, a "ise insurance &olicy for maintaining ecosystem services "ould

4e to conserve 4iodiversity# In doing so, "e increase the chance of maintaining our ecosystem

services in the event of future im&acts such as disease, invasive s&ecies and of course, climate change# *his year of 4iodiversity O a time to recogni@e that our &rotection of 4iodiversity maintains this service#

is the international 4iodiversity ma%es our survival on this &lanet &ossi4le and that

(afe water is also "ey to agriculture ,A0, EP O Cood and Agriculture <rgani@ation of the United Nations, -2Cha&ter '6 Introduction to agricultural "ater &ollution5, Natural )esources Management and Environment De&artment of the United Nations Cood and Agriculture <rgani@ation, htt&600"""#fao#org0docre&0!7/8HE0"7/8HeDJ#htm900.Kahn Second only to availa4ility of drin%ing "ater, access to food su&&ly is the greatest &riority# $ence, agriculture is a dominant com&onent of the glo4al economy# !hile mechani@ation of farming in many countries has resulted in a dramatic fall in the &ro&ortion of &o&ulation "or%ing in agriculture, the &ressure to &roduce enough food has had a "orld"ide im&act on agricultural &ractices# In many countries, this &ressure has resulted in e &ansion into marginal lands and is usually associated "ith su4sistence farming# In other countries, food re=uirements have re=uired e &ansion of irrigation and steadily increasing use of fertili@ers and &esticides to achieve and sustain higher yields# CA< -'88Da9, in its Strategy on !ater for Sustaina4le Agricultural Develo&ment, and the United
Nations Conference on Environment and Develo&ment -UNCED9 in Agenda 7', Cha&ters 'D, 'J and 'H -UNCED, '8879 have highlighted the challenge of securing food su&&ly into the 7'st century# Sustaina4le agriculture is one of the greatest challenges#

Sustaina4ility im&lies that agriculture not only secure a sustained food su&&ly, 4ut that its environmental, socio?economic and human health im&acts are recogni@ed and accounted for "ithin national develo&ment &lans# CA<Is definition of Sustaina4le agricultural develo&ment a&&ears in ;o '# It is "ell
%no"n that agriculture is the single largest user of fresh"ater resources, using a glo4al average of (D[ of all surface "ater su&&lies#

E ce&t for "ater lost through eva&otrans&iration, agricultural "ater is recycled 4ac% to surface "ater and0or ground"ater# $o"ever, agriculture is 4oth cause and victim of "ater &ollution# It is
a cause through its discharge of &ollutants and sediment to surface and0or ground"ater, through net loss of soil 4y &oor agricultural &ractices, and through salini@ation and "aterlogging of irrigated land# It is a victim through use of "aste"ater and &olluted surface and ground"ater "hich contaminate cro&s and transmit disease to consumers and farm "or%ers# Agriculture e ists "ithin

a sym4iosis of land and "ater and, as CA< -'88Da9 ma%es =uite clear, W### a&&ro&riate ste&s must 4e ta%en to ensure that
agricultural activities do not adversely affect "ater =uality so that su4se=uent uses of "ater for different &ur&oses are not im&aired#W Sagardoy -CA<, '881a9 summari@ed the action items for agriculture in the field of "ater =uality as6 h esta4lishment and o&eration of cost?effective "ater =uality monitoring systems for agricultural "ater uses# h &revention of adverse effects of

agricultural activities on "ater =uality for other social and economic activities and on "etlands, inter alia through o&timal use of on?farm in&uts and the minimi@ation of the use of e ternal in&uts in agricultural activities# h esta4lishment of 4iological, &hysical and chemical "ater =uality criteria for agricultural
"ater users and for marine and riverine ecosystems# h &revention of soil runoff and sedimentation# h &ro&er dis&osal of se"age from human settlements and of manure &roduced 4y intensive livestoc% 4reeding# h minimi@ation of adverse effects from agricultural chemicals 4y use of integrated &est management# h education of communities a4out the &ollution im&acts of the use of fertili@ers and chemicals on "ater =uality and food safety# *his &u4lication deals s&ecifically "ith the role of agriculture in the field of fresh"ater =uality# Categories of non?&oint source im&acts ? s&ecifically sediment, &esticides, nutrients, and &athogens ? are identified together "ith their ecological, &u4lic health and, as a&&ro&riate, legal conse=uences# )ecommendations are made on evaluation techni=ues and control measures# Much of the scientific literature on agricultural im&acts on surface and ground"ater =uality is from develo&ed countries, reflecting 4road scientific concern and, in some cases, regulatory attention since the '8(Ds# *he scientific findings and management &rinci&les are, ho"ever, generally a&&lica4le "orld"ide# *his &u4lication does not deal "ith "ater =uality im&acts caused 4y food &rocessing industries insofar as these are considered to 4e &oint sources and are usually su4Aect to control through effluent regulation and enforcement# !ater =uality as a glo4al issue Agriculture, as the single largest user of

fresh"ater on a glo4al 4asis and as a maAor cause of degradation of surface and ground"ater resources through erosion and chemical runoff, has cause to 4e concerned a4out the glo4al im&lications of "ater =uality# *he associated agrofood?&rocessing industry is also a significant source of organic &ollution
in most countries# A=uaculture is no" recognised as a maAor &ro4lem in fresh"ater, estuarine and coastal environments, leading to eutro&hication and ecosystem damage# *he &rinci&al environmental and &u4lic health dimensions of the glo4al fresh"ater =uality &ro4lem are highlighted 4elo"6 h Cive million &eo&le die annually from "ater?4orne diseases# h Ecosystem dysfunction and

loss of 4iodiversity# h Contamination of marine ecosystems from land?4ased activities # h


Contamination of ground"ater resources# h Flo4al contamination 4y &ersistent organic &ollutants# E &erts &redict that, 4ecause &ollution can no longer 4e remedied 4y dilution -i#e# the flo" regime is fully utili@ed9 in many countries, fresh"ater =uality "ill 4ecome the &rinci&al limitation for sustaina4le develo&ment in these countries early in the ne t century# *his WcrisisW is &redicted to have the follo"ing glo4al dimensions6 h Decline in sustaina4le food resources -e#g# fresh"ater and coastal

fisheries9 due to &ollution# h Cumulative effect of &oor "ater resource management decisions 4ecause of inade=uate "ater

=uality data in many countries# h Many countries can no longer manage &ollution 4y dilution, leading to higher levels of a=uatic &ollution# h Escalating cost of remediation and &otential loss of Wcredit"orthinessW# *he real and &otential loss of develo&ment o&&ortunity 4ecause of diversion of funds for remediation of "ater &ollution has 4een noted 4y many countries# At the '88J E &ert Meeting on !ater 3uantity and 3uality Management convened 4y the Economic and Social Commission for Asia and the Pacific -ESCAP9, Asian re&resentatives a&&roved a declaration "hich called for national and international action to assess loss of economic o&&ortunity due to "ater &ollution and to determine the &otential economic im&acts of the Wlooming "ater crisisW# Interestingly, the concern of the delegates to the ESCAP meeting "as to demonstrate the economic rather than sim&ly the environmental im&acts of "ater &ollution on sustaina4le develo&ment# Credit"orthiness -Matthe"s, '8819 is of concern insofar as lending institutions no" loo% at the cost of remediation relative to the economic gains# *here is concern that if the cost of remediation e ceeds economic 4enefits, develo&ment &roAects may no longer 4e credit"orthy# Sustaina4le agriculture "ill, inevita4ly, 4e re=uired to factor into its "ater resource &lanning the larger issues of sustaina4le economic develo&ment across economic sectors# *his com&rehensive a&&roach to management of "ater resources has 4een highlighted in the !orld ;an%Is -'8819 &olicy on "ater resource develo&ment# <lder chlorinated agricultural &esticides have 4een im&licated in a variety of human health issues and as causing significant and "ides&read ecosystem dysfunction through their to ic effects on organisms# Fenerally 4anned in the develo&ed countries, there is no" a concerted international effort to 4an these "orld"ide as &art of a &rotocol for Persistent <rganic Pollutants -P<Ps9# <ne e am&le of such an effort "as the Intergovernmental Conference on the Protection of the Marine Environment from Band?4ased Activities, convened in !ashington DC in '88/ Aointly "ith UNEP -more information is included in Cha&ter /9#

T$e collapse of &'(' agriculture turns every impact and ma"es extinction inevitable 4ugar, = O U#S# Senator O Indiana, ;eta *heta Pi from Denison University, )hodes Scholar at Pem4ro%e College ? ;achelor and MasterIs degrees, U#S# Navy Bieutenantn -)ichard, 2Plant Po"er5 <ur Planet v# 'J n# 1, htt&600"""#une&#org0<urPlanet0imgversn0'J10lugar#html9 In a "orld confronted 4y glo4al terrorism, turmoil in the Middle East, 4urgeoning nuclear threats and other crises, it is easy to lose sight of the long?range challenges# ;ut "e do so at our &eril# <ne of the most daunting of them is meeting the "orld>s need for food and energy in this century# At sta%e is not only &reventing starvation and saving the environment, 4ut also "orld &eace and security# $istory tells us that states may go to "ar over access to resources, and that &overty and famine have often 4red fanaticism and terrorism# !or%ing to feed the "orld "ill minimi@e factors that contri4ute to glo4al insta4ility and the &roliferation of "ea&ons of mass destruction# !ith the "orld &o&ulation e &ected to gro" from R 4illion &eo&le today to 8 4illion 4y mid?century, the demand for
afforda4le food "ill increase "ell 4eyond current international &roduction levels# Peo&le in ra&idly develo&ing nations "ill have the means greatly to im&rove their standard of living and caloric inta%e# Inevita4ly, that means eating more meat# *his "ill raise demand for feed grain at the same time that the gro"ing "orld &o&ulation "ill need vastly more 4asic food to eat# Com&licating a solution to this &ro4lem is a dynamic that must 4e 4etter understood in the !est6 develo&ing countries often use limited ara4le land to e &and cities to house their gro"ing &o&ulations# As good land disa&&ears, &eo&le destroy tim4er resources and even rainforests as they try to create more ara4le land to feed themselves# *he long?term environmental conse=uences could 4e disastrous for the entire glo4e# Productivity revolution *o meet the e &ected demand for food over the ne t /D years, "e in the United States "ill have to gro" roughly three times more food on the land "e have# *hat>s a tall order# My farm in Marion County, Indiana, for e am&le, yields on average H#1 to H#R tonnes of corn &er hectare O ty&ical for a farm in central Indiana# *o tri&le our &roduction 4y 7D/D, "e "ill have to &roduce an annual average of 7/ tonnes &er hectare# Can "e &ossi4ly 4oost out&ut that muchU !ell, it>s 4een done 4efore# Advances in the use of fertili@er and "ater, im&roved machinery and 4etter tilling techni=ues com4ined to generate a threefold increase in yields since '81/ O on our farm 4ac% then, my dad &roduced 7#H to 1 tonnes &er hectare# Much US agriculture has seen similar increases# ;ut of course there is no guarantee that "e can achieve those results again# Fiven the urgency of

e &anding food &roduction to meet "orld demand, "e must invest much more in scientific research and target that money to"ard &roAects that &romise to have significant national and glo4al im&act# Cor the United States, that "ill mean a maAor shift in the "ay "e conduct and fund agricultural science# Cundamental research "ill generate the innovations that "ill 4e necessary to feed the "orld# *he United States can ta%e a leading &osition in a &roductivity revolution# And our success at increasing food &roduction may &lay a decisive humanitarian role in the survival of 4illions of &eo&le and the health of our &lanet#

warming impact
+auses warming 5ec", 9 -.ohn Pec%, ''0J0(, 2*he *hreat of Agrofuels Industriali@ed FM< Monocultures !ill <nly $urt Carmers in Agrofuels5, htt&600"""#n"rage#org0content0threat?agrofuels? industriali@ed?gmo?monocultures?"ill?only?hurt?farmers900EM A recent study in the .ournal of Atmos&heric Chemistry and Physics has also made the startling assertion that 4urning agrofuels may actually contri4ute more to glo4al "arming than 4urning &etroleum # As re&orted in the *imes -U#K#9 on Se&t# 77, 7DD(, the 4urning of 4iodiesel from corn and canola actually generates /D[ and (D[ more greenhouse gas emissions, res&ectively, than the fossil fuel they "ould re&lace# *his is 4ecause agrofuel com4ustion generates more nitrous o ide "hich is 78R times more damaging as a greenhouse gas than car4on dio ide# Scientists admitted that this initial finding does not even ta%e into account the adverse climate
im&act of the fossil fuels e &ended to &roduce agrofuels in the first &lace# Using these figures, Dr# Dave )eay of the University of Edin4urgh estimated that if corn?4ased ethanol out&ut clim4s seven fold 4y 7D77, a &ro&osal no" 4eing &ushed in Congress, then

greenhouse gas emissions from the U#S# trans&ort sector alone "ould rise 4y R[# Bi%e the melting drainage of &eatlands in southeast Asia for agrofuel &alm oil &lantations "ill also have a huge im&act on glo4al "arming#
of arctic &ermafrost, human?induced

ogallala im&act .epletes t$e 0gallala A!uifer 5ec", 9 -.ohn Pec%, ''0J0(, 2*he *hreat of Agrofuels Industriali@ed FM< Monocultures !ill <nly $urt Carmers in Agrofuels5, htt&600"""#n"rage#org0content0threat?agrofuels? industriali@ed?gmo?monocultures?"ill?only?hurt?farmers900EM
Another recent re&ort from the non&rofit grou& Environmental Defense and covered 4y )euters in a 807D0D( article, "arns that ethanol &lant e &ansion in the Mid"est could also Aeo&ardi@e d"indling "ater su&&lies# In &articular,

the <gallala a=uifer, an HDD?mile?long underground sea that stretches from *e as to South Da%ota and su&&lies one fifth of all irrigated cro&land in the U#S# could 4e drained of an additional 7#R 4illion gallons &er year 4y ethanol &roduction# It ta%es u& to si gallons of "ater to &roduce one gallon of ethanol, "ith another '1 gallons of
"ater lost as "aste on average# *he e &anded corn acreage to su&&ly a 4ooming ethanol mar%et "ould re=uire an estimated '7D 4illion gallons of e tra irrigation "ater &er year# *here are '17 ethanol &lants already in o&eration in the U#S# "ith (8 more under construction ? most &ro&osed for the Mid"est#

0gallala a!uifier is on t$e brin" rig$t now 5ew 1 P2Putting Meat on the *a4le6 Industrial Carm Animal Production in America,5 A

ProAect of *he Pe" Charita4le *rusts and .ohns $o&%ins ;loom4erg School of Pu4lic $ealth, """#&e"trusts#org0u&loadedCiles0"""&e"trustsorg0)e&orts0IndustrialTAgriculture0PCICAP TCINAB#&df, &g# 7(Q

Bi%e other as&ects of ifa& -such as manure dis&osal9, cro& &roduction for animal feed &laces enormous demand on "ater resources6 H([ of the use of fresh"ater in the US is used in agriculture, &rimarily irrigation C5imentel et al', 1EE9@' ,or example, it ta%es nearly J7D gallons of "ater to &roduce one &ound of grain?fed 4roiler chic%en C5imentel et al', 1EE9@' ifap o&erations in arid or semiarid regions are thus of &articular concern 4ecause of their high "ater demand on the limited su&&ly of "ater, much of it from a=uifers that may have limited recharge ca&acity# *he '(J,DDD?s=uare?mile <gallala a=uifer , for example, is a
fossil a!uifer t$at dates bac" to t$e last ice age and underlies parts of /ebras"a, Hansas, +olorado, 0"la$oma, /ew Mexico, and Texas'

Irrigation has reduced the <gallala 4y more than half, and current depletion rates exceed 3'3 feet per year of water table level CMcMic$ael, 1EE3R (oule and 5iper, 1EE)@' ;ecause the a=uifer>s very slo" recharge rate is vastly outstri&&ed 4y irrigation and other human needs, the a=uifer is at ris% of 4eing fully de&leted, threatening not only agriculture 4ut drin%ing "ater su&&lies for a huge area of the &nited States'

+ollapse of t$e a!uifier causes a global food crisis 3 nobody can fill in Billiers 1 PMar=, veteran Aournalist, maga@ine editor and "riter, "ho has "or%ed as a foreign corres&ondent in Mosco", South Africa, and other &laces, !ater6 *he Cate of <ur Most Precious )esource, Pg 'R'?'R7Q *he &ro4lem, though, is that the 4an%ru&ting of agriculture in the region "ill affect more than a fe" farmers, or even a fe" states# Irrigation has made this second?rate farmland one of the "orldIs 4read4as%ets# A significant &ro&ortion of American grain e &orts come from the <gallala states, and almost half of AmericaIs 4eef# If, as is "idely e &ected, ChinaIs "ater crisis drives it to the "orld mar%et for grain, and if that increasing demand occurs "hen either the <gallala A=uifer is e hausted or "ater 4ecomes too e &ensive to &um&, that could &reci&itate a glo4al food crisis# No one? not Argentina, Canada, or Australia? "ould 4e a4le to &roduce enough to ma%e u& the shortfall# <f course, the future is unreada4le and forecasting the future a game for the foolhardy, 4ut itIs easy to see that a calamity could &ossi4ly follo"# ItIs the human and &olitical? the geo&olitical? conse=uences that constitute "aterIs most &otent crisis#

American agriculture failure triggers mass deat$ globally (ircus 12 -Mar%, director of agriculture ne"s, 2agricultural a&ocaly&se 7D'D,5 htt&600agriculture#imva#info0food?
&rices0agricultural?a&ocaly&se?7D'D9.CS

T$e world faces 8mass starvationD following North America6s next maAor crop failure# And it could even $appen before year6s end# So says Chicago?4ased Don Co e, "ho is one of the "orld>s leading e &erts on agricultural commodities, so much so that Canada>s reno"ned ;M< Cinancial Frou& named the fund after him# A crop failure in North America will $ave &articularly dire conse!uences for ma;or overseas mar"ets t$at are $ig$ly reliant on &'(' crop imports# Scientists in England are "arning that a 8perfect stormD of food s$ortages and "ater scarcity no" t$reatens to unleas$ public unrest and conflict, the
government>s chief scientist, Professor .ohn ;eddington, has "arned#PiQ 2Peo&le do not =uite realise the scale of the issue,5 said Professor Mi%e ;evan# 2T$is is one of t$e most serious problems that science has ever faced#5 In ;ritain

t$e lives of $undreds of t$ousands of people will be t$reatened by food s$ortages' T$e repercussions of food s$ortages for any society are devastating' T$e world faces 8mass starvationD following more ma;or crop failures in t$e &nited (tates and other &laces around the

glo4e# According to Chicago?4ased Don Co e, "ho is one of the "orld>s leading e &erts on agricultural commodities, so much so that Canada>s reno"ned ;M< Cinancial Frou& named the fund after him, this mind 4oggling event could ha&&en 4efore year>s end# We are facing a problem t$at literally $as never been faced in $uman $istory # Surging &o&ulation and food demand, food inflation, diminishing "orld food stoc%s, drought, flooding, cold, diminished credit, infestations, soil erosion, industrial farming, factory farm &ollution, a=uifers0"ells going dry, relocation of &roduce for energy &roduction are all slamming into a glo4al financial and economic crisis# And in some &laces li%e the United States they don>t have enough farmers# *hen on to& of everything else "e have desertification, "hich is one of the "orld>s most &ressing environmental issues# Ne" deserts are gro"ing at a rate of 7D,DDD s=uare miles -/',HDD s=uare %ilometers9 a year# Desertification leads to famine, mass starvation and human migration# According to Eric de Car4onnel, 2 T$ere is overw$elming, undeniable evidence t$at t$e world will run out of food ne t year# T$e 7D'D ,ood +risis is going to be different# %t is t$e crisis t$at will ma"e all doomsday scenarios come true# Early in 7DD8, the su&&ly and demand in agricultural mar%ets "ent 4adly out of 4alance# *he "orld e &erienced a catastro&hic fall in food &roduction as a result of the financial crisis -lo" commodity &rices and lac% of credit9 and adverse "eather on a glo4al scale# Normally food &rices should have already shot higher months ago, leading to lo"er food consum&tion and 4ringing the glo4al food su&&ly0demand situation 4ac% into 4alance# *his never ha&&ened 4ecause the United States De&artment of Agriculture -USDA9, instead of adAusting &roduction estimates do"n to reflect decreased &roduction, adAusted estimates u&"ards to match increasing demand from china# In this "ay, the USDA has 4rought su&&ly and demand 4ac% into 4alance -on &a&er9 and tem&orarily delayed a rise in food &rices 4y ensuring a catastro&he in 7D'D#5PiiQ According to the United States De&artment of Agriculture U#S# farmers &roduced the largest corn and soy4ean cro&s on record in 7DD8# And there are &eo&le "ho 4elieve that anyone "ho 4elieves government figures on anything concerning the economy or anything else is a total moron# Xery fe" &eo&le in the US have given any serious consideration to the =uestion of food security# *his essay should convince &eo&le that its time to start# Cor the most &art, "e>re not a"are of the &ro4lem 4ut if "e loo% hard at the Nhidden> ne"s "e see that the hand"riting is on the "all for an unimagina4le crisis that "ill come on us as early as this year# More than 7#' million hectares of grain have 4een destroyed 4y drought in 7DD8 in )ussia, Agriculture Minister :elena S%rynni% said# A total of R'R,DDD hectares have 4een destroyed in the region, or (D[ of the total amount &lanted#PiiiQ 2T$e world is blissfully unaware t$at t$e greatest economic, financial and &olitical crisis ever is a few mont$s away# It ta%es only the tiniest 4it of research to reali@e somet$ing is going critically wrong in the agricultural mar%et# All someone needs to do to %no" the "orld is headed for food crisis is to sto& reading USDA>s cro& re&orts &redicting a record soy4ean and corn harvests and listen to "hat else the USDA is saying#

Cood crises cause nuclear "ar

Cri44 'D -.ulian, .ulian Cri44 is a science communicator, Aournalist and editor of several ne"s&a&ers and 4oo%s# $is &u4lished "or% includes
over (,DDD ne"s&a&er articles, ',DDD 4roadcasts, and three 4oo%s and has received 17 a"ards for science, medical, agricultural and 4usiness Aournalism# $e "as Director, National A"areness, for AustraliaIs science agency, CSI)<, foundation &resident of the Australian Science Communicators, and originated the CFIA)Is Cuture $arvest strategy# $e has "or%ed as a ne"s&a&er editor, science editor for W*he Australian Wand head of &u4lic affairs for CSI)<# $e runs his o"n science communication consultancy, 2*he coming famine6 the glo4al food crisis and "hat "e can do to avoid it,5 &# 7R9 *his is the most li%ely means 4y "hich the

coming famine "ill affect all citi@ens of Earth, 4oth through the direct the effect on glo4al food &rices and the cost to &u4lic revenues of redressing the &ro4lem# Cou&led "ith this is the ris% of "ars 4rea%ing out over local dis&utes a4out food, land, and "ater and the dangers that the maAor military &o"ers may 4e suc%ed into these vortices, that smaller nations ne"ly nuclear?armed may 4ecome em4roiled, and that shoc% "aves &ro&agated 4y these conflicts "ill Aar the glo4al economy and disru&t trade, sending food &rices into a fresh s&iral# Indeed, an increasingly credi4le scenario for !orld !ar III is not so much a confrontation of su&er&o"ers and their allies as a festering, self?&er&etuating chain of resource conflicts driven 4y the "idening ga& 4et"een food and energy su&&lies and &eo&lesI need to secure them#
conse=uences of refugee floods for receiving countries and through

d#rule Watson 99 -)ichard, Professor of Philoso&hy c !ashington U, !orld $unger and Moral <4ligation, &# ''H?''89.CS
*hese arguments are morally s&urious# *hat food sufficient for "ell?nourished survival is the e=ual right of every human individual or nation is a s&ecification of the higher &rinci&le that everyone has e=ual right to the necessities of life# *he moral stress of the &rinci&le of e=uity is &rimarily on e=ual sharing, and only secondarily on "hat is 4eing shared# *he higher moral &rinci&le is of human equity per se# Conse=uently, t$e moral action is to distribute all food e!ually, w$atever

t$e conse!uences' T$is is t$e $ard line a&&arently dra"n 4y such moralists as Immanuel Kant and Noam Choms%yEbut t$en, morality is $ard' T$e conclusion may be unreasona4le -impractical and irrational in conventional terms9, but it is obviously moral# Nor should anyone &ur&ort sur&riseG it has al"ays 4een understood that the claims of moralityEif ta%en seriouslyEsupersede t$ose of conflicting reason' 0ne may even $ave to sacrifice one6s life or one6s nation to be moral in situations w$ere practical be$avior would preserve it # Cor e am&le, if a &risoner of "ar undergoing
torture is to 4e a -&erha&s dead9 &atriot even "hen reason tells him that colla4oration "ill hurt no one, he remains silent# Similarly, if one is to 4e moral, one distributes available food in e!ual s$ares Ceven if everyone t$en

dies9#

*hat an action is necessary to save one>s life is no e cuse for 4ehaving un&atriotically or immorally if one "ishes to 4e a &atriot or moral# No &rinci&le of morality a4solves one of 4ehaving immorally sim&ly to save one>s life or nation# *here is a strict analogy here 4et"een adhering to moral &rinci&les for the sa%e of 4eing moral, and adhering to Christian &rinci&les for the sa%e of 4eing Christian# T$e moral world contains pits and lions , 4ut one loo%s al"ays to the highest light# T$e

ultimate test always $ar"s to t$e $ig$est principleGrecant or dieGand it is pat$etic to profess morality if one !uits w$en t$e going gets roug$' % $ave put aside many !uestions of detailGsuc$ as t$e mec$anical problems of distributing foodG because detail does not alter t$e star" conclusion' %f every $uman life is e!ual in value, t$en t$e e!ual distribution of t$e necessities of life is an e tremely high, if not t$e $ig$est, moral duty# It is at least high enough to override the e cuse that 4y doing it one "ould lose one>s life# ;ut many people cannot accept t$e view that one must distri4ute e=ually even in f the nation colla&ses or all &eo&le die# %f everyone dies, t$en t$ere will be no realm of morality # Practically s&ea%ing, sheer survival comes first# <ne can adhere to the &rinci&le of e=uity only if one e ists# (o it is rational to suppose t$at t$e principle of survival is morally $ig$er t$an t$e principle of e!uity # And though one might
not 4e a4le to argue for une=ual distri4ution of food to save a nationEfor nations can come and goEone might "ell argue that une=ual distri4ution is necessary for the survival of the human s&ecies# *hat is, some large grou&Esay one?third of &resent "orld &o&ulationEshould 4e at least "ell?nourished for human survival# *owever, from an individual standpoint,

t$e $uman speciesEli%e the nationEis of no moral relevance# Crom a naturalistic stand&oint, survival does come firstG from a moralistic standpointEas indicated a4oveEsurvival may $ave to be sacrificed' %n t$e milieu of morality, it is immaterial w$et$er or not t$e $uman species survives as a result of individual 4ehavior#

ama:on impact
.estroys t$e Ama:on 5ec", 9 -.ohn Pec%, ''0J0(, 2*he *hreat of Agrofuels Industriali@ed FM< Monocultures !ill <nly $urt Carmers in Agrofuels5, htt&600"""#n"rage#org0content0threat?agrofuels? industriali@ed?gmo?monocultures?"ill?only?hurt?farmers900EM Mean"hile, the destruction and conversion of tro&ical rainforests for e &ort oriented agrofuel monocultures continues a&ace# )o4ert Carley, Monsanto Xice President, s&ea%ing at an agrofuel e &o in Argentina on March '/, 7DD( admitted that the 4oom "ould 4e Wunimagina4le in terms of "hat itIs going to mean for corn and soy4ean surface areaW# *he real "inner, though, could 4e more tro&ical cro&s li%e sugar and &alm oil# Cor
instance, ;ra@il already has R million hectares devoted to agrofuels and &lans to increase its sugar cane acreage alone 4y five fold to 1D million hectares to meet ethanol e &ort demands# In 7DD/ .a&anese oil giant, Ni&&on, signed a Aoint venture deal "ith Petro4ras to shi& out '#H 4illion liters of ethanol &er year# Clush "ith all sorts of s&eculative ca&ital -over V8 4illion in 7DDR alone9, merger mania is no" s"ee&ing ;ra@ilIs sugarcane and ethanol sector# Eduardo Pereira de Carvalho, the &resident of the Sao

Paulo Sugar Cane Manufacturers Union, &redicts that a third of the countryIs &asture "ill soon 4e converted to sugar, leading the tim4er magnates and cattle 4arons to drive dee&er into the Ama@on# Ama:on destruction ensures extinction Ta"acs EP -David, *$E IDEA <C DIXE)SI*:6 P$IB<S<P$IES <C PA)ADISE, &g# 7DD?7D'9 So biodiversity %ee&s the "orld running# It has value and of itself, as "ell as for us# )aven, Er"in, and !ilson o4lige us to thin% a4out the value of 4iodiversity for our o"n lives# *he Ehrlichs> rivet?&o&&er tro&e ma%es this same &ointG 4y eliminating rivets, "e &lay )ussian roulette "ith glo4al ecology and human futures 6 2It is li%ely that destruction of the rich com&le of s&ecies in the Ama@on 4asin could trigger ra&id changes in glo4al climate &atterns# Agriculture remains heavily de&endent on sta4le climate, and human 4eings remain heavily de&endent on food# ;y the end of the century the e tinction of &erha&s a million s&ecies in the Ama@on 4asin could have entrained famines in "hich a 4illion human 4eings &erished# And if our s&ecies is very unluc%y, the famines could lead to a thermonuclear "ar, "hich could e tinguish civili@ation #5 Else"here
Ehrlich uses different &articulars "ith no less drama6 !hat then "ill ha&&en if the current decimation of organic diversity continuesU Cro& yields "ill 4e more difficult to maintain in the face of climatic change , soil erosion, loss of de&enda4le "ater su&&lies, decline of &ollinators, and ever more serious assaults 4y &ests# Conversion of &roductive land to "asteland "ill accelerateG deserts "ill continue their seemingly ine ora4le e &ansion# Air &ollution "ill increase, and local climates "ill 4ecome harsher# $umanity "ill have to forgo many of the direct economic 4enefits it might have "ithdra"n from EarthIs "ellistoc%ed genetic li4rary# It might, for e am&le, miss out on a cure for cancerG 4ut that "ill ma%e little difference# As ecosystem services falter, mortality from res&iratory and e&idemic disease, natural disasters, and es&ecially famine "ill

lo"er life e &ectancies to the &oint "here canicer -largely a disease of the elderly9 "ill 4e unim&ortant# *umanity will bring upon itself conse=uences de&ressingly similar to those e &ected from a nuclear winter# ;arring a nuclear conflict, it a&&ears that civili@ation "ill disa&&ear some time 4efore the end of the ne t century ? not
"ith a 4ang 4ut a "him&er#

invasive species impact


+auses invasive species 5ec", 9 -.ohn Pec%, ''0J0(, 2*he *hreat of Agrofuels Industriali@ed FM< Monocultures !ill <nly $urt Carmers in Agrofuels5, htt&600"""#n"rage#org0content0threat?agrofuels? industriali@ed?gmo?monocultures?"ill?only?hurt?farmers900EM Mean"hile, the government of India has targeted 'J million hectares of su&&osed W"astelandW# for Aatro&ha agrofuel &lantations# .atro&ha is an es&ecially dangerous agrofuel alternative since it is invasive s&ecies, to ic to animals, originally trans&lanted 4y the Portuguese from Central America to Asia and Africa for
living hedgero"s# In Ethio&ia, a Ferman firm attem&ted to &urchase '1,DDD hectares for a similar Aatro&ha &roAect, a&&arently una"are that most of this land fell "ithin an ele&hant sanctuary# In Uganda, grassroots activists are no" fighting government efforts to sell off &rotected areas in the Ma4ira Corest and on ;ugulu Island to agrofuel s&eculators# And in the )e&u4lic of the Congo, a RH,DDD hectare eucaly&tus &lantation "as recently ac=uired 4y a Canadian com&any, MagIndustries, "ith the goal of e &orting half a million tonnes of "oodchi&s to Euro&e for 4iomass 4urning#

xtinction /adol, EE -Xi%i Nadol, .D Candidate c Xal&araiso, Summer '888, North"estern School of Ba" of Be"is _ Clar% College, & ln9 T$e t$reat of invasion 4y nonnative s&ecies $as always existed' It is argua4ly a natural &rocess that should 4e allo"ed to continue unheeded# n7' *he &ro4lem "ith t$is theory is that it fails to ta"e into account t$e rate at w$ic$ $umans are responsible for accelerating t$e pace of successful introductions, as
com&ared to those that "ould occur naturally# n77 *he last five hundred years or so demarcate an era of human e &ansion that has resulted in the increasingly ra&id disru&tion and wea"ening of art$Is eco systems # n71 T$e fragile

condition of t$ese systems renders t$em vulnerable to t$e establis$ment of invasive species# n7J In addition, rates of introduc P*1J1Q tion have escalated "ith the advent of ne" modes of conveyance
4y trade and travel# n7/ Air&lanes, 4oats, and automo4iles &rovide sufficiently =uic% and s&acious travel, facilitating entry of a num4er of invasive s&ecies into ha4itat @ones other"ise out of reach# n7R In the late '8/Ds, Charles Elton, a reno"ned ;ritish ecologist, "arned that modern society "as "itnessing great historical dislocations of the "orldIs fauna and flora# n7( Indeed, the sco&e of invasion is alarming, as are its effects# n7H <ver J/DD invasive species are no" esta4lished in the United States# n78 *hese s&ecies greatly

t$reaten biological diversity n1D 4ecause t$ey are often able to out# compete and displace native organisms' n1' As "ould 4e e &ected, t$ey also add to t$e stress already suffered by endangered and threatened native species# n17 <ne study indicates that invasive s&ecies are
second only to ha4itat destruction among the leading causes of s&ecies loss nation"ide# n11 $o"ever, some e &erts fear that

invasive species ultimately will contribute to t$e demise of t$e $uman population by destroying natural processes and ecosystems necessary to $uman survival # n1J j ****o Cootnotes***j n1D# See infra note 1/ and accom&anying te t# %n addition to t$reatening diversity, invasive species ultimately t$reaten survival of species as wellA As t$e total number of species declines, plants and animals t$at may be important food resources, t$at play a critical role in t$e food web, or t$at contain medicinal !ualities may disappear' (urviving species will $ave fewer buffers against catastrop$ic fluctuations in t$e environment# If, for e am&le, a fish s&ecies loses many or some of its food resources, any
threat or damage to the remaining food resource can 4e far more detrimental to the fish 4ecause alternatives have 4een lost# *hus homogeni@ation of ha4itats and s&ecies can have far?reaching effects# ;reaching Natural ;arriers, su&ra note 77, at H# n1'# 3uammen, su&ra note 7/, at RR# As one s&ecialist e &lains, invasive s&ecies outgro", out?mature, and sim&ly out?com&ete native s&ecies# *ele&hone Intervie" "ith Neil )ichmond, Shellfish Cishery ;iologist, <regon De&It of Cish _ !ildlife -Nov# 7/, '88H9 Phereinafter )ichmond Intervie"Q# n17# 3uammen, su&ra note 7/, at RR -WPAQ re&ort, from the U#N# Environmental Program, declares that almost 7D &ercent of the "orldIs endangered verte4rates suffer from &ressures -com&etition, &redation, ha4itat transformation9 created 4y e otic interlo&ers#W9# n11# !estley et al#, su&ra note R, at JR# n1J# See 3uammen, su&ra note 7/, at RH# !e come to a certain fretful lea& of logic that other"ise thoughtful o4servers seem "illing, even eager, to ma%e6 that t$e

ultimate conse=uence "ill 4e the e tinction of us# ;y sei@ing such a huge share of EarthIs landsca&e, 4y im&osing so "antonly on its &rovidence and &resuming so rec%lessly on its forgivingness, by "illing off so many species , they say, we will doom our own species to extinction' j

)ac nat gas $ydrates


Massive amounts of natural gas in t$e gulfGalso solves gas $ydrates researc$ (cience .aily, E -Science Daily, R0'08, 2Significant Fas )esource Discovered In Fulf <f Me ico5, htt&600"""#sciencedaily#com0releases07DD80D/0D8D/1''DDH'8#htm900EM )ecent drilling 4y a government and industry consortium confirm that the Fulf of Me ico is the first offshore area in the United States "ith enough information to identify gas hydrate energy resource targets "ith &otential for gas &roduction# Fas hydrate , a su4stance com&rised of natural gas and "ater, is thought to e ist in great a4undance in nature and has the &otential to 4e a significant ne" energy source to meet future energy needs# $o"ever, &rior to this e &edition, there "as little documentation that gas hydrate occurred in resource?=uality accumulations in the marine environment# 2*his is an e citing discovery 4ecause for the first
time in the U#S# Fulf of Me ico, "e "ere a4le to &redict hydrate accumulations 4efore drilling, and "e discovered thic%, gas hydrate? saturated sands that actually re&resent energy targets,5 said U#S# Feological Survey Energy Program Coordinator ;renda Pierce# *he U#S# De&artment of Energy -D<E9, the U#S# Feological Survey -USFS9, U#S# Minerals Management Service -MMS9 and a grou& of U#S# and international energy industry com&anies under the management of Chevron "ere res&onsi4le for conducting this first ever drilling &roAect "ith the goal to collect geologic data on gas?hydrate?4earing sand reservoirs in the Fulf of Me ico# 2!e have

also found gas hydrate in a range of settings, including sand reservoirs, thic% se=uences of fracture?filling gas hydrates in shales, and &otential &artially saturated gas hydrates in younger systems,5 said USFS Scientist *imothy Collett# 2*hese sites should &rovide a "ealth of o&&ortunities for further study and data collection that should &rovide significant advances in understanding the nature and develo&ment of gas hydrate systems#5

/atural gas $ydrates solve extinction Ma"ogon et al, S De&artment of Petroleum Engineering at *e as A _ M University-:#C# Ma%ogon, S#A# $olditch, and *#:# Ma%ogon, 'D010/, 2Natural gas?hydrates E A &otential energy source for the 7'st Century5, htt&600research#nigc#ir0files0infoTres0articles0HRD7/agTr'1#&df900EM *he history of humanity is characteri@ed 4y com&etition for the living s&ace on our small &lanet# *he &ast century has 4een one of high &o&ulation and energy consum&tion gro"th# <ver the &ast hundred years, the &o&ulation on Earth gre" four?fold, e ceeding R#7 4illion, "hile the energy consum&tion gre" 4y over an order of magnitude, from D#8k'D8 tons of oil e=uivalent -*<E9 to '#D7k'D'D *<E -;P, 7DD/9# T$e rate of modern civili:ation gro"th in the future "ill de&end on numerous factors, 4ut t$e !uality and !uantity of energy used "ill 4e among the most im&ortant factors# *he data &resented in Cig# ' reflect the

distri4ution and changes of energy sources over time# Currently, oil and natural gas are the &rimary fuels# $o"ever, the data in Cig# 7 sho" that the &ast century should 4e named the century of 4ituminous coal rather than oil or gas# *he cumulative role of nuclear and hydroelectric &o"er has not e ceeded 'D[# According to the United Nations, the &otential energy resources of uranium on earth do not e ceed J#/[ of the resources from oil, gas and coal# Cor the foreseea4le future, oil, gas and coal "ill 4e the &rimary sources of energy# According to ;P -7DD/9, as of ' .anuary 7DD/, the &roven hydrocar4on reserves are 'R'#8 4illion tons of oil and '(8#/ trillion m1 of natural gas# At the current level of consum&tion, the reserves are sufficient for J' yr for oil and RR yr for natural gas# *he standard of living of individual countries in the modern "orld is determined in &art 4y their location and s&ecific levels of the energy consum&tion# *he =uality of life in each country is determined not 4y the reserves of the energy resources it has, 4ut 4y the consum&tion of energy 4y each of its inha4itants# !hile the levels of energy consum&tion may have 4een similar in different countries over 7DD yr ago, in the modern "orld the ga& in energy consum&tion 4et"een individual countries has reached an order of magnitude or more# Cor e am&le, although a4out /[ of the "orldIs &o&ulation lives in the USA, the country consumes 77[ of the "orldIs energy and &roduces much of the "orldIs FDP# At the same time, the &o&ulation of India accounts for a4out 7D[ of the "orld &o&ulation, 4ut its energy consum&tion does not e ceed 1#7[# *he energy consum&tion &er &erson in the USA is 1D times as high as in India# Each inha4itant in China uses '0'D the energy of their counter&arts in the USA# Energy sources can change ra&idly, de&ending on the level of the develo&ment of civili@ation# *oday, some countries, including .a&an and Korea, im&ort over 8H[ of the energy they use# Most of the energy used these countries is trans&orted thousands of %ilometers# $o"ever, enormous

&otential resources of natural gas reside in natural hydrates very near .a&an and Korea# *hese de&osits of natural gas in gas?hydrates are actually found all over the "orld in dee&"ater or in the Arctic# <ver 77D

gas?hydrate de&osits -F$D9 have 4een found in the "orld to date# A ma& of the discovered F$D is sho"n in Cig# 1 -Ma%ogon et al#, 7DDJ9# *he "orldIs &otential amount of natural gas in &lace in hydrates e ceeds '/ =uadrillion m1# Commercial &roduction of Aust '/[ of this gas "ould &rovide the "orld "ith energy for 7DD yr at the current level of energy consum&tion# *he &roduction of natural gas from hydrates could 4e used to contri4ute not only to sustained economic develo&ment of

individual countries, 4ut also to the political stability of t$e world#

)ac oil clean up


Transboundary agreement solves oil spill cleanupGefforts now are doomed to failure Martin* and Wood**, 13 *director of the Energy Program at the Institute of the Americas at the University of California, San Diego AND **director of the Me ico Institute at the !oodro" !ilson International Center for Scholars# $e "or%ed as a &rofessor for '( years in Me ico and &reviously "as director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de M, ico -.eremy Martin, , /010'1, 2U#S# Should Act 3uic%ly on *rans4oundary $ydrocar4on Agreement !ith Me ico5, htt&600"""#"orld&oliticsrevie"#com0articles0&rint0'7871900EM Second, this agreement ma%es clear that 4oth nations are %eenly a"are of the energy &otential of the Fulf, &articularly along the maritime 4order# ;ut it also firmly esta4lishes the issue of increased regulation and

standards for drilling in a 4ilateral agreement# Since the A&ril 7D'D Macondo accident, the largest oil s&ill in U#S# history, the U#S# has 4een more concerned "ith drilling safety not Aust in the U#S# 4ut also in neigh4oring countries around the Fulf such as Cu4a and Me ico# *his agreement formali:es interaction in terms of regulation and any res&onses to

incidents along the maritime 4order# *hird, then?Secretary of State $illary Clinton "as correct to em&hasi@e the commercial o&&ortunity and energy security element of the accord "hen it "as first announced# *he agreement &rovides the &ossi4ility for U#S# firms to Aoin "ith Me ico>s national oil com&any, Peme , to e &loit dee&? "ater oil resources in the Fulf of Me ico along the countriesI maritime 4oundaries# *his could &rovide im&ortant
o&&ortunities for U#S# com&anies, including e citing Aoint venture o&&ortunities "ith Peme long thought im&ossi4le#

T*A ensures safe drilling Martin and Wood 13 O *Director of the Energy Program at the Institute of the Americas at the University of California, San DiegoG **Director of the Me ico Institute at the !oodro" !ilson International Center for Scholars, &rofessor for '( years in Me ico and &reviously "as director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de M, ico -I*AM9 in Me ico City -.eremy M# and Duncan, 2U#S# ShoUld Act 3Uic%ly on trAnS4oUndAry hydrocAr4on Agreement !ith me ico,5 !orld Politics )evie", May 1, 7D'1, htt&600"""#iamericas#org0ne"s0!P)TUSTMe icoTD/D17D'1#&df900;"ang
Second, this

agreement ma%es clear that 4oth nations are %eenly a"are of the energy &otential of the Fulf, &articularly along esta4lishes the issue of increased regulation and standards for drilling in a 4ilateral agreement# Since the A&ril 7D'D Macondo accident, the largest oil s&ill in U#S# history, the U#S# has 4een more concerned "ith drilling safety not Aust in the U#S# 4ut also in neigh4oring countries around the Fulf such as Cu4a and Me ico# *his agreement formali@es interaction in terms of regulation and any res&onses to incidents along the maritime 4order#
the maritime 4order# ;ut it also firmly

)ac cooperation

T$e plan solves broader +uban, +anadian, and Russian oil cooperation and liberali:es t$e Mexican oil sector Melgar, 1) director of the Center for Sustaina4ility and ;usiness at EFADE ;usiness School of the *ecnol+gico de Monterrey -B<U)DES MEBFA), Summer 7D'7, 2*he Cuture of PEMEL5, htt&600"""#americas=uarterly#org0node01(H'900EM Dee&"ater drilling is li%ely to ta%e center stage "ith the signing of the U#S#OMe ico *rans4oundary $ydrocar4on Agreement in Ce4ruary 7D'7# *he agreement, ratified 4y the Me ican Senate 4ut still a"aiting a&&roval in the U#S#, relieves concerns a4out the so?called 2stra"5 effect, in "hich Me ican oil is si&&ed a"ay 4y the U#S# as its &roduction advances closer to the international maritime 4order in the Fulf of Me ico# *he agreement &rovides a legal frame"or% for develo&ment of oil and gas reservoirs that cross the maritime 4order in the Fulf of Me icoEthe first such &act for 4oth countries# In fact, it is vie"ed as a dress rehearsal for negotiations the U#S# "ill have to underta%e "ith Canada, )ussia and even Cu4a to address shared reservoir e &loitation# Im&lementation "ill re=uire legal and institutional adAustments in Me ico and in the United States# Since it re=uires Aoint or coordinated &roduction, the agreement &ossi4ly opens a ne" era of coo&eration 4et"een PEMEL and international oil com&anies# If a trans4oundary field "ere identified, PEMEL "ould have to
"or% "ith field o&erators on the U#S# side# *his ma%es technological a&titude &articularly relevant, since shared reservoirs are more li%ely to e ist in the dee& and ultra?dee& "aters of the Fulf of Me ico# Cor sovereignty, energy security and &olitical reasons, Me ico "ill go the e tra mile to ensure that its hydrocar4on resources are not lost to its neigh4or# *his gives it a high incentive to develo& the institutional architectureEincluding strengthening the CN$Eneeded to im&lement the agreement# Identifying and develo&ing a Aoint reservoir "ould allo" PEMEL to "or% in full &artnershi& "ith com&anies at the cutting edge of ultra?dee&"ater &roduction# *he e &erience, 4enefits and %no"?ho" that "ould 4e gained may reduce the reluctance to underta%e Aoint &roduction and other strategic alliances that are 4anned 4y PEMEL 4yla"s# Im&lementation of the treaty could trigger an accelerated transformation of the regime under "hich dee&"ater resources are e &loited in Me ico# E citing times are in sight# *he incoming administration "ill 4e com&elled to conduct a de4ate on the future of PEMEL, and the issue of constitutional reform "ill have to 4e a full &art of it#

*he Me ican oil industry can no longer thrive on amendments to distorted schemes#

ATA 0ffcase

)ac tGgovt to govt


5lan mandates government interaction wit$ mexico 3 our ev uses t$e term of art Myers et' Al 1)-!illiam C# Danvers, Staff Director Kenneth A# Myers, .r#, Staff Director U#S# F<XE)NMEN* P)IN*INF
<CCICE ((?/R( !AS$INF*<N 6 7D'7 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E USE <C *$E C<MMI**EE <N C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E O;)!9 *he <4ama administration contends that the agreementIs ar4itration mechanism is not intended to

&roduce 4inding decisions, ho"ever, that is not s&ecifically &rovided for in the te t of the agreement and "ould 4e different from ar4itration mechanisms in many other international agreements# T$e T-A further contains re!uirements of data sharing and notification of li%ely reserves 4et"een the United States and Me ico, o&ening the o&&ortunity for increased government#to# government collaboration on strategic energy &olicy choices# Me ico and the United States are relatively less advanced in effective communication and lin%ages of our energy systems than "e are in less &olitically? controversial economic areas# Im&roved ties can im&rove understanding and galvani@e coo&eration in often
une &ected "ays#

)ac plan popular


5lan popular wit$ RepublicansGit will be passed easily senaro, 13 -Al4erto Esenaro, J0(0'1, 23UICK !$I*E $<USE )ESP<NSE C<UBD MEAN A C<<* IN *$E D<<) IN MELIC<>S $:D)<CA);<NS SEC*<)5, htt&600me icanla"4log#com0=uic%?"hite?house?res&onse?could?mean?a?foot?in?the?door?in? me icos?hydrocar4ons?sector0900EM
In A&ril of 7D'7, then Secretary of State $illary Clinton made an agreement "ith former &resident Celi&e Calder+n allo"ing Aoint oil e &loration in the Fulf of Me ico, "hich "ould give the U#S# access to Me ico>s "ell?%no"n oil riches# Interestingly, "hile the deal "as a&&roved "ith lightning s&eed in the Me ican Senate -"here o&&osition to &rivati@ation is =uite strong9, the current <4ama administration in the United States has delayed finali@ing the off?shore drilling deal# According to )e&u4lican

la"ma%ers and industry e &erts, a =uic% res&onse is essential and foot?dragging could have disastrous

conse=uences for Americans interested in accessing Me ican oil# *he reason "hy conse=uences could 4e disastrous according to industry e &erts is that Me ico could very easily change its mind and call off the deal6 &u4lic o&inion on any foreign investment in the country>s hydrocar4ons sector generally tends to 4e negative and &oliticians could very "ell su4mit to the "ill of the &o&ulace# )e&# .eff Duncan -)?S#C#9 s&o%e to *he $ill recently after a $ouse Coreign )elations committee hearing# S&ea%ing a4out energy deals "ith Me ico, he said6 2It>s

time for the administration to act# All t$ey $ave to do is send t$e enacting legislation over $ere and let us act on it, because "e>re sitting on Ngo#>5

T$e plan is bipartisan and 0bama doesn6t pus$ +,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E *)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*? ''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM *here is reason to 4elieve that the T-A can receive 4road 4i&artisan 4ac%ing in Congress# It "ould 4enefit 4ilateral relations, &romote domestic oil &roduction, and im&rove environmental &rotections in the Fulf of Me ico# Collo"ing normal Congressional &rocedure to ensure the agreement is vetted and im&lementing legislation is reasoned "ill 4enefit each of those goals# E ternal &ro&onents of the *;A "ill need to increase communication and advocacy to im&rove the li%elihood of Congressional leaders acting
on the agreement in the ''1th U#S# Congress#

T-A is popular 3 swings congressional leaders and enables bipart Myers et' Al 1)-!illiam C# Danvers, Staff Director Kenneth A# Myers, .r#, Staff Director U#S# F<XE)NMEN* P)IN*INF
<CCICE ((?/R( !AS$INF*<N 6 7D'7 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E USE <C *$E C<MMI**EE <N C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E O;)!9 *here is reason to 4elieve that the T-A can receive broad bipartisan bac"ing in +ongress # It

"ould 4enefit 4ilateral relations, &romote domestic oil &roduction, and im&rove environmental &rotections in the Fulf of Me ico# Collo"ing normal Congressional &rocedure to ensure the agreement is vetted and im&lementing legislation is reasoned "ill 4enefit each of those goals# xternal proponents of t$e T-A will need to increase communication and advocacy to improve t$e li"eli$ood of +ongressional leaders acting on t$e agreement in the ''1th
U#S# Congress# North American Energy Security *he United States and Canada are radically transforming glo4al energy mar%ets# Unconventional oil and natural gas has led to a renaissance in North American energy &roduction# Alongside continued gro"th in rene"a4le fuel and &o"er sources and energy efficiency, the continent is &oised to 4e functionally self?sufficient in energy# Me ico should 4e invited to Aoin in the U#S#?Canada driven resurgence# *he im&acts of the North American oil and gas &o"erhouse reach 4eyond energy mar%ets# Bo"?&riced American natural gas is encouraging Ao4 creation, industrial gro"th, and ne" trade o&&ortunities# Increasing U#S# domestic oil &roduction and trade "ith Canada "ill %ee& more American dollars at home# )egimes that use their oil and natural gas riches for intimidation and coercion, such as Xene@uela and )ussia, are seeing their &etro?fueled &o"er eroded# Afforda4le and relia4le energy su&&lies are critical to Ao4 creation and =uality of life for citi@ens of the United States and for our allies Canada and Me ico# North America has long 4een a glo4al leader in energy innovation, &roduction, and mar%et &romotion# *he geogra&hical &ro imity of our industrial and &o&ulation centers "ith our resource 4asins, integrated su&&ly and trans&ort chains across 4orders, and cultural closeness of our &eo&les has encouraged steadily increasing coordination and integration of North American energy, trans&ort, and related infrastructure# Ma imi@ing the &otential for oil and

natural gas to &romote economic gro"th and security across the continent "ill re=uire continual im&rovement in &olicy communication , infrastructure rationali@ation, and regulatory harmoni@ation 4et"een the
U#S#, Canada, and Me ico# Canada and the U#S# have largely integrated energy systems, 4ut fissures over the Keystone LB &i&eline a&&roval &rocess is an e am&le of the need for even greater regulatory coordination# Com&aratively, U#S#?Me ico energy coordination and integration is "ell 4ehind# Po"er sector reforms &rom&ted 4y NAC*A demonstrate that a trilateral effort can have maAor results# Most im&ortantly, "ey leaders from 4oth the P)I and PAN in Me ico City are interested in

ma"ing progress#

5lan is bipart Marex 13 a &rivately?o"ned 4ro%er of financial instruments in the commodities sector and &hysical energy &roducts -2U#S#
$ouse Passes Maritime *rans4oundary Agreement DuncanIs ;ill <&ens '#/ Million Acres in the Fulf for Energy Production5 .une 7H, 7D'1, le is9 00K: <n *hursday, Congressman .eff Duncan of South Carolina &raised the $ouse &assage of his 4ill $#)# 'R'1, the <uter Continental Shelf *rans4oundary $ydrocar4on Agreements Authori@ation Act# Duncan>s legislation &assed the $ouse 4y

a 4i&artisan vote of 7/R?'(', and is one of several energy related 4ills he>s authored since 4eing elected to Congress# *he 4ill "ill allo" the United States and Me ico to e &lore and &roduce the resources "hich are shared or co?o"ned underneath the maritime 4order, &utting in &lace safety and regulatory standards "hich currently a&&ly to offshore
energy &roduction in U#S# Fulf of Me ico "aters# 2;y &assing this *rans4oundary Agreement, the $ouse has furthered its commitment to create Ao4s through energy# *his legislation im&lements a first of its %ind agreement "ith the government of Me ico to develo& shared resources located 4et"een our t"o countries in the Fulf,5 said Duncan# 2*he legislation also o&ens roughly '#/ million acres in the Fulf of Me ico for &roduction and "ould hel& create American Ao4s and gro" our economy in the &rocess# According to the ;ureau of <cean Energy Management and the U#S# State De&artment, these areas are estimated to contain '(7 million 4arrels of oil and 1DJ 4illion cu4ic feet of natural gas, a considera4le amount that "ill lessen our de&endence on Middle Eastern sources of oil# *he agreement also &rioriti@es safety 4y re=uiring that all o&erations in the region conform to U#S# safety standards and esta4lishes a frame"or% for &ossi4le future arrangements "ith other neigh4oring countries li%e Canada# Sim&ly &ut,

this legislation is a "in?"in for our country, and I am &roud that it received strong 4i&artisan su&&ort#5

%t6s popular and s$ould be ratified Martin and Wood 13 O *Director of the Energy Program at the Institute of the Americas at the University of California, San DiegoG **Director of the Me ico Institute at the !oodro" !ilson International Center for Scholars, &rofessor for '( years in Me ico and &reviously "as director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de M, ico -I*AM9 in Me ico City -.eremy M# and Duncan, 2U#S# ShoUld Act 3Uic%ly on trAnS4oUndAry hydrocAr4on Agreement !ith me ico,5 !orld Politics )evie", May 1, 7D'1, htt&600"""#iamericas#org0ne"s0!P)TUSTMe icoTD/D17D'1#&df900;"ang
*hese are all &ositive ste&s, and their &rogress "ill 4e monitored closely 4y U#S# and international o4servers, es&ecially Me ico# ;ut it 4ears underscoring that further delay in U#S# ado&tion of the agreement ma%es little sense# *he

agreement is not an overly &olari@ing issue domestically6 in fact, =uite the o&&osite# Several la"ma%ers have descri4ed it as a "in?"in for 4oth Me ico and the U#S#
As the U#S# Congress de4ates the deal, it is "orth revisiting the four %ey reasons the agreement merits an e &editious a&&roval in the coming "ee%s# Cirst, a&&roval of the deal in the U#S# "ould 4e an im&ortant sign of 4ilateral concord, &articularly at the outset of a ne" administration in Me ico and a second term for <4ama# *his is im&ortant, as it underscores the t"o nations> increasing a4ility to "or% together and conclude com&licated agreementsEand coo&erationEon 4inational issues unrelated to immigration or crime and drugs# Second, this agreement ma%es clear that 4oth nations are %eenly a"are of the energy &otential of the Fulf, &articularly along the maritime 4order# ;ut it also firmly esta4lishes the issue of increased regulation and standards for drilling in a 4ilateral agreement# Since the A&ril 7D'D Macondo accident, the largest oil s&ill in U#S# history, the U#S# has 4een more concerned "ith drilling safety not Aust in the U#S# 4ut also in neigh4oring countries around the Fulf such as Cu4a and Me ico# *his agreement formali@es interaction in terms of regulation and any res&onses to incidents along the maritime 4order# *hird, then?Secretary of State $illary Clinton "as correct to em&hasi@e the commercial o&&ortunity and energy security element of the accord "hen it "as first announced# *he agreement &rovides the &ossi4ility for U#S# firms to Aoin "ith Me ico>s national oil com&any, Peme , to e &loit dee&?"ater oil resources in the Fulf of Me ico along the countries> maritime 4oundaries# *his could &rovide im&ortant o&&ortunities for U#S# com&anies, including e citing Aoint venture o&&ortunities "ith Peme long thought im&ossi4le#

Cinally, the agreement is relevant and "orthy of attention in 4oth the U#S# and Me ico 4ecause of the im&ortant role of Me ican oil in the U#S# energy security e=uation, and the im&ortance of the U#S# mar%et for Me ican oil e &orts and revenue# During her remar%s at the signing ceremony, Clinton called the agreement &art of a commitment to im&rove energy security for 4oth countries and to ensure safe, efficient, res&onsi4le e &loration of the oil and gas reservoirs in the Fulf of Me ico# *his last &oint has echoed throughout the congressional hearings on the to&ic, "hile mem4ers of Congress from 4oth &arties and from across the country have focused on the im&ortance of colla4oration "ith our neigh4ors, shared technology and the o&&ortunity to 4oost energy security on 4oth sides of the 4order# *he &resident>s visit to Me ico and the accom&anying surge in interest in the agreement &rovide the necessary momentum to facilitate &assage of the 4ill and ta%e the critical first ste&s to"ard im&lementation#

!aiting any longer to do so merely delays the many 4enefits the agreement has to offer and sends the "rong signal a4out the need for the U#S# and Me ico to "or% together in the Fulf of Me ico, and on energy issues more generally# l

T*A passed t$e $ouse, is pus$ed by .uncan and is popular Traino 9K11K13 Chiris *rainor, staff "riter at inde Aournal -2$ydrocar4on agreement clears $ouse Act &ushed 4y Duncan
no" a"aits Senate action5 (0''0'1 htt&600"""#inde Aournal#com0main#as&USu4SectionIDZJD_ArticleIDZ'8R(H_SectionIDZJ (0''07D'19 00K: A trans4oundary hydrocar4ons agreement 4et"een the U#S# and Me ico ? heavily &ushed 4y )e&u4lican *hird District U#S# )e&# .eff Duncan ? cleared the U#S# $ouse and no" a"aits action from the U#S# Senate# *he <uter Continental Shelf *rans4oundary $ydrocar4on Agreements Authori@ation Act ? $#)# 'R'1 ? recently &assed the U#S# $ouse 4y a 7/R?'(' tally# *he 4ill had 4i&artisan su&&ort# *he 4ill "ould set into motion the terms of the U#S#?Me ico *rans4oundary $ydrocar4ons Agreement, "hich governs the develo&ment of oil and natural gas resources along the U#S#?Me ico maritime 4order in the Fulf of Me ico# Bander In?Story *he 4ill "ould lift a moratorium on drilling along the

maritime 4order and &rovide access to an area thought to contain more than '(D million 4arrels of oil and 1DJ 4illion cu4ic
feet of natural gas# !hen reached 4y &hone late last "ee%, Duncan said he "as &leased to see the 4ill &ass the $ouse "ith a 4i&artisan vote# W*his "as a good 4ill,W Duncan said# WI thin% it "as the right thing for America, as far as energy inde&endence goes# I 4elieve you "ill see a 4i&artisan vote over in the Senate # IIm ho&ing they ta%e u& the same $ouse 4ill, 4ut if they ta%e u& a different version ### then it "ould go to conference and "e "ould see "hat "e could do in conference#

)ac 0bama doesn6t pus$


0bama won6t pus$##empirics -oman PK)PK13 staff "riter at rig@one -Karen ;oman, 2!hite $ouse Cannot Su&&ort Fulf *rans4oundary ;ill5 .une 7R,
7D'1 htt&600"""#rig@one#com0ne"s0oilTgas0a0'7(17R0!hiteT$ouseTCannotTSu&&ortTFulfT*rans4oundaryT;ill9 00K: *he <4ama administration cannot su&&ort a 4ill that "ould move for"ard esta4lishing a frame"or%

for oil and gas e &loration and &roduction in the trans4oundary @one in the Fulf of Me ico, the <ffice of Management and ;udget -<M;9 re&orted *uesday# *he !hite $ouse does su&&ort the goal set out in $#)# 'R'1 to &rovide Congressional a&&roval of the agreemen t and allo" the Secretary of the Interior to im&lement the agreement# $o"ever, the administration Wstrongly o4AectsW to e em&ting actions ta%en 4y &u4lic com&anies in accordance "ith trans4oundary agreements from re=uirements under Section '/DJ of the Dodd?
Cran% Act and the Securities and E change CommissionIs Natural )esource E traction Disclosure )ule#

Wyden and Mur"ows"i pus$ t$e plan T/( 13 -*argeted Ne"s Service, 2 Sen# !yden Introduces ;ill to Authori@e Im&lementation of U#S#?Me
$ydrocar4on Agreement5, A&r 1D, 7D'1, &ro=uest9 00K: !AS$INF*<N, A&ril 1D ?? Sen# )on !yden, D?<re#, has introduced the Interior to ta%e actions to

ico *rans4oundary

legislation -S# H'79 to Wauthori@e the Secretary of im&lement the Agreement 4et"een the United States of America and the United Me ican States Concerning *rans4oundary $ydrocar4on )eservoirs in the Fulf of Me ico#W *he 4ill "as introduced on A&ril 7/ and "as co?s&onsored 4y Sen# Bisa Mur%o"s%i, )?Alas%a# *he legislation "as
referred to the Senate Energy and Natural )esources Committee#

)ac atA "riti"


t$e alternative is stuc" in t$e irrelevant world of academia 3 concrete action is inevitable and is t$e only way to fix real world problems ,riedric$s and Hratoc$wil, E -.brg, University Becturer in Politics, < ford De&artment of International Develo&ment, University of < ford, and Criedrich, Professor of International )elations, De&artment of Political and Social Sciences, Euro&ean University Institute, 2<n Acting and Kno"ing6 $o" Pragmatism Can Advance International )elations )esearch and Methodology,5 International <rgani@ation, Xolume R1, Call 7DD8, &g# (D'?(1', &df9 Acce&ting the conse=uences of the failure of false e&istemological am4itions does not mean an end to all critical in=uiry, nor is it nihilism, relativism, or 2anything goesm5 If there are no incontroverti4le foundations of scientinc %no"ledge, a &ragmatic strategy of %no"ledge generation is the o4vious alternative . In this s&irit, "e have
oeshed out &ro4lems of research design as they arise "hen one o&ts for a &ragmatic a&&roachm *his is not to claim that a4duction is the only &ossi4le &ragmatic a&&roach, nor is it to deny that other forms of scientinc in=uiry have their legitimate &lacem !e do argue, ho"ever, that a4duction re&resents a good 4et in &ursuing social scientinc research after the

failure of traditional e&istemology to &rovide the incontroverti4le foundations of %no"ledge# In fairness, a4duction is a ris%y endeavor since there is no algorithm to guarantee successful research# <f course
the same a&&lies to &ositivist methodologies such as theory?testing, although novices are often lured into 4elieving that a &ositivistic logic of in=uiry is a guarantee of scientinc successm ;ut 4e that as it may, "ith a4duction there is a danger of endlessly

&roliferating com&le ity if one does not ta%e the necessary &recautions# As "e have seen, ho"ever, follo"ing a fe" &ractical &rinci&les can dramatically increase the li%elihood that a research effort "ill lead to meaningful results that "ill 4e acce&ted 4y the relevant evaluators and a "ider audiencem Moreover, the ris%

inherent in a4duction is also the &rice for learning something genuinely ne"m <nly "hen the range of &ossi4le results is &redetermined 4y the %ind of =uestions "e as%, as in the case of theory testing, is there no ris% of indeterminacym ;ut then neither is there a chance of any real sur&rise# As "e have seen, &ragmatism as the consensus?oriented &ractice of discursive communities and &ragmatism as a device for the generation of useful %no"ledge are t"o sides of the same coin# Discursive communities can go com&letely astray

"hen they are so alienated from their social environment that they disregard &lain commonsense# *a%e as an

e am&le the medieval de4ate on "hether the duc% is a 4ird or a nsh, or &eriodical discussions among I) scholars on "hat matters more, structure or agencym Such de4ates =uic%ly &eter out "hen %no"ledge is understood as a social &roduct and, at the same time, lia4le to some &ur&osem Pragmatism must therefore neither 4e reduced to the e isting eor fa4ricated\ consensus of a narro" grou& of scientists, nor to the utility of results regardless of their &resu&&ositions and meaningm An academic research &roAect should carry the day if, and only if, it fulnls the follo"ing t"o criteria6 nrst, it should 2"or%5 as a reasona4le res&onse to the &ro4lem at handG and second, it should convince the relevant evaluatorsm Academic communities should not 4ecome so self?

referential to 4ehave as the sole Audges of their o"n discourse, "ithout considering "hat other tri4unals have ruled

or "hat the Aury says# It is im&ortant to maintain the communica4ility of our research =uestions and nndings not only to fello" s&ecialists 4ut also to a "ider academic audience and, ultimately, society at largem It is also im&ortant that "e listen to "hat these other constituencies have to saym It matters if &hiloso&hers of science have reached the conclusion that there is no e&istemological 4asis for the

accumulation of la"?li%e statements# It similarly matters if &olitical decision ma%ers and &eo&le interested in &olitics

are not interested in our theoretical ruminations 4ecause they either do not understand them or do not see their utilitym Ideally, the nndings of em&irical research and the gist of theoretical de4ates should 4e re&orted in a voca4ulary close enough to everyday language to allo" for cross?community dialogue# *he a&&ro&riate res&onse to the e&istemological im&asse is neither indulgence in endless meta?

theoretical de4ating nor a candid denial of the &ro4lem, 4ut the &ursuit of a &ragmatic a&&roach to research and methodologym <r, more 4luntly6 let us recogni@e that neither lofty theory 4ashing nor clueless research activism can &rovide secure foundations for our %no"ledge, and let us instead see% %no"ledge that "ill ena4le us to deal "ith relevant &ro4lems and, ultimately, to nnd our "ay through the com&le ities of the social "orld# 0nly small reforms li"e t$e plan institutionali:e c$ange and get ot$ers to sign onto t$e alternative

Wrig$t, 9 -Eri% <lin, Xilas Distinguished Professor of Sociology at the University of !isconsin, 2Fuidelines for Envisioning )eal Uto&ias,5 Soundings, A&ril 7DD(, """#ssc#"isc#edu0e"right0Pu4lished[7D"riting0Fuidelines?soundings#&df9 /# !aystations *he final guideline for discussions of envisioning real uto&ias concerns the im&ortance of "aystations# *he central &ro4lem of envisioning real uto&ias concerns the via4ility of institutional alternatives that em4ody emanci&atory values, 4ut the &ractical achieva4ility of such institutional designs often de&ends u&on the e istence of smaller ste&s, intermediate institutional innovations that move us in the right direction 4ut only &artially em4ody these values# Institutional &ro&osals "hich have an all?or?nothing =uality to them are 4oth less li%ely to 4e ado&ted in the first &lace, and may &ose more difficult transition?cost &ro4lems if
im&lemented# *he catastro&hic e &erience of )ussia in the 2shoc% thera&y5 a&&roach to mar%et reform is historical testimony to this &ro4lem# !aystations are a difficult theoretical and &ractical &ro4lem 4ecause there are many instances in "hich &artial reforms may have very different conse=uences than full? 4odied changes# Consider the e am&le of unconditional 4asic income# Su&&ose that a very limited, 4elo"?su4sistence 4asic income "as instituted6 not enough to survive on, 4ut a grant of income unconditionally given to everyone# <ne &ossi4ility is that this %ind of 4asic income "ould act mainly as a su4sidy to em&loyers "ho &ay very lo" "ages, since no" they could attract more "or%ers even if they offered 4elo" &overty level earnings# *here may 4e good reasons to institute such "age su4sidies, 4ut they "ould not generate the &ositive effects of a U;I, and therefore might not function as a ste&&ing stone# !hat "e ideally "ant, therefore, are intermediate reforms that have t"o main &ro&erties6 first, they concretely

demonstrate the virtues of the fuller &rogram of transformation, so they contri4ute to the ideological 4attle of convincing &eo&le that the alternative is credi4le and desira4le G and second, they enhance the ca&acity for action of &eo&le, increasing their a4ility to &ush further in the future# !aystations that increase &o&ular &artici&ation and 4ring &eo&le together in &ro4lem?solving deli4erations for collective &ur&oses are &articularly salient in this regard# *his is "hat in the '8(Ds "as called 2nonreformist reforms56 reforms that are &ossi4le "ithin e isting institutions and that &ragmatically solve real &ro4lems "hile at the same time em&o"ering &eo&le in "ays "hich enlarge their sco&e of action in the future# Aff impacts are true ### t$eir H dissolves into paralysis ### our worldview is inevitable Qac"son, 11 -Patric% *hadeus, associate &rofessor of I), School of International Service at American University, 2*he Conduct of In=uiry in International )elations,5 &g# /(?/89 Perha&s the greatest irony of this instrumental, deconte tuali@ed im&ortation of 2falsification5 and its critics into I) is the "ay that an entire line of thought that &rivileged disconfirmation and refutationEno matter ho" com&licated that disconfirmation and refutation "as in &racticeE has 4een transformed into a license to "orry endlessly a4out foundational assum&tions# At the very 4eginning of the effort to 4ring terms such as 2&aradigm5 to 4ear on the study of
&olitics, Al4ert <# $irschman -'8(D4, 11H9 noted this very danger, suggesting that "ithout 2a little more Nreverence for life> and a little less straightAac%eting of the future,5 the focus on &roducing internally consistent &ac%ages of assum&tions

instead of actually e amining com&le em&irical situations "ould result in scholarly &aralysis# $ere
as else"here, $irschman a&&ears to have 4een =uite &rescient, inasmuch as the maAor effect of &aradigm and research &rogramme language in I) seems to have 4een a series of de4ates and discussions a4out "hether the fundamentals of a given school of thought "ere sufficiently 2scientific5 in their construction# *hus "e have de4ates a4out ho" to evaluate scientific

&rogress, and attem&ts to &ro&ose one or another set of research design &rinci&les as uni=uely scientific, and inventive,
2reconstructions5 of I) schools, such as Patric% .ames> 2ela4orated structural realism,5 su&&osedly for the &ur&ose of &lacing them on a firmer scientific footing 4y ma%ing sure that they have all of the re=uired elements of a 4asically Ba%atosian'8 model of science -.ames 7DD7, R(, 8HO'D19# *he 4et "ith all of this scholarly activity seems to 4e that if "e can Aust get the fundamentals right, then scientific &rogress "ill inevita4ly ensue # # # even though this is the &recise o&&osite of "hat Po&&er and Kuhn and Ba%atos argued\ In fact, all of this

o4sessive interest in foundations and starting?&oints is , in form if not in content, a lot closer to logical &ositivism than it is to the concerns of the falsificationist &hiloso&hers, des&ite the &rominence of language a4out 2hy&othesis
testing5 and the concern to formulate testa4le hy&otheses among I) scholars engaged in these endeavors# *hat, a4ove all, is "hy I have la4eled this methodology of scholarshi& neo&ositivist# !hile it ta%es much of its self Austification as a science from criticisms of logical &ositivism, in overall sensi4ility it still o&erates in a visi4ly &ositivist "ay, attem&ting to construct %no"ledge from the ground u& 4y getting its foundations in logical order 4efore concentrating on ho" claims encounter the "orld in terms of their theoretical im&lications# *his is 4y no means to say that neo&ositivism is not interested in hy&othesis testingG on the contrary, neo&ositivists are e tremely concerned "ith testing hy&otheses, 4ut only after the fundamentals have 4een soundly esta4lished# Certainty, not conAectural &rovisionality, seems to 4e the goalEa goal that, ironically, Po&&er and Kuhn and Ba%atos "ould all reAect#

5$ysical survival and extinction outweig$s ontology

Qonas, EP -$ans, Cormer Alvin .ohnson Professor of Philoso&hy at the Ne" School for Social )esearch, Cormer Eric Xoegelin Xisiting Professor at the University of Munich, 2Mortality and Morality6 A Search for the Food After Ausch"it@, &g# '''?''79
!ith this loo% ahead at an ethics for the future, "e are touching at the same time u&on the =uestion of the future of freedom# *he unavoida4le discussion of this =uestion seems to give rise to misunderstandings# My dire &rognosis that not only our material standard of living 4ut also our democratic freedoms "ould fall victim to the gro"ing &ressure of a "orld"ide ecological crisis, until finally there "ould remain only some form of tyranny that "ould try to save the situation, has led to the accusation that I am defending dictatorshi& as a solution to our &ro4lems# I shall ignore here "hat is a confusion 4et"een "arning and recommendation# ;ut I have indeed said that such a tyranny "ould still 4e 4etter than total ruinG thus, I have ethically acce&ted it as an alternative# I must no" defend this stand&oint, "hich I continue to su&&ort, 4efore the court that I myself have created "ith the main argument of this essay# Cor are "e not contradicting ourselves in &ri@ing &hysical survival at the &rice of freedomU Did "e not say that freedom "as the condition of our ca&acity for res&onsi4ilityEand that this ca&acity "as a reason for the survival of human%indU ;y tolerating tyranny as an alternative to &hysical annihilation are "e not violating the &rinci&le "e esta4lished6 that the $o" of e istence must not ta%e &recedence over its !hyU :et "e can ma%e a terri4le concession to the &rimacy of &hysical survival

in the conviction that the ontological ca&acity for freedom , inse&ara4le as it is from man>s 4eing, cannot really 4e e tinguished, only tem&orarily 4anished from the &u4lic realm# *his conviction can 4e su&&orted 4y e &erience "e are all familiar "ith# !e have seen that even in the most totalitarian societies the urge for freedom on the &art of some individuals cannot 4e e tinguished, and this rene"s our faith in human 4eings# Fiven this faith, "e have reason to ho&e that, as long as there are human 4eings "ho survive, the image of Fod "ill continue to e ist
along "ith them and "ill "ait in concealment for its ne" hour# !ith that ho&eE"hich in this &articular case ta%es &recedence over fearEit is &ermissi4le, for the sa%e of &hysical survival, to acce&t if need 4e a tem&orary a4sence of

freedom in the e

ternal affairs of humanity# *his is, I "ant to em&hasi@e, a "orst?case scenario, and it is the foremost tas% of res&onsi4ility at this &articular moment in "orld history to &revent it from ha&&ening# *his is in fact one of the no4lest of duties -and at the same time one concerning self?&reservation9, on the &art of the im&erative of res&onsi4ility to avert future coercion that "ould lead to lac% of freedom 4y acting freely in the &resent, thus &reserving as much as &ossi4le the a4ility of future generations to assume res&onsi4ility# ;ut more than that is involved# At sta%e is the &reservation of the Earth>s entire miracle of

creation, of "hich our human e istence is a &art and 4efore "hich man reverently 4o"s, even "ithout &hiloso&hical 2grounding#5 $ere too faith may &recede and reason follo"G it is faith that longs for this &reservation of the
Earth -fides =uaerens intellectum9, and reason comes as 4est it can to faith>s aid "ith arguments, not %no"ing or even as%ing ho" much de&ends on its success or failure in determining "hat action to ta%e# !ith this confession of faith "e come to the end of our essay ontology#

xtinction outweig$s 3 it6s ontologically destructive 3 deat$ is always worse t$an a loss of being 5aterson, 3 -Craig, De&artment of Philoso&hy, Providence College, )hode Island, 2A Bife Not !orth BivingU,5 Studies in Christian Ethics, Xolume 'R, August 7DD1, &g# '?7D, Sage .ournals, &df9
Contrary to those accounts, I "ould argue that it is death &er se that is really the o4Aective evil for us, not 4ecause it de&rives us of a &ros&ective future of overall good Audged 4etter than the alternative of non?4eing# It cannot 4e a4out harm to a former &erson "ho has ceased to e ist, for no &erson actually suffers from the su4?se=uent non?&artici&ation# )ather, death in itself is an evil to us

4ecause it ontologically destroys the current e istent su4Aect E it is the ultimate in meta&hysical lightening stri%es# *he evil of death is truly an ontological evil 4orne 4y the &erson "ho already e ists, inde&endently of calculations a4out 4etter or "orse &ossi4le lives# Such an evil need not 4e consciously
e &erienced in order to 4e an evil for the %ind of 4eing a human &erson is# Death is an evil 4ecause of the change in %ind it 4rings a4out, a change that is destructive of the ty&e of entity that "e essentially are# Anything, "hether caused naturally or caused 4y human intervention -intentional or unintentional9 that drastically interferes in the &rocess of maintaining the &erson in e istence is an o4Aective evil for the &erson# !hat is crucially at sta%e here, and is dialectically su&&ortive of the self?evidency of the 4asic good of human life, is that death is a radical interference "ith the current life &rocess of the %ind of 4eing that "e are# In conse=uence, death itself can 4e credi4ly thought of as a N&rimitive evil> for all &ersons, regardless of the e tent to "hich they are currently or &ros&ectively ca&a4le of &artici&ating in a full array of the goods of life# In conclusion, concerning "illed human actions, it is Austifia4le to state that any intentional reAection of human life

itself cannot therefore 4e "arranted since it is an e &ression of an ultimate disvalue for the su4Aect, namely, the destruction of the &resent &ersonG a radical ontological good that "e cannot 4egin to "eigh o4Aectively against the travails of life in a rational manner# *o deal "ith the sources of disvalue -&ain, suffering, etc#9
"e should not see% to irrationally destroy the &erson, the very source and condition of all human &ossi4ility#

xistence is prior to value 3 sub;ective desires

Hacou, 1 -Amien, 2!$: EXEN MINDU <n *he A Priori Xalue <f NBife>,5 Cosmos and $istory6 *he .ournal of Natural and Social Philoso&hy, Xolume J, Issue '?7, htt&600cosmosandhistory#org0inde #&h&0Aournal0article0vie"0870'HJ9
Curthermore, that manner of finding things good that is in &leasure can certainly not e ist in any "orld "ithout consciousness -i#e#, "ithout 2life,5 as "e no" understand the "ord9Eslight analogies &ut aside# In fact, "e can 4egin to develo& a more so&histicated definition of the conce&t of 2&leasure,5 in the 4roadest &ossi4le sense of the "ord, as follo"s6 it is the common &sychological element in all &sychological e &erience of goodness -4e it in Aoy, admiration, or "hatever else9# In this sense, &leasure can al"ays 4e &ictured to 2mediate5 all a"areness or &erce&tion or Audgment of goodness6 there is &leasure in all consciousness of things goodG &leasure is the common element of all conscious satisfaction# In short, it

is sim&ly the very e &erience of li%ing things, or the li%ing of e &erience, in general# In this sense, &leasure is, not only uni=uely characteristic of life 4ut also, the core e &ression of goodness in lifeEthe most general sign or &henomenon for favora4le conscious valuation, in other "ords# *his does not mean that 2good5 is a4solutely synonymous "ith 2&leasant5E "hat "e value may "ell go 4eyond &leasure# -*he fact that "e value things needs not 4e reduced to the e &erience of li%ing things#9 $o"ever, "hat "e value 4eyond
&leasure remains a matter of s&eculation or theory# Moreover, "e note that a variety of things that may seem other"ise unrelated are correlated "ith &leasureEsome more strongly than others# In other "ords, there are many things the e &erience of

"hich "e li%e# Cor e am&le6 the admiration of othersG se G or roc%?&a&er?scissors# ;ut, again, "hat they are is irrelevant in an in=uiry on a &riori valueE"hat gives us &leasure is a matter for em&irical
investigation# *hus, "e can

see no" that, in general, something &rimitively valua4le is attaina4le in livingEthat is, &leasure itself# And it seems e=ually clear that "e have a &riori logical reason to &ay attention to the "orld in any "orld "here &leasure e ists# Moreover, "e can no" also articulate a foundation for a security interest in our life6 since the good of &leasure can 4e found in living -to the e tent &leasure remains attaina4le9,P'(Q and only in living, therefore, a &riori, life ought to 4e continuously -and indefinitely9 &ursued at least for the sa%e of &reserving the &ossi4ility of finding that good#
$o"ever, this &latitude a4out the value that can 4e found in life turns out to 4e, at this &oint, insufficient for our &ur&oses# It seems to amount to very little more than recogni@ing that our su4Aective desire for life in and of itself sho"s that life has some o4Aective value# Cor "hat difference is there 4et"een saying, 2living is uni=ue in 4enefiting something I value -namely, my &leasure9G therefore, I should desire to go on living,5 and saying, 2I have a uni=ue desire to go on livingG therefore I should have a desire to go on living,5 "hereas the latter &ro&osition immediately seems senselessU In other "ords, 2life gives me &leasure,5 says little more than, 2I li%e life#5 *hus, "e seem to have arrived at the conclusion that the fact that "e already have some -su4Aective9

desire for life sho"s life to have some -o4Aective9 value# ;ut, if that is the most "e can say, then it seems our
enter&rise of Austification "as =uite su&erficial, and the su4Aective0o4Aective distinction "as uselessEfor all "e have really done is highlight the corres&ondence 4et"een value and desire# Perha&s, our in=uiry should 4e a 4it more com&le #

Representations don6t s$ape reality Balb;Trn, = -Morten, PhD in the De&artment of Political Science at Aarhus, 2*he Middle East and Palestine6 Flo4al Politics and )egional Conflict,5 &g# R(?RH9
As mentioned 4efore, the relational &ers&ective is a criti=ue of 4oth the neglect of the issue of <therness 4y the I) mainstream and the "ay in "hich &ro&onents of an essentialist a&&roach relate to the <ther# Cor this reason, it "ould 4e natural to assume that &ro&onents of this second attem&t to Wculturali@eW the study of international relations "ould 4e &articularly %een to address the =uestion of ho" to ac%no"ledge cultural diversity "ithout committing the sins of orientalism# Indeed, this is also "hat Said is stressing in the introduction to <rientalism6 *he most im&ortant tas% of all "ould 4e to underta%e studies in contem&orary alternatives to <rientalism, to as% ho" one can study other cultures and &eo&les from a li4ertarian, or nonre&ressive and non? mani&ulative &ers&ective# -'88/6 7J9 $o"ever, he then goes on to add that Wthese are all tas%s left em4arrassingly incom&lete in this studyW -Said, '88/6 7J9# Boo%ing at other analyse s4ased on a relational conce&tion of culture, it 4ecomes a&&arent that the latter remar% is verytelling for this %ind of understanding of culture as a "hole -e#g# Doty, '8816 1'/9# Des&ite a4lan% reAection of the universalism of I) mainstream and, at least in &rinci&le, a recognition of the e istence of different <thers "ho are not only &roAections of o"n fantasies and desires, in &ractice, &ro&onents of this alternative a&&roach nonetheless usually leave the =uestion of ho" to address and a&&roach the actual cultural <ther unans"ered# *his might very "ell 4e an unintended outcome of the &reviously mentioned radical constructivism associated "ith this a&&roach# *hus, 4y stressing ho" the re&resentation of the <ther is intimately related to the construction of identities or a su4tle "ay of &erforming &o"er, one

ris%s 4eing caught in a %ind of e&istemological and moral crisis, characteri@ed 4y a nagging dou4t a4out "hether it really is &ossi4le to gain any %no"ledge of <thers or if "e are Aust &roAecting our o"n fantasies, and 4y a&ronounced fear that our re&resentations are silencing voices so that "e un"ittingly are ta%ing &art in a su4tle &erformance of &o"er -$astru&, '8876 /J9# In merely
dealing "ith the relationshi& 4et"een the re&resentcr and his re&resentations, these dilemmas can 4e Wavoided#W $o"ever, at the same time one "rites off the o&&ortunity to relate to cultural diversity as anything 4ut discursive &roducts of oneIs o"n fantasies and &roAections# *his is &recisely the criti=ue that su&&orters of the relational understanding of culture have 4een facing# Crom this &ers&ective, it a&&ears less sur&rising that Said has had so much more to offer onthe dynamics of !estern re&resentations of the Middle East than on real alternatives to the orientalist de&iction of the region# Unfortunately, this second 4id for a culturalistic a&&roach to the study of international relations is not only aligned "ith a num4er of very "elcome critical =ualities that may enrich

the study of international relations# It is also related to a &ro4lematic tendency to overreact "hen it comes to addressing the &revalent ;lindness to the Self "ithin I) mainstream and among su4scri4ers to the essentialist conce&tion of culture# *hus, as&irations of &romoting a larger self consciousness in the study of international relation end u&

4ecoming self?centeredness, Aust as the attem&t to &romote a larger sensitivity to"ard the <ther in reality 4ecomes oversensitivity to saying anything su4stantial "hen it comes to actual <ther# *his is &ro4lematic, &artly 4ecause "e are left "ithout any real idea as to ho" to a&&roach actual Middle Eastern international relations rather than !estern re&resentations of theseG and &artly 4ecause there is the ris% of losing sight of the material and very concrete conse=uences that s&ecific re&resentations may engender -Krishna, '8819# Also, the &ro&onents of this second WculturalisticW
alternative seem to 4e 4etter at as%ing im&ortant and critical =uestions than at offering attractive ans"ers#

/o single root cause of war +as$man, )" -Freg, Professor of Political Science at Salis4ury State University 2!hat Causes "arU6 An introduction to theories of international conflict,5 &g# 89
*"o "arnings need to 4e issued at this &oint# Cirst, "hile "e have 4een using a single varia4le e &lanation of "ar merely for the sa%e of sim&licity, multivariate e &lanations of "ar are li%ely to 4e much more &o"erful # Since social and &olitical 4ehaviors

are e tremely com&le , they are almost never e &laina4le through a single factor# Decades of research have led most analysts to reAect monocausal e &lanations of "ar# Cor instance, international
relations theorist .# David Singer suggests that "e ought to move a"ay from the conce&t of 2causality5 since it has 4ecome associated "ith the search for a single cause of "arG "e should instead redirect our activities to"ard discovering

2e &lanations5Ea term that im&lies multi&le causes of "ar, 4ut also a certain element of randomness or chance in their occurrence#

)ac lin" uni!ueness


4in" s$ould6ve been triggeredG0bama6s meeting wit$ /ieto Martin and Wood 13 O *Director of the Energy Program at the Institute of the Americas at the University of California, San DiegoG **Director of the Me ico Institute at the !oodro" !ilson International Center for Scholars, &rofessor for '( years in Me ico and &reviously "as director of the International )elations Program at the Instituto *ecnol+gico Aut+nomo de M, ico -I*AM9 in Me ico City -.eremy M# and Duncan, 2U#S# ShoUld Act 3Uic%ly on trAnS4oUndAry hydrocAr4on Agreement !ith me ico,5 !orld Politics )evie", May 1, 7D'1, htt&600"""#iamericas#org0ne"s0!P)TUSTMe icoTD/D17D'1#&df900;"ang
:esterday, U#S#

President ;arac% <4ama and Me ican President Enri=ue Pena Nieto met in Me ico City to discuss the 4ilateral relationshi&# It "as <4ama>s first meeting "ith Pena Nieto since the latter too% office in Decem4er,
although the t"o did meet "hen Pena Nieto visited !ashington as &resident?elect in Novem4er# In star% contrast to meetings 4et"een the American and Me ican &residents in recent years, the

agenda included 4ut "as not dominated 4y security and organi@ed crime# Instead, as underscored 4y the &residents> Aoint &ress conference, <4ama>s visit to Me ico City offered a varied menu of issues such as trade, education, innovation, North American com&etitiveness and energy# <n this last issue, it is li%ely that the Me ican &resident in=uired a4out the status of the *rans4oundary $ydrocar4ons Agreement, signed "ith much fanfare in Bos Ca4os in Ce4ruary
7D'7# *he agreement creates a frame"or% for resolving the thorny issue of o"nershi& of oil and gas reserves that e ist acrossEor rather underneathEthe international 4order 4et"een Me ico and the U#S# in the Fulf of Me ico# *his &ro&osed frame"or% "ould &ut to rest long?standing Me ican fears of the 2efecto &o&ote,5 or stra" effectEthe idea that U#S# com&anies aim to slur& u& Me ican oil reserves from across the nations> maritime 4order# *he 7D'7 agreement mar%ed a maAor shift 4y &roviding legal certainty for e &loration and &roduction activities near the 4order, and 4y allo"ing for the &ros&ect of long?&rohi4ited Aoint develo&ment of reserves that straddle the Fulf "aters of 4oth countries# At its core, the agreement see%s to set u& legal guidelines for com&anies to Aointly develo& socalled trans4oundary reservoirs and lift the moratorium on oil and gas e &loration and &roduction for roughly '#/ million acres in the Fulf# Me ico underscored its commitment to the agreement 4y =uic%ly ratifying itG the Me ican Senate a&&roved the treaty in A&ril 7D'7# In the United States, mean"hile, &rogress stalled for more than a year# ;ut Aust in time for

yesterday>s 4ilateral meeting, the agreement is again under discussion as legislators revive the dormant ratification &rocess, "hich is good ne"s for those eager to see its a&&roval in the U#S# Indeed, according to the !hite $ouse, <4ama s&o%e in &ositive terms yesterday a4out the recent &rogress made on the agreement6 ;oth the $ouse Su4committee on !estern $emis&here Affairs and the $ouse Committee on Natural )esources recently held hearings focused on the challenges and o&&ortunities that a&&roval of the accord "ould &resent for the United States# <n A&ril 'H, a 4ill "as
introduced in the $ouse of )e&resentatives that "ould ma%e "ay for the a&&roval and im&lementation of the terms of the agreement#

)ac atA natural gas exports disadGdefense

/atural gas exports to Mexico $ig$ now +roo"s 9K1K13 staff "riter for the Ciancial *imes -Ed Croo%s, 2US gas e

&orts give Me ico com&etitive edge over other countries5, .uly ', 7D'1 htt&600"""#ft#com0cms0s0D0'H/7RR8e?e7/4?''e7?a(fa?DD'JJfea4dcD#html`a @@7a=dC<LmN9 00K: US natural gas e &orts to Me ico hit a record last year, hel&ing hold do"n the country>s energy costs as its industry gre" ra&idly# Planned ne"

&i&elines that "ill ena4le further ra&id gro"th in im&orts from the US "ill

strengthen and loc% in that advantage, and hel& to give Me ico a com&etitive edge over other emerging economies for as long as North American shale &roduction remains strong# China>s manufacturing la4our costs overtoo% Me ico>s last year 4ecause of its high rates of "age inflation, and its energy costs are also significantly higher# ;y 7D'/, China>s total manufacturing costs "ill 4e a4out 8/ &er cent of US levels, "ith gas contri4uting a4out J &ercentage &oints of that, "hile Me ico>s "ill 4e Aust H8 &er cent, "ith gas at Aust ' &ercentage &oint, according to ne" research from the ;oston Consulting Frou&# Me ico>s industrial out&ut has 4een falling this year, 4ut its lo"er costs and &ro imity to the US, "hich reduces trans&ort costs and increases fle i4ility, "ill ma%e it increasingly com&etitive as a manufacturing location, analysts say# Com&anies including $onda and Nissan, the .a&anese car manufacturers, and last "ee% Feneral Motors of the US, have recently announced ne" investments in Me ico, and $al Sir%in of ;CF said he e &ected more to come# 2!e may not have really seen it in the investment data yet, 4ut Me ico is 4eing discussed in 4oardrooms, and it>s loo%ing attractive,5 he said# US gas e &orts to Me ico rose '8 &er cent to R7D4n cu4ic

feet last year, meeting a4out 7D &er cent of the country>s demand # Domestic &roduction has 4een in decline 4ecause of under investment 4y Peme , the national oil com&any# At that rate, the &i&elines from the US to Me ico "ere full, forcing the government to im&ort e &ensive li=uefied natural gas, "hich costs more than four times the 4enchmar% US gas &rice of a4out V1#RD &er million ;ritish thermal units# $o"ever, Me ico &lans to more than dou4le its im&ort ca&acity from the US "ith the )amones &i&eline &roAect, its 4iggest energy infrastructure develo&ment for JD years# Phase one is

&lanned to 4e in o&eration ne t year# Maria .ose $ernande@ of the consultancy Eurasia Frou& said6 2*he government has resorted to the more costly BNF im&orts, su4sidising them to an e tent 4ut also rationing su&&ly as "ellG a fi insufficient to satisfy industrial demand# Im&orts from the US are much chea&er, so there is a tremendous economic incentive to 4uild ne" &i&elines#5 *he

North American Cree *rade Agreement means US com&anies see%ing to e &ort gas to Me ico do not face the same regulatory hurdles as &ro&osed BNF &lants see%ing to e &ort gas to countries "ithout a trade
agreement#

/atural gas exports inevitableG.0 permits *argreaves PK=K13 energy corres&ondent for CNN -Steve $argreaves, 2U#S# ste&s u& natural gas e
htt&600money#cnn#com07D'10DR0DJ0ne"s0economy0natural?gas?e &orts0inde #html9 00K:

&orts5, .une J, 7D'1

*he United States "ill soon start e &orting more of its energy 4ounty # *hatIs ma%ing oil and gas com&anies ha&&y, American manufacturers nervous, and some environmentalists livid# Bast month, the Energy De&artment a&&roved a second a&&lication to e &ort natural gas, this time from a facility along the Fulf Coast &artly o"ned 4y ConocoPhilli&s -C<P, Cortune /DD9# *he a&&roval came t"o years after D<E granted the first natural gas e &ort license to
Cheniere Energy -BNF9, "hich also has a &lant on the Fulf Coast# *he t"o?year ga& "as the result of D<E "aiting for studies on ho" gas e &orts "ould im&act the economy# !ould e &orts significantly raise &rices for consumersU !ould they cause manufacturers to leave, ta%ing Ao4s "ith themU *hose studies ?? along "ith several from the &rivate sector ?? are no" done# *he re&orts all generally said e &orts "ould 4e a good thing# So no" thereIs every indication that the &ace of e &ort licenses "ill =uic%en # At a recent congressional hearing, a

D<E official told la"ma%ers that it too% a4out t"o months to a&&rove the most recent a&&lication# Although ne"ly a&&ointed Energy Secretary Ernest Moni@ said heIll revie" the &ermit &rocess
4efore the ne t a&&lication, analysts too% that to mean that ne" &ermits could start rolling out as fast as one every t"o months# W<ur vie" is that the Moni@ revie" is most li%ely to 4e short and lead to the same conclusion as many revie"ers of the issue ?? that BNF -li=uefied natural gas9 e &orts "ill &rovide a net 4enefit to the U# S,W !hitney Stanco, an energy analyst at Fuggenheim SecuritiesI !ashington )esearch Frou&, "rote in a research note last "ee%# !hile many may 4elieve e &orts "ill have a net 4enefit, that o&inion is certainly not unanimous#

&( will exportGs$ale boom and (abine 5ass

($u"man 9K1PK13 Science editor, ;;C Ne"s -David Shu%man, 2US to 4egin e
htt&600"""#44c#co#u%0ne"s0science?environment?711'(1(D9 00K:
US gas &roduced 4y the controversial techni=ue of Wfrac%ingW is due to 4e e &orted for the first time #

&orting Ifrac%edI gas5, (0'R07D'1

A V7D4n &roAect to &re&are an e &ort

terminal is under "ay in Bouisiana# *he huge facility on the Fulf of Me ico "as originally designed to im&ort natural gas to the US# ;ut "ithin t"o years of o&ening, the o"ners decided to reverse the &rocess# In that time, American shale gas has 4ecome a4undant and relatively chea&# <ne of the first contracts "ill see shale gas shi&&ed to ;ritain under a contract "ith Centrica# *he decision to sell gas a4road illustrates the e traordinary scale of the shale revolution in the United States "ith a further huge e &ansion forecast # A com4ination of ne"
seismic imaging techni=ues, the a4ility to drill hori@ontally and the &rocess of fracturing the shale roc% itself has transformed the energy scene in the United States# *he &lant at Sa4ine Pass, o"ned 4y Cheniere Energy, "as constructed to receive shi&ments of li=uefied natural gas and a handful of deliveries "as made# ;ut no" the com&any, 4an%ing on gro"ing glo4al demand for chea& American gas, is investing in four massive systems, %no"n as WtrainsW, to li=uefy gas ready for e &ort# !hen com&leted, the terminal is &lanned to e &ort nearly 7D million tonnes of BNF a year# *he first shi&ments are scheduled for 7D'/# According to Shell, one of the maAor &roducers of shale gas in the US, &ros&ects have gone through a sur&risingly ra&id transformation# Peter ;rett, manager of ShellIs onshore "ell o&erations in the US, told ;;C Ne"s that there is Wmassive &otentialW# WItIs huge ? Aust five years ago "e "ere tal%ing a4out im&orting BNF and 4ringing that in from overseas and no" "eIre loo%ing at self sufficiency for the ne t 'DD years in natural gas# W!eIre ta%ing a long term vie" ? thereIs going to 4e an ever increasing energy demand, "eIre going to need all energy sources and shale gas "ill 4e a 4ig &art of that#W Cor years, reservoirs of oil and gas in u&&er layers of roc% have 4een e tracted 4ut the layer of shale 4elo" ? the Wsource roc%W in "hich the hydrocar4ons "ere formed ? "as deemed too difficult to e &loit# <ne maAor ne" &ros&ect ? or W&layW, as the industry calls ne" fields ? is the Eagle Cord shale in southern *e as# Infogra&hic Near the Me ican 4order at Carri@o S&rings, this arid scru4land is no" the scene of frenetic activity as several maAor energy com&anies have moved in# At do@ens of sites, drilling rigs are used to reach at least a mile dee& into the shale, and then at least a mile hori@ontally through the roc% formation# *y&ically, a do@en "ells can 4e drilled from the same site# *he frac%ing &rocess involves a fleet of truc%s carrying &um&s to drive a com4ination of "ater, chemicals and W&ro&&antsW ? tiny grains li%e sand ? under high &ressure into the roc%# *his fractures the shale, forcing o&en tiny fissures "hich the &ro&&ants then hold o&en, allo"ing the gas to flo" out# *he techni=ue is controversial for several reasons# Cirst, there are concerns a4out the ris% of earth tremors 4ut these have 4een e tremely rare des&ite more than a million Wfrac% Ao4sW in the US# Second, as the "ell &asses through "ater?4earing layers of roc%, there is a ris% of the contamination of drin%ing "ater su&&lies# A dou4le 4arrier ? a cement lining of the "ell and a steel &i&e ? is designed to &revent any gas reaching a=uifers# .ohn ;ic%ley, "ho manages technology for ShellIs shale o&erations, said that if drilling and frac%ing are &ro&erly handled, the W&ossi4ility of contamination is very smallW# If methane is found in drin%ing "ater, there are other e &lanations for ho" it might have got there, he said# W*here could 4e old "ell 4ores that lea%ed in the &ast# :ou could have methane that naturally migrates u&#W $e conceded that the li%elihood of shale gas 4eing e &loited in other countries 4eyond the US &artly de&ends on &u4lic reaction# WUntil "e get &eo&le to understand that "eIre doing this in an environmentally friendly manner that could delay or even cancel o&erations in different countries#W In the 4ig country of south *e as, "ith a s&arse &o&ulation, the &rocess is inevita4ly less controversial than in more cro"ded areas# In central California, near the to"n of Shafter, "e found that frac%ing o&erations had ta%en &lace almost on the doorste& of a retired 4usinessman, !alt Desatoff# W*hey drilled Aust across street ? they had three giant generators, they Aust started u&# *here "as lighting, 7J0( activity, a huge "aste &it that "as of concern WIt "as maAor inconvenience ? the activity, the smells, the dust from the truc%s and the noise# W*hey did allocate us some money for a hotel ? "e intermittently left for a fe" days "hen "e couldnIt ta%e it#W Crac%ing Industry says that if drilling and frac%ing are &ro&erly handled the ris% of contamination is lo" *he frac%ing o&eration close to Mr DesatoffIs home "as to &roduce oil not gas 4ut the techni=ue is the same# !e a&&roached the com&any involved 4ut it said it never commented on individual cases# Cor environmentalists, a maAor concern is the =uality of regulation and the a4ility of the authorities to enforce it# .en Po"is of the Sierra Clu4 said there "as insufficient control over the dum&ing of W"ater laced "ith chemicalsW, emissions from com&ressor stations and the im&act of &i&eline develo&ment# She also said that the &lan to e &ort US shale gas carried ris%s# W*here are '( &ro&osals to e &ort natural gas and no one has loo%ed at them as a "hole# W!hat a4out the &i&elines and the "etlands and the shi&s coming in and outU !hat a4out the "ater "ith this increased trafficU And to get to that e &ort, "hat a4out the ris%s u&streamUW ;ut for the moment, a shale

gas 4oom, made &ossi4le 4y frac%ing, is under "ay in the US "ith every &ros&ect of it gro"ing for decades to come# xports are coming now .altorio 9KEK13 -*ony, Contri4uting !riter, Money Morning 2Natural Fas Com&anies6 BNF E

&ort ;oom Still on the Baunch&ad5 .uly 8, 7D'1, htt&600moneymorning#com07D'10D(0D80natural?gas?com&anies?lng?e &ort?4oom?still?on?the? launch&ad09 00K: Anyone investing in natural gas com&anies is eagerly a"aiting ne"s that the li=uefied natural gas -BNF9 e &ort

4oom is officially under"ayY !hile "e still have to "ait, the good ne"s is that last "ee% De&artment of Energy Secretary Ernest Moni@ told )euters his de&artment "ill go through the a&&lications as =uic%ly as &ossi4le# $e added that he e &ects the Energy De&artment to conduct a 2fair amount of action5 regarding the a&&lications this year# *his falls in ste& "ith the <4ama Administration>s energy initiatives, "hich include a &ush for the develo&ment of 2a glo4al mar%et for natural gas #5 *his glo4al natgas mar%et "ill
re&lace the current regional gas mar%ets only if there are large e &orts of chea& natural gas from the U#S# Such e &orts are one main reason Money Morning Flo4al Energy Strategist Dr# Kent Moors is 4ullish on natural gas &rices in the

years ahead# $e>s also 4ullish a4out the &ros&ects for investors in certain natural gas com&anies O es&ecially ones &ositioning to &rofit from Asia>s need for BNFY

)ac atA natural gas exports disadGprice volatility

Top level
xports expand production and solve price volatility Gprevious studies are wrong Tunstall SK)EK13 research director of the University of *e as at San Antonio Institute for Economic Develo&ment -*homas
*unstall, 2E &orting Natural Fas !ill Sta4ili@e U#S# Prices5, May 78, 7D'1, htt&600online#"sA#com0article0S;'DDD'J7J'7(HH(171R''RDJ/(H18RJJ'1/HDD7/HJ#html9 00K: All of this

sounds li%e a clear "in?"in# *han%s to hydraulic fracturing and hori@ontal drilling, the U#S# is no" the "orldIs e &orts &rovide a clean and much?needed source of energy to our trading &artners and economic gro"th and Ao4s in the U#S# Nevertheless there are o&&onents "ho argue that the natural?gas mar%et is historically too volatile and that e &orts "ill contri4ute to higher domestic &rices, harming U#S# consumers and crucial industries such as chemical manufacturing# Natural?gas &rices over the &ast decade have fluctuated "ildly Eranging 4et"een V7 and V'7 &er thousand cu4ic feet# ;ut revolutionary changes are at "or% that "ill transform the mar%et landsca&e significantly, contri4uting to more sta4le &rices in the future # At &resent, glo4al natural?gas mar%ets are not integrated# Prices are (/ cents &er thousand cu4ic feet in Saudi Ara4ia# *hey are V1?VJ in the U#S# and around V'7 in Euro&e, and as high as V'R?V'( in .a&an# *hese varying &rices are 4ased on short?term shifts in su&&ly and demand, "hich have created o&&ortunities for ar4itrage through e &orts that "ill 4ring &rices closer to uniformity# In order to shi& natural gas from the U#S# efficiently, the gas must 4e su&ercooled to minus 7RD degrees Cahrenheit near an e &ort terminal at a dee&?"ater &ort and transformed into li=uefied natural gasEa transformation that reduces the volume of gas 4y more than RDD times# An BNF tan%er then trans&orts the &roduct to its
largest &roducer of natural gas# Natural?gas designated foreign mar%et# !hen the BNF reaches its destination, it is re?va&ori@ed -or Wre?gasifiedW9 4efore 4eing shi&&ed to its final destination 4y &i&eline# Each ste& in this &rocess has significant costs# Cor e am&le, given the current "orld?"ide &rice differentials, it is &rofita4le to shi& BNF to .a&an from the U#S# Assuming a U#S# mar%et &rice of VJ &er thousand cu4ic feet, there is the additional cost of a&&ro imately VR#JD to li=uefy, trans&ort and re?gasify at the delivery &oint in .a&anEmore than dou4ling the &rice# Even so, a healthy &rofit of VR#RD for every thousand cu4ic feet is still generated# *his lucrative o&&ortunity "ill not go unnoticed 4y Australian, East African and even Canadian natural gas su&&liersEall of "hom have su4stantial natural gas reserves and are e=ually or 4etter &ositioned logistically to shi& to .a&an than is the U#S# Prices in Euro&e have also remained artificially high 4ecause of )ussiaIs Fa@&rom <F^P: ?'#/7[ mono&oly on natural gas e &orts# !ith the threat of BNF im&orts from the U#S#, U%raine and other countries, &rices in Euro&e are unli%ely to remain at current levels# Fa@&romIs &i&eline mono&oly is already under siege from domestic &roducers in )ussia, such as Novate% NX*K#BN mD#7R[ and )osneft, and Statoil S*B#<S ?D#1'[ in Nor"ay# In short, the eventual synchroni@ation of su&&ly and demand "ill serve to 4oth moderate the

demand for e &orts from the U#S#, as "ell as &ut do"n"ard &ressure on natural gas &rices# In the same "ay that crude oil has 4ecome a glo4al mar%et, so "ill natural gas # *his "ill come a4out as a
direct result of ne", significant natural gas discoveries and eventual &roduction in Australia, East Africa and &ro4a4ly ChinaE &erha&s other countries as "ell# *hese countries "ill see% to e &ort their sur&lus, or in the case of China, reduce their need to im&ort# *a%en as a "hole, these ne" su&&lies "ill serve to %ee& a ca& on U#S# domestic natural?gas

&rices in "hat our research at the University of *e

as, San Antonio -as "ell as inde&endent research conducted 4y .ames

$enderson at the < ford Institute for Energy Studies9 estimates

"ill eventually 4e in the V/?VR range# *here is of shale gas reserves on a glo4al 4asis more li%ely re&resents a &aradigm shift in the "ay natural gas mar%ets o&erate# If this is the case, sim&le e tra&olations from the recent &ast "ill &rove to 4e inade=uate forecasting tools# :et this is essentially the a&&roach 4eing ta%en 4y analysts "ho e amine the U#S# natural gas su&&ly mar%et in isolation# <&&onents of e &orts discount ho" the current de&ressed U#S# &rice levels for natural gas already a&&ear to 4e acting as a deterrent to future e &loration and &roduction# *his year, for e am&le, natural gas &roduction in the Eagle Cord Shale area in South *e as has flattened out at roughly 7D'7 out&ut levels -a4out t"o 4illion cu4ic feet &er day9, meaning that there has 4een essentially no increase in year?over?year &roduction# Fas &roduction in the ;arnett and $aynesville shale fields is similarly muted#
al"ays a tendency to attem&t to &roAect the future in a linear fashion# $o"ever, the develo&ment <ver the long haul, mar%et dynamicsE"hich include the a4ility to e &ort "ithout undue uncertainty or restrictionE"ill 4est manage glo4al su&&ly and demand curves for natural gas# Evidence strongly suggests that limiting e &orts "ill sim&ly have the unintended effect of also limiting su&&ly#

5lan solves natural gas price volatilityGstable mar"et base

(mead )212 Director of Navigant Consulting, Inc# -)ichard F# Smead, 2Price Insta4ility in the U#S# Natural Fas Industry j
$istorical Pers&ective and <vervie"5 Pre&ared for j *he *as% Corce on Natural Fas Mar%et Sta4ility htt&600"""#cleans%ies#org0"&? content0u&loads07D''0DH0Intro7NATNFMar%ets#&df9 A# *he ;asic )ole of Natural Fas and the Issue of Xolatility j Cirst, "hat is at sta%e for the nationU ;ased u&on "idely acce&ted analyses 4y most e &erts, the j United States has availa4le an un&recedented a4undance of natural gas

resource# Bast year>s 4iennialj estimate 4y the Potential Fas Committee &laced the recovera4le resource at a&&ro

imately 'DD years> j "orth of current &roduction, "ith some estimates 4eing even higher# j 7j $istory over the &ast decade and j e &ectations for the future as to the &ace of develo&ment, the gro"th in delivera4ility, are fairly "ideranging, 4ut e=ually ro4ust# j 1j Fiven the overarching glo4al challenge of car4on>s role in climate change j and the lo"?car4on chemical com&osition of natural gas as com&ared "ith other fossil fuels, as "ell asj the ongoing concern over U#S# de&endence on foreign sources of crude oil, the

nation>s a4ility to j &roduce natural gas rates a4ove historic levels , at a ra&idly escalating -and sustained9 &ace, is &otentially j a maAor strategic asset# j $o"ever, such develo&ment faces various hurdles# *he leading edge, the driving engine of U#S# j natural gas gro"th, es&ecially onshore "here hurricanes and sensitivity over offshore drilling are not j issues, is the enormous shale gas resource# j Jj *he sustained develo&ment of this resource re=uires t"o j maAor elements to 4e in &lace6 -'9 the resolution of
various environmental, "ater, and land?accessj issues that attend the drilling and stimulation of the large num4er of "ells involved, j /j and -79 a sta4le, j sustained and gro"ing consum&tion mar%et that can &roduce &rices sufficient

for the develo&ment#j Rj *his second re=uirement for ro4ust and successful develo&ment of the U#S# natural gas resource j is seriously undermined 4y a lac% of trust in &rice sta4ility on the &art of large, very &rice?sensitive j consumers# Consumers such as the chemical industry and com&etitive &o"er generators have 4een j reluctant to commit to U#S# natural gas 4ecause of the &erce&tion that natural gas &rices e hi4it j unacce&ta4le volatility# *hese consumers 4ase their lac% of trust on history, 4oth long?term history and j the very recent 4ehavior of the natural gas mar%et# Cigure No# ' sho"s a sna&shot of the recent &ricing j at the $enry $u4, the &rimary &rice reference &oint in the U#S#
natural gas industry#j *his is "hat consumers have seen in the industry, a &rice that moved from a range of VR#DD ? j VH#DD &er million ;tus in 7DD(, as high as V'1#DD in 7DDH, then as lo" as V7#DD in 7DD8# Cor &ricesensitive consumers, such

&rice movement ma%es &lanning e tremely difficult, ma%es any degree of j long?term commitment very ris%y, and generally has made natural gas more of an o&&ortunistic fuel j source than a 4ase fuel and feedstoc% source if there is another choice #j (j Currently, &rices have recovered
to the VJ#DD to V/#DD range# $o"ever, this then highlights the j other sector that is very dissatisfied "ith natural gas &rice volatility6 &roducers# At VJ#DD to V/#DD, j &roducers have indicated that steady, sustained develo&ment of the nation>s e tensive natural gas j resource is &ro4lematic# At these &rice levels, drilling is currently continuing, 4ut in large &art driven 4y j the re=uirements of e isting leases and 4y the a4ility to focus only on the 2s"eet5 s&ots in the various j shale gas 4asins#j Hj Additionally, in some 4asins, the &resence of hydrocar4on li=uids??crude oil, natural j gasoline, etc#??su&&ort the economics of some drilling even "ith inade=uate natural gas &rices#j 8j In other j "ords, the &roducers are &ic%ing and choosing, 4ased on factors other

than an overall healthy natural j gas mar%et "ith ade=uate, sta4le &rices# j It "ould seem that an industry "herein 4oth &roducers and consumers are dissatisfied "ith the j un&redicta4ility of &rice 4ehavior "ould 4e a4le to achieve some meeting of the minds to sta4ili@e j su&&ly?demand relationshi&s# $o"ever, that has not ha&&ened in the natural gas industryEe=uili4rium j has a&&arently 4een hard to find# <ne o4Aective of the *as% Corce is to understand the reasons, "hether j those reasons
&ertain in the same degree in the future, and "hat, if anything, might 4e done a4out j them in the &rivate and &u4lic arenas#

5rice instability "ills t$e fertili:er industryGt$at6s "ey to &( agriculture % +A 3 non&rofit organi@ation created to &romote the interests of manufacturing com&anies for "hich the availa4ility, use and
cost of energy, &o"er or feedstoc% &lay a significant role in their a4ility to com&ete PIndustrial Energy Consumers of America, , .uly 77 7DD1, 2IMPAC* <C *$E U#S# NA*U)AB FAS C)ISIS <N *$E N<)*$ AME)ICAN NI*)<FEN CE)*IBI^E) INDUS*):,5 htt&600"""#ieca?us#com0"&?content0u&loads0D(77D1Certili@er4riefing#&dfQ

Agriculture

Natural gas is the &rinci&al and only economically feasi4le feedstoc% ra" material used for &roducing anhydrous ammonia, the 4uilding 4loc% &roduct for nitrogen fertili@er # *he fertili@er

industry accounts for a&&ro imately three &ercent of the total natural gas consumed in the United States, "hile natural gas costs at current &rice levels account for nearly 8D &ercent of the cost to &roduce ammonia# Natural gas is the &rimary feedstoc% in the &roduction of virtually all commercial nitrogen fertili@ers in the United States# It is im&ortant to 4e very clear a4out this6 natural gas is not sim&ly an energy source for usG it is the ra" material from "hich nitrogen fertili@ers are made# *he &roduction &rocess involves a catalytic reaction 4et"een elemental nitrogen derived from the air "ith hydrogen derived from natural gas# *he &rimary &roduct from this reaction is anhydrous ammonia -N$19# Anhydrous ammonia is used directly as a commercial fertili@er or as the 4asic 4uilding 4loc% for &roducing virtually all other forms of nitrogen fertili@ers such as urea, ammonium nitrate and nitrogen solutions, as "ell as diammonium &hos&hate and mono?ammonium &hos&hate# *he volatility and high level of U#S#

natural gas &rices, virtually un&recedented in the history of our country, has resulted in the &ermanent closure of almost 7D &ercent of U#S# nitrogen fertili@er ca&acity and the idling of an additional 7/ &ercent# ;y the end of Decem4er 7DDD, the U#S# nitrogen o&erating rate fell to 4elo" (D &ercent of ca&acity# ;y the end of .anuary 7DD', o&erating rates dro&&ed to an all?time lo" of only JR &ercent# *o &ut this into &ers&ective,
the average U#S# o&erating rate during the '88Ds "as 87 &ercent# During the gas s&i%e in late Ce4ruary and early March of 7DD1, "or%ing ca&ital re=uirements for one Mid?!estern nitrogen manufacturer to 4uy gas for its o&erations nearly dou4led??an increase of nearly VJD million in one month# 7 Im&act on U#S# Carmers Natural gas &rices 4egan to steadily increase during calendar year 7DDD, rising from an average of V7#1R &er MM;tu in .anuary to over VR#DD &er MM;tu in Decem4er 7DDD and to a record V'D &er MM;tu in .anuary 7DD' -Cigure 19# In turn, this forced fertili@er &roduction costs to un&recedented levels# Ammonia &roduction costs, for e am&le, s&i%ed u& from a&&ro imately V'DD &er ton to V'(D &er ton 4y .une 7DDD, to V77D &er ton in Decem4er 7DDD, and to an average of over V1/D &er ton in .anuary 7DD'# *he shar& rise in natural gas &rices and the resulting curtailment of U#S# fertili@er &roduction also has had a dramatic im&act on fertili@er &rices throughout the mar%eting chain and, in &articular, at the farm level# Nitrogen &rices at the farm level, for e am&le, Aum&ed this year to near?record high levels# According to U#S# De&artment of Agriculture data, the U#S# average farm?level &rice for ammonia Aum&ed this s&ring to V1(1 &er ton com&ared to an average s&ring &rice last year of V7/D# Similarly, urea &rices have clim4ed from V'8' to V7R' and UAN &rices from V'7( to V'R' in the same time &eriod# *his translates into an increase in cost to a ty&ical Mid"est corn farmer of V'D to V'/ &er acre# It is im&ortant to understand that most U#S# nitrogen fertili@er is consumed "ithin a very short time frame in the fall and s&ring a&&lication seasons# During the '88Ds, a&&ro imately (D?(/ &ercent of the nitrogen fertili@ers consumed 4y American farmers "as su&&lied 4y domestic &roduction "ith another '/ &ercent su&&lied from near4y Canadian &lants# *he remaining 'D?'/ &ercent of the volume "as sourced from offshore su&&liers# *he continued consolidation in the industry due to high energy costs and other critical factors is also im&acting the farm in&ut retail dealer sector# A&&ro imately 'H &ercent of the largest farming o&erations in the country currently use HD &ercent of the in&uts# *here are currently 'D,/DD retail in&ut outlets in America today# ;ut the num4er of retail com&anies, "hich oversee these facilities, has dro&&ed almost J/ &ercent from the more than R,DDD in '88/ to Aust 1,JDD in 7DD7#1 .o4s and the Economy Since mid?7DDD, "hen the natural gas crisis 4egan to manifest itself, '' ammonia &lants re&resenting 7' &ercent of U#S# ca&acity have 4een &ermanently closed# *he United States lost these Ao4s and this industrial out&ut, in essence sending them overseas# *his lost ca&acity "as re&laced 4y im&orted materials from regions that have ine &ensive natural gas su&&lies, including the Middle East, the Cormer Soviet Union, *rinidad and Xene@uela# <f the 7D million tons of ammonia ca&acity that e isted in the United States &rior to 7DDD, a&&ro imately 1#/ million tons have already 4een &ermanently closed# According to a recent study com&leted 4y Certecon, the "orld>s largest fertili@er consulting com&any, another four million tons is at ris% of closing "ithin the ne t t"o years# In addition, it is antici&ated that the remainder of the North American nitrogen

industry "ill li%ely o&erate on a 2s"ing 4asis#5 Due to the current volatile natural gas mar%ets, the industry has suffered through four years of e treme financial hardshi&# *"o maAor U#S# &roducers have filed for 4an%ru&tcy# In .une 7DD1, only /D &ercent of remaining industry ca&acity "as o&erating#
!or%ers have 4een laid off, and more &ermanent &lant closures may 4e inevita4le# *his "ill increase the de&endence of the U#S# farmer and industrial consumer on foreign sources of nitrogen fertili@er su&&ly# Ultimately, this &uts in Aeo&ardy our nation>s food security, and 4y e tension, our national security# *he level of attrition in the North American fertili@er

industry in the &ast t"o decades is staggering and is 4eing accelerated 4y increased natural gas costs and shutdo"ns of domestic &roduction# *here "ere R1 entitities o"ning domestic anhydrous ammonia
&roduction in the '8(Ds, no" do"n to 77 in the early 7DDDs# <f the H7 cor&orate entities &roducing domestic nitrogen in the '8RDs and '8(Ds, only '7 are currently &roducing &roduct#J Cor e am&le, a "orld?scale nitrogen &roduction facility in Donaldsonville, Bouisiana, currently em&loys /D( full?time and contract "or%ers# *his facility accounts for VJR million a year in "ages and VH million in sales and &ro&erty ta es# During a normal &roduction year, the facility converts a&&ro imately (H million MM;tu of natural gas into 7#7/ million tons of ammonia, '#(/ million tons of urea, and 7#'/ million tons of UAN# *he com&le has a daily re=uirement of over 7DD million cu4ic feet of natural gas as a feedstoc% and fuel# Domestic fertili@er manufacturing facilities such as the one noted a4ove have historically &rovided to&?&aying Ao4s and additional em&loyment o&&ortunities in local communities# According to a recent ;aton )ouge Advocate article, Ao4s in chemical manufacturing are at the to& of the &ay scale among Bouisiana manufacturers# *he average chemical industry "age in Ce4ruary "as V7/#71 &er hour, "ith a JJ#7?hour "or%"ee% &roducing V',''/

&er "or%er &er "ee%, com&ared to a general manufacturing "age of V'(#R1 &er hour or V(/R on a J7#8?hour "or%"ee%# Chemical industry Ao4s also have a high multi&lier effect# In East ;aton )ouge Parish, for e am&le, each chemical Ao4 is estimated to su&&ort another J#R &ositions in the overall Ao4 mar%et# E am&les of .o4 Bosses and Bayoffs As re&orted in the .une 1D, 7DD1, Freen Mar%ets, *erra Industries Inc# due to not 4eing a4le to cover its cash costs 4ecause of continuing high natural gas costs said it "ould shut do"n ammonia and urea &roduction at its ;lytheville, Ar%ansas, nitrogen com&le 4y the end of .une, resulting in the lay?off of RD em&loyees, "hich re&resents R/ &ercent of that facility>s "or%force# As re&orted in the .une 71, 7DD1, Freen Mar%ets, PotashCor& and Mississi&&i Chemical Cor& 4egan layoffs at its Mem&his, *enn#, and Feismer, Ba#, &roduction facilities, res&ectively# A com4ined '8D em&loyees are im&acted at the t"o &lants# / As re&orted in the A&ril 7H, 7DD1, Freen Mar%ets, Agrium Inc# told em&loyees at its Kenai, Alas%a, nitrogen facility A&ril 7J that it "ould 4e laying off R/ "or%ers due to restructuring as a result of reduced natural gas su&&lies# As re&orted in the March 'D, 7DD1, Freen Mar%ets, IMC Flo4al eliminated a total of 'DD &ositions in a move to cut costs due to current conditions in the de&ressed "orld fertili@er mar%et#R Policy )ecommendations $igh natural

gas &rices &resent the most serious threat to the fertili@er sector and to farmers in general, since the energy shoc%s of the '8(Ds# *he fertili@er industry 4elieves it is im&erative that the U#S# develo& a com&rehensive and 4alanced energy &olicy O one that encourages the develo&ment of additional su&&lies and, at the same time, &romotes the efficient use of a variety of energy sources and technologies# *he fertili@er industry 4elieves that a 4alanced and com&rehensive energy &olicy is not only long overdue, 4ut also essential to the long?term via4ility of this strategic sector# It is also crucial to the American farmer given that almost one?third of U#S# cro& &roduction is derived from nitrogen fertili@er# If "e are to &revent further decimation of the North American nitrogen fertili@er industry, the U#S# government must enact &olicies that sta4ili@e the su&&ly0demand 4alance for natural gas# &( agriculture and food production is critical to prevent world food wars 4ugar )222 -)ichard, Chairman of the Senator Coreign )elations Committee and Mem4er0Cormer Chair of the Senate Agriculture Committee, 2Plant &o"er5 htt&600"""#une&#org0<urPlanet0imgversn0'J10lugar#html9 In a "orld confronted 4y glo4al terrorism, turmoil in the Middle East, 4urgeoning nuclear threats and other crises, it is easy to lose sight of the long?range challenges# ;ut "e do so at our &eril# <ne of the most daunting of them is meeting the "orld>s need for food and energy in this century# At sta%e is not only &reventing starvation and saving the environment, 4ut also "orld &eace and security# $istory tells us that states may go to "ar over access to resources, and that &overty and famine have often 4red fanaticism and terrorism# !or%ing to feed the "orld "ill minimi@e factors that contri4ute to glo4al insta4ility and the &roliferation of "ea&ons of mass destruction# !ith the "orld &o&ulation e &ected to gro" from R 4illion &eo&le today to 8 4illion 4y mid?century, the demand for afforda4le food "ill increase "ell 4eyond current international &roduction levels# Peo&le in ra&idly
develo&ing nations "ill have the means greatly to im&rove their standard of living and caloric inta%e# Inevita4ly, that means eating more meat# *his "ill raise demand for feed grain at the same time that the gro"ing "orld &o&ulation "ill need vastly more 4asic food to eat# Com&licating a solution to this &ro4lem is a dynamic that must 4e 4etter understood in the !est6 develo&ing

countries often use limited ara4le land to e &and cities to house their gro"ing &o&ulations# As good land disa&&ears, &eo&le destroy tim4er resources and even rainforests as they try to create more ara4le land to feed themselves# *he long?term environmental conse=uences could 4e disastrous for the entire glo4e# Productivity revolution *o meet the e &ected demand for food over the ne t /D years, "e in the United States "ill have to gro" roughly three times more food on the land "e have# *hat>s a tall order# My farm in Marion County, Indiana, for e am&le, yields on average H#1 to H#R tonnes of
corn &er hectare O ty&ical for a farm in central Indiana# *o tri&le our &roduction 4y 7D/D, "e "ill have to &roduce an annual average of 7/ tonnes &er hectare# Can "e &ossi4ly 4oost out&ut that muchU !ell, it>s 4een done 4efore# Advances in the use

of fertili@er and "ater, im&roved machinery and 4etter tilling techni=ues com4ined to generate a threefold increase in yields
since '81/ O on our farm 4ac% then, my dad &roduced 7#H to 1 tonnes &er hectare# Much US agriculture has seen similar increases# ;ut of course there is no guarantee that "e can achieve those results again# Fiven the urgency of e &anding food &roduction to meet "orld demand, "e must invest much more in scientific research and target that money to"ard &roAects that &romise to have significant national and glo4al im&act# Cor the United States, that "ill mean a maAor shift in the "ay "e conduct and fund agricultural science# Cundamental research "ill generate the innovations that "ill 4e necessary to feed the "orld#

/atural 7as volatility "ills t$e c$emical industry (tones E -Ed"ard, Director of Energy )is% Do" Chemical Com&any in a &resentation to the Committee on Energy and Natural )esources, 2*he )ole of Natural Fas in Mitigating Climate Change5 'D07H08 htt&600"""#energy#senate#gov0&u4lic0inde #cfm0files0serveU CileTidZ84(H((4R?eR'R?(Rf'?1/'1?Dc1feJcda/'J9 W$en it comes to natural gas and climate &olicy, Do" favors policies t$at will avoid the j demand destruction that occurs in natural gas price spi"es, along wit$ policies t$at will j allow t$e &( to use all of its low#carbon resources' (uc$ policies will maintain industrial j competitiveness' j Do" also 4elieves that t$e &( needs a sustainable energy policy' Climate change is an j im&ortant com&onent of a sustaina4le energy &olicy, 4ut it is not the only &art# We $ave j develo&ed a list of s&ecific recommendations t$at, if im&lemented, "ould form the 4asis j of a sustaina4le energy &olicy# j Cirst,
aggressively &romote the cleanest, most relia4le, and most afforda4le 2fuel5E energy efficiency# Energy efficiency is the consensus solution to advance energy security, j reduce F$Fs, and %ee& energy &rices lo"# It is often undera&&reciated for its value# <f j &articular im&ortance is im&roving the energy efficiency of 4uildings# ;uildings are res&onsi4le for 1H[ of C<7 emissions, JD[ of energy use, and (D[ of electricity use# A j com4ination of federal incentives and local energy efficiency 4uilding codes is needed# j Second, increase and diversify domestic energy supplies, including natural gas# Nuclear j energy and clean coal "ith car4on ca&ture and se=uestration -CCS9 should 4e &art of the j solution, as should solar,

+$emical industry

wind, 4iomass, and ot$er renewable energy sources # !e 4elieve a &rice on car4on "ill advantage natural gas, and further
incentives "ould only j dangerously increase inelastic demand# *herefore, Congress should not &rovide free allo"ances or other incentive &ayments for the &ur&ose of &romoting fuel s"itching from j coal to natural gas in the &o"er sector# j An estimated HR 4illion 4arrels of oil and J7D trillion cu4ic feet of natural gas are not 4eing ta&&ed# $istory suggests that the more "e e &lore, the more "e %no", and the more j our estimates of resources gro"# EIA has said that 2the estimate of ultimate recovery increases over time for most reservoirs, the vast maAority of fields, all regions, all countries, j and the "orld#5 And "e have the technology that allo"s us to &roduce 4oth oil and natural gas in an entirely safe and environmentally sound manner# Any ne" fossil energy resources must 4e used as efficiently as &ossi4le# <ne "ay to ma imi@e the transformational value of increased oil and gas &roduction is to j share the royalty revenue "ith coastal states and use the federal share to hel& j fund research, develo&ment and de&loyment in such areas as energy efficiency and rene"a4le energy# Production of oil and gas on federal lands has 4rought 4illions of dollars j of revenue into state and federal treasuries# E &anding access could &ut 4illions of additional dollars into state and federal 4udgets# j j *hird, act 4oldly on technology &olicy through long?term ta credits, and increased investment in )_D and de&loyment# *hese are costly 4ut necessary to &rovide the certainty that the 4usiness community needs to s&ur investment# !e didn>t res&ond to S&utni% "ith half?measures# !e can>t afford to res&ond to our energy challenges "ith halfmeasures, either# j Courth, em&loy mar%et mechanisms to address climate change in the most cost?effective j "ay# *here is a need for direct action no" to slo", sto&, and then reverse the gro"th of j greenhouse gas levels in the atmos&here# !e concur "ith the &rinci&les and recommendations of the US Climate Action Partnershi& -USCAP9, of "hich Do" is a &roud mem4er# And "e recogni@e that concerted action is needed 4y the rest of the "orld to ade=uately address this glo4al &ro4lem# Particular attention must 4e &aid to cost containment and the availa4ility of offsets -and international offsets9# Also, climate &olicy j should not &enali@e the use of fossil energy as a feedstoc% material to ma%e &roducts that j are not intended to 4e used as a fuel# j To minimi:e t$e downsides of natural gas price

volatility, +ongress s$ould adopt policies j to increase t$e number of elastic users of natural gas, and consider &olicies to increase US j su&&ly of natural gas# A resilient natural gas mar"et would empower &( manufacturers j to create $ig$ value ;obs as they did from '8H1?'88R, during
"hich &eriod US industrial j gas use gre" at an average rate of 7#([0yr# In the event "eather increases natural gas j demand, &rice sensitive e &orts "ould 4e tem&orarily reduced, re4alancing the natural j gas mar%et "ith less disru&tion# &nder t$is

scenario, price spi"es won6t be as severe, and j won6t cause as muc$ $arm w$en t$ey occur, w$ic$ is ultimately good for bot$ industry j and all consumers' j &nder t$is scenario we can envision a circumstance in w$ic$ t$e c$emical industry is j once again able to preferentially invest in t$e &(' j Conclusion j /atural gas will play a critical role in US climate &olicy# &( manufacturing ;obs are j closely lin"ed to natural gas price and price volatility' T$e policy c$oices +ongress will j ma"e on natural gas are t$erefore critical to &( manufacturers' !ithout industrial gas j users, any disru&tion in su&&ly or demand must 4e met 4y dramatic &rice changes# j Energy efficiency should 4ecome a national &riority# +ongress s$ould enact legislation j to create a sustainable energy supply based on all sources of domestic energy, including j nuclear energy# *echnology &olicy should create &o"erful incentives for clean energy j
technologies, such as CCS# A &rice on car4on, cou&led "ith a&&ro&riate cost contain?ment measures, "ould 4e a large and sufficient incentive to &romote US natural gas demand, "hich is already gro"ing even in the a4sence of a &rice on car4on# j *here is no one silver 4ullet solution to our energy and climate &ro4lems# All Americans j paid a $ig$ price for over#

reliance on natural gas in t$e last ten years' 0ur country cannot j afford to repeat

t$at mista"e' T$is time we must fas$ion a compre$ensive energy policy j w$ic$ addresses supply and demand realities, and environmental, security and economic j goals to ensure energy costs in t$e &( remain globally competitive and avoid economically devastating volatility'

+$emical industry is "ey to solving everyt$ing from disease to environmental collapse 3 prevents extinction -aum EE O editor?in?chief of the American Chemical SocietyIs Chemical and Engineering Ne"s P)udy M# ;aum, C_E Ne"s, 2Millennium S&ecial )e&ort,5 '7?R?88, htt&600&u4s#acs#org0hotartcl0cenear088'7DR0((J8s&intro7#htmlQ 00 BDK *he &ace of change in todayIs "orld is truly incom&rehensi4le# (cience is advancing on all fronts, particularly c$emistry and biology wor"ing toget$er as t$ey never $ave before to understand life in general and $uman beings in particular at a breat$ta"ing pace' *echnology ranging
only this6 !e donIt %no"# !e do %no", ho"ever, that we

from com&uters and the Internet to medical devices to genetic engineering to nanotechnology is transforming our "orld and our e istence in it# It is, in fact, a foolIs mission to &redict "here science and technology "ill ta%e us in the coming decade, let alone the coming century# !e can say "ith finality

face enormous c$allenges, "e R 4illion humans "ho no" inha4it Earth# In its '88H revision of "orld &o&ulation estimates and &roAections , t$e &nited /ations anticipates a world population in )2S2 of 9'3 billion to 12'9 billion, "ith a Wmedium?fertility &roAection,W considered the most li%ely,

indicating a "orld &o&ulation of H#8 4illion &eo&le in 7D/D# According to the UN, fertility no" stands at 7#( 4irths &er "oman, do"n from / 4irths &er "oman in the early '8/Ds# And fertility rates are declining in all regions of the "orld# *hatIs good ne"s# ;ut &eo&le are living a lot longer# *hat is certainly good ne"s for the individuals "ho are living longer, 4ut it also &oses challenges for health care and social services the "orld over# *he '88H UN re&ort estimates for the first time the num4er of octogenarians, nonagenarians, and centenarians living today and &roAected for 7D/D# *he num4ers are startling# In '88H, RR million &eo&le "ere aged HD or older, a4out one of every 'DD &ersons# *hat num4er is e &ected to increase si fold 4y 7D/D to

*ere is t$e fundamental c$allenge we faceA T$e worldIs growing and aging population must be fed and clot$ed and $oused and transported in ways t$at do not perpetuate t$e environmental devastation wroug$t by t$e first waves of industriali:ation of the '8th and
reach 1(D million &eo&le, or one in every 7J &ersons# ;y 7D/D, more than 7#7 million &eo&le "ill 4e 'DD years old or older\ 7Dth centuries# As "e increase our out&ut of goods and services, as "e increase our consum&tion of energy, as "e meet the im&erative of raising the standard of living for the &oorest among us, "e must learn to carry out our economic activities sustaina4ly# *here are o&timists out there, C_EN readers among them, "ho 4elieve that the history of civili@ation is a long string of technological trium&hs of humans over the limits of nature# In this vie", the idea of a Wcarrying ca&acityW for EarthEa limit to the num4er of humans EarthIs resources can su&&ortEis a fiction 4ecause technological advances "ill continuously o4viate &reviously &erceived limits# *his vie" has historical merit# Dire &redictions made in the '8RDs a4out the e haustion of resources ranging from &etroleum to chromium to fresh "ater 4y the end of the '8HDs or '88Ds have &roven utterly "rong# !hile I do not count myself as one of the technological &essimists "ho see technology as a mi ed 4lessing at 4est and an unmitigated evil at "orst, I do not count myself among the technological o&timists either# T$ere

are environmental c$allenges of transcendent complexity t$at % fear may overcome us and our art$ before tec$nological progress can come to our rescue' 7lobal climate c$ange, t$e accelerating destruction of terrestrial and oceanic $abitats, t$e catastrop$ic loss of species across t$e plant and animal "ingdomsGt$ese are problems t$at are not obviously amenable to straig$tforward tec$nological solutions' -ut % "now t$is, tooA (cience and tec$nology $ave broug$t us to w$ere we are, and only science and tec$nology, coupled wit$ innovative social and economic t$in"ing, can ta"e us to w$ere we need to be in t$e coming millennium # Chemists, c$emistry, and t$e c$emical industryE"hat "e at C_EN call the chemical enter&riseEwill play central roles in addressing t$ese c$allenges' *he first section of this S&ecial )e&ort is a series called WMillennial MusingsW in "hich a "ide variety of re&resentatives from the chemical enter&rise share their thoughts a4out the future of our science and industry# *he five essays that follo" e &lore t$e contributions t$e c$emical enterprise is ma"ing rig$t now to ensure t$at we will successfully meet t$e c$allenges of t$e )1st century' *he essays do not attem&t to &redict the future# *a%en
as a "hole, they do not &retend to 4e a com&rehensive e amination of the efforts of our science and our industry to tac%le the challenges IIve outlined a4ove# )ather, they &aint, in 4road 4rush stro%es, a &ortrait of scientists, engineers, and 4usiness managers struggling to ma%e a vital contri4ution to humanityIs future# *he first essay, 4y Senior Editor Marc S# )eisch, is a case study of the chemical industryIs ongoing transformation to sustaina4le &roduction# Although it is not "ell %no"n to the general &u4lic, t$e

c$emical industry is at t$e forefront of corporate efforts to reduce waste from production streams to :ero' Industry giants DuPont and
Do" Chemical are ta%ing maAor strides "orld"ide to manufacture chemicals "hile minimi@ing the environmental Wfoot&rintW of their facilities# *his is an ethic that starts at the to& of cor&orate structure# Indeed, )eisch =uotes Do" President and Chief E ecutive <fficer !illiam S# Stavro&olous6 W!e must integrate elements that historically have 4een seen as at odds "ith one another6 the tri&le 4ottom line of sustaina4ilityEeconomic and social and environmental needs#W DuPont Chairman and CE< Charles -Chad9 <# $olliday envisions a future in "hich W4iological &rocesses use rene"a4le

resources as feedstoc%s, use solar energy to drive gro"th, a4sor4 car4on dio ide from the atmos&here, use lo"?tem&erature and lo"?&ressure &rocesses, and &roduce "aste that is less to ic#W ;ut sustaina4ility is more than Aust a &hiloso&hy at these t"o chemical com&anies# )eisch descri4es ongoing Do" and DuPont initiatives that are ma%ing sustaina4ility a reality at Do" facilities in Michigan and Fermany and at DuPontIs massive &lant

Anot$er manifestation of t$e c$emical industryIs evolution is its embrace of life sciences' Fenetic engineering is a revolutionary technology# In the '8(Ds, research advances fundamentally shifted
site near )ichmond, Xa# our &erce&tion of DNA# !hile it had al"ays 4een clear that deo yri4onucleic acid "as a chemical, it "as not a chemical that could 4e mani&ulated li%e other chemicalsEcli&&ed &recisely, altered, stitched 4ac% together again into a functioning molecule# )ecom4inant DNA techni=ues 4egan the transformation of DNA into Aust such a chemical, and the rever4erations of that change are li%ely to 4e felt "ell into the ne t century# Fenetic engineering has entered the fa4ric of modern science and technology# It is one of the 4asic tools chemists and 4iologists use to understand life at the molecular level# %t

provides new avenues to p$armaceuticals and new approac$es to treat disease' %t expands enormously agronomistsI ability to introduce traits into crops, a capability sei:ed on by numerous c$emical companies # *here is no dou4t that this &o"erful ne" tool
"ill &lay a maAor role in feeding the "orldIs &o&ulation in the coming century, 4ut its ado&tion has hit some 4um&s in the road# In the second essay, Editor?at?Barge Michael $eylin e amines ho" the &romise of agricultural 4iotechnology has gotten tangled u& in real &u4lic fear of genetic mani&ulation and cor&orate control over food#

(table low prices are "ey to revitali:e manufacturing industry T$omas 1) P.ason M#, Director of )esearch, *he Carlyle Frou&, 2Chea& Natural Fas and U#S# )eindustriali@ation5
htt&600"""#carlyle#com0sites0default0files0A&ril[7D7D'7[7D?[7DChea&[7DNatural[7DFas[7Dand[7DU#S# [7D)eindustriali@ation#&dfQ At Aust over V7 &er million ;ritish *hermal Units -;*Us9, natural gas seems e ce&tionally chea&# *he &rice of
j natural gas colla&sed along "ith the &rice of oil in the de&ths of the Freat )ecession# Unli%e oil, "hich has j since recovered more than RD[ of its &ea%?to?trough &rice decline, the &rice of natural gas has continued to j fall# Natural gas is no" so ine &ensive that its &rice could increase five?fold from current levels and still 4e j undervalued relative to oil on an energy content e=uivalent 4asis # Although the o4vious im&lication is that j an investor should 4uy natural gas and short oil futures, these &roductive commodities are not financial j assets governed 4y ar4itrage arguments# *he mis&ricing has already j dee&ened 4eyond levels most o4servers thought &ossi4le and j continues to gro"# j It has 4een said that the 4est 2cure5 for lo" commodity &rices is lo" j commodity &rices# *hat is to say, natural gas &rices are so lo" that j 4urning natural gas should 4e e tremely attractive to utilities and, j more im&ortantly, energy?intensive 4usinesses# Chea& gas increases j the e &ected return on investments in activities li%e manufacturing j and mining, "hich generates demand for additional &i&elines and j other ty&es of energy infrastructure# *he 4est "ay to &rofit from lo" natural gas &rices in the near term may j 4e through investments in an American 2reindustriali@ation5 4ased on energy?intensive economic activityj that can 4est e &loit the economic "indfall from chea& gas#

Manufacturing

T$at puts a cap on conflict 06*anlon 1) -Michael, Director of )esearch and Senior Cello" O ;roo%ings Institution, 2*he Arsenal of Democracy and $o"
to Preserve It6 Key Issues in Defense Industrial Policy .anuary 7D'75, htt&600"""#4roo%ings#edu0e0media0research0files0&a&ers07D'70'07R[7Ddefense[7Dindustrial [7D4ase0D'7RTdefenseTindustrialT4aseTohanlon9 *he current "ave of defense cuts is also different than &ast defense 4udget reductions in their li%ely industrial im&act, as the U#S# defense industrial 4ase is in a much different &lace than it "as in the &ast# Defense industrial issues are too often vie"ed through the lens of Ao4s and &et &roAects to &rotect in congressional districts# ;ut the overall health of the firms that su&&ly the

technologies our armed forces utili@e does have national security resonance# 3ualitative su&eriority in "ea&onry and other %ey military technology has 4ecome an essential element of American military &o"er in the modern eraEnot only for "inning "ars 4ut for deterring them # T$at re!uires world#class scientific and manufacturing capabilitiesG w$ic$ in turn can also generate civilian and military export opportunities for the United States in a glo4ali@ed mar%et&lace#

)ac atA xo cp
( & 1) "e4site dedicated to energy &olicy -Smart Energy Universe, 2U#S#?Me ico *rans4oundary $ydrocar4ons Agreement5, 7D'7, htt&600"""#smartenergyuniverse#com0regulatory?u&date0'1D((?u?s?me ico?trans4oundary?hydrocar4ons?agreement9 00K:

xecutive action over T*A still go t$roug$ congress

***note *;AZ *rans4oundary $ydrocar4ons Agreement


It is "idely ac%no"ledged in 4oth ca&itals that the *;A

negotiations moved =uic%ly in order to 4e com&leted the United States, the *;A stalled

in time for the ratification in Me

ico &rior to 7D'7 Congressional elections# ;oth PAN and P)I &olitical leaders used their

influence to gain su&&ort for the *;A, "hich the Me ican Senate ratified# In

"ithin the <4ama administration des&ite su&&ort 4y %ey officials in the De&artments of State and Interior# Prior to

com&leting the agreement, the De&artments of State and Interior &artici&ated in Senate Coreign )elations Committee 4riefings to discuss status of the negotiationsG ho"ever, there "as no consultation on s&ecific te t# An e ecutive agreement "ould

not re=uire the t"o?thirds vote necessitated 4y a treaty, 4ut instead it "ould 4e a&&roved in the same form as a statute, re=uiring &assage 4y maAority in 4oth the Senate and the $ouse of )e&resentatives# Begislation a&&roving the agreement, necessary im&lementing authorities, and clarifications regarding certain &rovisions of the *;A could 4e su4Aect to amendment, including 4y items unrelated to the *;A itself, thus &ossi4ly miring the *;A in other &olitical fights# +ongress is "ey to effective implementation -rown and Meac$am PKSK13 &olitical insiders -Neil ;ro"n and Carl Meacham, DR0D/0'1 2 *ime for US?Me

ico *rans4oundary Agreement5 htt&600thehill#com0o&inion0o&?ed01D1(18?time?for?us?me ico?trans4oundary? agreement`i @@7a^@Sns*K9 00K: Fiven the foreign &olicy, energy security, and environmental 4enefits of the *;A signed in Ce4ruary 7D'7, it is disa&&ointing that the <4ama administration has delayed ta%ing ste&s necessary for Congress to a&&rove the agreement# *hat delay does not ma%e it any less im&ortant for Congress to a&&rove the agreement soon# Congress

has a critical role in clarifying certain &rovisions of this international agreement# Dis&ute resolution mechanisms "arrant &articular attention# Already, it has 4een mista%enly argued that the *;A re=uires greater secrecy in &ayments of oil deals, encouraging an effort to e em&t the agreement from the Cardin?Bugar trans&arency la"# No such secrecy is re=uired 4y the *;A, "hich su4ordinates its confidentiality rules to domestic la"# *he longer the *;A sits on the shelf, the more li%ely it "ill 4e hamstrung as a &ro y for more rancorous energy dis&utes# Prom&t Congressional activity could 4e a useful vote of confidence in the u&coming domestic energy sector reform in Me ico# Me ico needs ne" oil &roduction from more com&le fields to counter4alance its declining fields, let alone increased

&roduction# Beaders in Me ico>s t"o largest &olitical &arties %no" that under current ca&ital and management constraints, PEMEL alone is e tremely unli%ely to turn Me ico>s oil and natural gas a4undance into &ros&erity for the Me ican &eo&le# International oil maAors are needed, 4ut that "ill ta%e &olitical courage# Congressional a&&roval of the *;A "ould tangi4ly

demonstrate that the U#S# government and our com&anies are "illing &artners# *hat is good for Me
U#S#

ico and for the

)ac atA unilateral drilling


.oesn6t solve 5 M ? liberali:ation and "ills relations +,R, 1) -Senate Committee on Coreign )elations, '707'0'7, 2 <IB, MELIC<, AND *$E *)ANS;<UNDA): AF)EEMEN*5 htt&600"""#g&o#gov0fdsys0&%g0CP)*? ''7SP)*((/R(0html0CP)*?''7SP)*((/R(#htm900EM
PEMELIs limited a4ility to e &lore in dee& "ater, the

Second, it is unli%ely that the U#S# maritime 4order areas "ould 4e develo&ed "ithout the *;A, "hereas a PEMEL official indicated desire to 4egin e &loration on the Me ican side of the 4order# Potential U#S# o&&onents of the *;A may argue that given

real effect of the *;A "ill 4e to reduce I<CsI com&etitive advantages# In other "ords, the o&&osition argument could state, the U#S# should sim&ly move for"ard "ith e &loration since our com&anies have the ca&ital and technology to move more =uic%ly than PEMEL# *hat criticism neglects the reality that, over the long?term, the I<Cs have a greater interest in investing throughout Me ican territory than they do in a sliver of U#S# area along the maritime 4order# *herefore, those I<Cs "ould not ris% enraging the Me ican government 4y, &otentially, draining Me ican resources from U#S# territory# *hus, U#S# interests in increased safe and secure domestic oil &roduction along the 4order "ill 4e
4est met "ith the *;A#

***/ 7

/atural 7as xports .isad

1nc russia econ


7ulf of Mexico natural gas production decreasing %A, 13 -EIA, R07D0'1, 2Natural gas &roduction declines in the F<M strong on the mainland5, htt&600"""#cattlenet"or%#com0cattle?ne"s07'77'7(H'#html900EM
Natural gas mar%eted &roduction is &roAected to increase from R8#7 ;cf0d in 7D'7 to (D#D ;cf0d in 7D'1, and to (D#J ;cf0d in 7D'J# <nshore &roduction increases over the forecast &eriod, "hile federal Fulf of Me ico &roduction declines # Natural gas &i&eline gross im&orts, "hich have fallen over the &ast five years, are &roAected to remain near their 7D'7 level over the forecast# BNF im&orts are e &ected to remain at minimal levels of around D#J ;cf0d in 4oth 7D'1 and 7D'J# Me icoIs domestic natural gas consum&tion is rising faster than domestic &roduction, leading to 4oth record &i&eline gas im&orts from the United States and gro"th in the countryIs im&orts of li=uefied natural gas -BNF9# Natural gas trade 4et"een Me ico and the United States has 4een gro"ingG daily net e &orts from the United States to Me ico so far in 7D'1 -.anuary '?May R9 are estimated to average '#R 4illion cu4ic feet &er day -;cf0d9, u& almost 78 &ercent over the same &eriod in 7D'7# *he N<AA Atlantic $urricane Season <utloo% &redicts that the Atlantic ;asin li%ely "ill e &erience a4ove?normal tro&ical "eather activity during the current hurricane season# EIA estimates that the median outcome for shut?in natural gas &roduction in the federally administered

Fulf of Me ico as a result of disru&tions during the 7D'1 hurricane season is JR ;cf -see the 7D'1 <utloo% for $urricane?

)elated Production <utages in the Fulf of Me ico9# EIAIs simulation results indicate a /H?&ercent &ro4a4ility of offshore natural gas &roduction e &eriencing outages during the current hurricane season that are e=ual to or larger than the 17 ;cf of &roduction shut in during the 7D'7 hurricane season#

5lan increases natural gas exports (now, 13 -Nic% Sno", R0(0'1,2!itnesses descri4e 4enefits from e &anding <CS activity5, htt&600"""#ogA#com0articles07D'10DR0"itnesses?descri4e?4enefits?from?e &anding?ocs? activity#html900EM E &anded oil and gas activity on the US <uter Continental Shelf "ould &roduce su4stantial economic and energy security 4enefits, three "itnesses told a US $ouse Natural )esources su4committee# ;ut a fourth "itness said

alternative energy and other offshore industries should also 4e allo"ed to gro"# Most of the "itnesses at the Energy and Minerals Su4committee>s .une R hearing a&&lauded the goals of $) 771', "hich US )e&# Doc $astings -)?!ash#9, the full committee>s chairman, introduced on .une J# *he measure "ould e &and federal offshore oil and gas leasing 4eyond areas that are &art of the 7D'7?'( <CS &rogram# 2It "ould safely o&en u& ne" areas that "ere &reviously under moratoria Esuch as the Mid?Atlantic, Southern Pacific, and Arctic,5 $astings said in his o&ening statement# 2*his "ould create over a million ne" American Ao4s and generate hundreds of millions of dollars in ne" revenue to the federal treasury#5 .ohn C# Celmy, American Petroleum Institute chief economist, testified, 2If offshore energy &roduction "ere e tended to ne" areas, it could generate a 4ounty of Ao4 creation and ne" revenues to the government "hile im&roving America>s energy security#5 $e added, 2Earlier this year, a single lease sale in the Fulf of Me ico generated V'#7 4illion in revenue for the federal government# As "ells are drilled and the leases 4egin to &roduce, the revenue im&act "ill only gro", along "ith the &ros&ects for em&loyment in the region and around the country#5 Christo&her Fuith, vice?&resident for &olicy at the US Cham4er of Commerce>s Institute for 7'st Century Energy, said in his "ritten statement that $) 771' is necessary 4ecause more than HR[ of the US <CS is &resently off?limits to oil and gas activity# Systematic increase 2;y increasing access to the <CS and esta4lishing long?term &roduction targets for the PUSp De&artment of the Interior to &lan around "hen formulating oil and gas leasing &rograms, the country can 4egin to systematically

increase its energy security and rea& the economic 4enefits that entails,5 Fuith suggested in his "ritten testimony#

%ncreased natural gas exports displaces Russia, crus$ing t$eir economy Ratner, 13 S&ecialist in Energy Policy -Michael )atner, J0H0'1, 2U#S# Natural Fas E &orts6 Ne" <&&ortunities, Uncertain <utcomes5, htt&600"""#fas#org0sg&0crs0misc0)J7D(J#&df900EM Many of the &roAected &roAects in Cigure / are targeting the Asian BNF demand centers# Although the locations of most of the &ro&osed U#S# e &ort terminals are on the U#S# Fulf Coast and the East Coast, Asia may 4e the target mar%et for U#S# BNF as it tends to &ay higher &rices for its natural gas im&orts# *he "idening of the Panama Canal, scheduled to 4e com&leted in 7D'/, "ould contri4ute to U#S# com&etitiveness in Asia # )ussia, the main su&&lier of natural gas to Euro&e, may 4e &ut under increasing &ressure 4y U#S# e &ort &roAects to further delin% its natural gas &rices from oil# U#S# BNF e &orts could also &rovide
o&tions for some countries that are highly de&endent on one su&&lier

Euro&e has a lot of BNF im&ort ca&acity U#S# Natural Fas E &orts6 Ne" <&&ortunities, Uncertain <utcomes Congressional )esearch Service '7 and gro"ing demand, 4ut needs to continue to im&rove its infrastructure connections to trans&ort gas to mar%ets#'H

T$at decimates t$e Russian economy Weit:, 11 senior fello" at the $udson Institute and a !orld Politics )evie" senior editor -)ichard !eit@, Novem4er 7D'', 2Can !e Manage a Declining )ussiaU5, htt&600"""#aei#org0files07D''0'70DH0?can?"e?manage?a?declining?russiaT'/7(D'H88J'(#&df9 Euro&e is an unavoida4le &artner# *he Euro&ean mar%et consumes 8D[ of )ussiaIs total gas e &orts and RD[ of its crude oil, "hich ma%e u& only 7/ and '/[ of Euro&eIs total demand, res&ectively# )ussia &resently does not have any via4le alternative mar%ets remotely e=ual in si@e to Euro&e# De&endence is a t"o?!ay &henomenon# WJD[ of )ussian &u4lic money5 comes from the sale of oil and gas to Euro&e, and at least (/[ of )ussian e &ort revenues are lin%ed to the EUIs energy mar%et in general# !ithout any e tant alternative mar%ets to e &loit in the near?term, Mosco" re=uires Euro&ean gas revenues to &reserve its o"n financial solu4ility# Energy overshado"s other concerns# Paillard 4elieves that "hile the energy trade has, in the &ast, 4een
W&art of a game of 4lac%mail, lies and fearW 4et"een Euro&e and )ussia, its ne" status as a W=uestion of life or death for )ussian revitali@ationW and its im&ortance to Euro&eIs economic gro"th mean that neither side can afford to use gas su&&lies as leverage in other international concerns# In PaillardIs estimation, ;russels and Mosco" 4oth regard issues such as human rights or the Chechen conflict as not 4eing "orth ris%ing the energy trade over# *herefore, )ussian and the Euro&ean Union are ine trica4ly 4ound to one another 4y their mutual de&endence on the energy trade# )ussia cannot a4sor4 the financial conse=uences of

interru&ting the EU revenue stream, "hile the Euro&ean Union cannot do "ithout )ussian gas su&&lies# Euro&e has
fe" alternative su&&liers, and cannot develo& alternative energy sources in the near term# )ussia, mean"hile, is unli%ely to 4e a4le to diversify its economy or target ne" mar%ets any 4etter than it has in the &ast#

Russian economic decline causes nuclear war ,ilger E -Sheldon, Author O $uffington Post, 2)ussian Economy Caces Disastrous Cree Call Contraction5, htt&600"""#glo4aleconomiccrisis#com04log0archives01/R9 %n Russia, historically, economic health and &olitical stability are intertwined to a degree that is rarely
encountered in other maAor industriali@ed economies# It "as the economic stagnation of the former Soviet Union that led to its &olitical do"nfall# Similarly, Medvedev and Putin, 4oth intimately ac=uainted "ith their nationIs history, are un=uestiona4ly alarmed at the &ros&ect that )ussiaIs economic crisis "ill endanger the nationIs &olitical sta4ility , achieved at great cost after years of chaos follo"ing the demise of the Soviet Union# Already, stri%es and &rotests are occurring among ran% and file "or%ers facing unem&loyment or non?&ayment of their salaries# )ecent &olling demonstrates that the once su&reme &o&ularity ratings of Putin and Medvedev are eroding ra&idly# ;eyond the &olitical elites are the financial oligarchs, "ho have 4een forced to deleverage, even unloading their yachts and e ecutive Aets in a des&erate attem&t to raise cash# Should the )ussian

economy deteriorate to the &oint "here economic colla&se is not out of the =uestion, the im&act "ill go far 4eyond the o4vious accelerant such an outcome "ould 4e for the Flo4al Economic Crisis# *here is a geo&olitical dimension
that is even more relevant then the economic conte t# Des&ite its economic vulnera4ilities and &erceived decline from su&er&o"er status, )ussia remains one of only t"o nations on earth "ith a nuclear arsenal of sufficient sco&e and

ca&a4ility to destroy the "orld as "e %no" it# Cor that reason, it is not only President Medvedev and Prime Minister Putin "ho "ill 4e lying a"a%e at nights over the &ros&ect that a national economic crisis can transform itself into a virulent and desta4ili@ing social and &olitical u&heaval# It Aust may 4e &ossi4le that U#S# President ;arac% <4amaIs
national security team has already 4riefed him a4out the conse=uences of a maAor economic meltdo"n in )ussia for the &eace of the "orld# After all, the most recent national intelligence estimates &ut out 4y the U#S# intelligence community have already concluded that the Flo4al Economic Crisis re&resents the greatest national security threat to the United States, due to its facilitating &olitical insta4ility in the "orld# During the years ;oris :eltsin ruled )ussia, security forces res&onsi4le for guarding the nationIs nuclear arsenal "ent "ithout &ay for months at a time, leading to fears that desperate personnel would illicitly sell

nuclear weapons to terrorist organi:ations# If the current economic crisis in )ussia "ere to deteriorate much further, ho" secure "ould the )ussian nuclear arsenal remainU It may 4e that the financial im&act of the Flo4al Economic Crisis is its least dangerous conse=uence#

1nc russia soi


7ulf of Mexico natural gas production decreasing %A, 13 -EIA, R07D0'1, 2Natural gas &roduction declines in the F<M strong on the mainland5, htt&600"""#cattlenet"or%#com0cattle?ne"s07'77'7(H'#html900EM
Natural gas mar%eted &roduction is &roAected to increase from R8#7 ;cf0d in 7D'7 to (D#D ;cf0d in 7D'1, and to (D#J ;cf0d in 7D'J# <nshore &roduction increases over the forecast &eriod, "hile federal Fulf of Me ico &roduction declines # Natural gas &i&eline gross im&orts, "hich have fallen over the &ast five years, are &roAected to remain near their 7D'7 level over the forecast# BNF im&orts are e &ected to remain at minimal levels of around D#J ;cf0d in 4oth 7D'1 and 7D'J# Me icoIs domestic natural gas consum&tion is rising faster than domestic &roduction, leading to 4oth record &i&eline gas im&orts from the United States and gro"th in the countryIs im&orts of li=uefied natural gas -BNF9# Natural gas trade 4et"een Me ico and the United States has 4een gro"ingG daily net e &orts from the United States to Me ico so far in 7D'1 -.anuary '?May R9 are estimated to average '#R 4illion cu4ic feet &er day -;cf0d9, u& almost 78 &ercent over the same &eriod in 7D'7# *he N<AA Atlantic $urricane Season <utloo% &redicts that the Atlantic ;asin li%ely "ill e &erience a4ove?normal tro&ical "eather activity during the current hurricane season# EIA estimates that the median outcome for shut?in natural gas &roduction in the federally administered

Fulf of Me ico as a result of disru&tions during the 7D'1 hurricane season is JR ;cf -see the 7D'1 <utloo% for $urricane?

)elated Production <utages in the Fulf of Me ico9# EIAIs simulation results indicate a /H?&ercent &ro4a4ility of offshore natural gas &roduction e &eriencing outages during the current hurricane season that are e=ual to or larger than the 17 ;cf of &roduction shut in during the 7D'7 hurricane season#

5lan increases natural gas exports (now, 13 -Nic% Sno", R0(0'1,2!itnesses descri4e 4enefits from e &anding <CS activity5, htt&600"""#ogA#com0articles07D'10DR0"itnesses?descri4e?4enefits?from?e &anding?ocs? activity#html900EM E &anded oil and gas activity on the US <uter Continental Shelf "ould &roduce su4stantial economic and energy security 4enefits, three "itnesses told a US $ouse Natural )esources su4committee# ;ut a fourth "itness said

alternative energy and other offshore industries should also 4e allo"ed to gro"# Most of the "itnesses at the Energy and Minerals Su4committee>s .une R hearing a&&lauded the goals of $) 771', "hich US )e&# Doc $astings -)?!ash#9, the full committee>s chairman, introduced on .une J# *he measure "ould e &and federal offshore oil and gas leasing 4eyond areas that are &art of the 7D'7?'( <CS &rogram# 2It "ould safely o&en u& ne" areas that "ere &reviously under moratoria Esuch as the Mid?Atlantic, Southern Pacific, and Arctic,5 $astings said in his o&ening statement# 2*his "ould create over a million ne" American Ao4s and generate hundreds of millions of dollars in ne" revenue to the federal treasury#5 .ohn C# Celmy, American Petroleum Institute chief economist, testified, 2If offshore energy &roduction "ere e tended to ne" areas, it could generate a 4ounty of Ao4 creation and ne" revenues to the government "hile im&roving America>s energy security#5 $e added, 2Earlier this year, a single lease sale in the Fulf of Me ico generated V'#7 4illion in revenue for the federal government# As "ells are drilled and the leases 4egin to &roduce, the revenue im&act "ill only gro", along "ith the &ros&ects for em&loyment in the region and around the country#5 Christo&her Fuith, vice?&resident for &olicy at the US Cham4er of Commerce>s Institute for 7'st Century Energy, said in his "ritten statement that $) 771' is necessary 4ecause more than HR[ of the US <CS is &resently off?limits to oil and gas activity# Systematic increase 2;y increasing access to the <CS and esta4lishing long?term &roduction targets for the PUSp De&artment of the Interior to &lan around "hen formulating oil and gas leasing &rograms, the country can 4egin to systematically

increase its energy security and rea& the economic 4enefits that entails,5 Fuith suggested in his "ritten testimony# /atural gas exports decrease Russian sp$ere of influence 4ugar, 1) former ran%ing mem4er of the Senate Coreign )elations Committee -)ichard F# Bugar, Indiana )e&u4lican, '70'70'7, 2BUFA)6 U#S# natural gas e &orts could 4rea% )ussian dominance5, htt&600"""#"ashingtontimes#com0ne"s07D'70dec0'70us?natural?gas?e &orts? could?4rea%?russian?dominan0&rint0900EM

Dee& "inter is a&&roaching in Eastern and Central Euro&e and the Caucasus, 4ringing "ith it the &ros&ect of icy days and frigid nights# Cor our friends and allies in the region, it also 4rings a chilly reminder of their chronic over?de&endence for heat and &o"er on natural gas from )ussia, "hich has demonstrated a &enchant for using energy as a "ea&on against its neigh4ors# *he good ne"s is, recent trends have turned in favor of our NA*< allies and other friends to 4rea% )ussiaIs energy

dominance# *he United States can ca&itali@e on these trends 4y utili@ing our o"n ne"?found a4undance of natural gas and &ursuing smart, committed di&lomacy in the region, to hel& many nations diversify their energy im&orts# Most countries in the eastern Euro&ean Union, nearly all of them NA*< mem4ers, as "ell as E#U# as&irants U%raine and
Moldova, are heavily de&endent on )ussian gas# In the &ast, Mosco" sho"ed itself =uic% to use energy as a clu4 to &unish and coerce

its neigh4ors ?? 4ut the )ussians over&layed their hand# After too many threats and actual cutoffs 4y the Kremlin, the Euro&ean Commission is no" going after the giant )ussian state gas mono&oly, Fa@&rom, for anti?com&etitive 4ehavior and &rice gouging# At the same time, Euro&ean countries are turning to the Middle East for ne", chea&er, su&&lies of li=uefied natural gas -BNF9, "hich had 4een intended for the United States 4efore our o"n shale gas revolution turned us from a nascent im&orter to a &otential e &orter# *his has hel&ed strengthen the Euro&eansI 4argaining &osition "ith )ussia# *hese trends may not last, 4ut they have o&ened a "indo" for the United States, "ith our Euro&ean allies, to advance 4road natural gas diversification# *he U#S# should move =uic%ly to sei@e this o&&ortunity#

T$at causes nuclear war land 1 Senior Cello" and Director of the Center on Peace _ Bi4erty at *he Inde&endent Institute, received an M#;#A# in a&&lied economics and a Ph#D# in Pu4lic Policy from Feorge !ashington University# $e has 4een Director of Defense Policy Studies at the Cato Institute, and he s&ent '/ years "or%ing for Congress on national security issues, contri4utor to numerous volumes and the author of J/ in?de&th studies on national security issues -''010DH, Ivan, 2Is a 2)esurgent5 )ussia a *hreat to the United StatesU5 htt&600"""#inde&endent#org0ne"sroom0article#as&U
idZ71R1, ^A9
U#S# analysts say, ho"ever, that increased military s&ending "ould allo" )ussia to have more influence over nations in its near a4road and Eastern Euro&e# <f course, throughout history, small countries living in the shado" of larger &o"ers have had to ma%e &olitical, di&lomatic, and economic adAustments to suit the larger &o"er# Increased )ussian influence in this s&here, ho"ever, should not necessarily threaten the security of the fara"ay United States# It does only 4ecause the United States has defined its security as re=uiring intrusions into )ussia>s traditional s&here of influence# ;y e &anding NA*< into Eastern Euro&e and the former Soviet Union, the United States has guaranteed the security of these allied countries against a nuclear?armed &o"er, in the "orst case, 4y sacrificing its cities in a nuclear "ar# Providing this %ind of guarantee for these non? strategic countries is not in the U#S# vital interest# Denying )ussia the s&here of influence in near4y areas traditionally enAoyed 4y great &o"ers -for e am&le, the U#S# uses the Monroe Doctrine to &olice the !estern $emis&here9

"ill only lead to unnecessary U#S#?)ussian tension and &ossi4ly even cataclysmic "ar#

-ubble .A

/atural gas bubble is being avoided now, w$ic$ restores companies to profitability' %ncrease in prices is "ey' Wallace 12 (Christopher, Former private equity fund manager, now full time private investor; 7/17/2012, !atural "as# $ovements %nto
&torage &uggest "lut 'ill &oon (isappear,) &ee*ing +lpha, http#//see*ingalpha,-om/arti-le/72.7/10natural0gas0movements0into0storage0 suggest0glut0will0soon0disappear 0 12'3 4ow mu-h of a glut is there56 7he glut was signifi-ant, a8out 90: a8ove the . year average at the 8eginning of this in;e-tion season, !atural gas is stored (in underground stru-tures3 and there is a finite amount of gas that -an 8e stored, 7hat

1/+

amount of ma<imum storage -apa-ity is estimated to 8e a8out =,200 8illion -u8i- feet, "as in storage is very mu-h a fun-tion of pea* and
trough usage, 7here are times of the year when -onsumption e<-eeds produ-tion and inventories of gas in storage de-line, >withdrawal season>, 7his runs from !ovem8er through $ar-h, From +pril through ?-to8er, produ-tion e<-eeds -onsumption and inventories 8uild through what is -alled >in;e-tion season>, $any will 8e familiar with the following graph produ-ed and updated 8y the @%+, showing the two seasons#6 +s the graph depi-ts, this year we 8egan in;e-tion season with inventories 90: a8ove the . year average (2,=A7 8-f this

+ normal in;e-tion season would ta*e inventories a8ove storage -apa-ity, a prospe-t that -ould have a devastating effe-t on gas pri-es, Bust a few months ago, pundits were -alling for this to happen and for natural gas pri-es to approa-h Cero,6 %n;e-tions are 8elow normal this season, for two fundamental reasons 6 !atural gas inventories are 8uilding at a mu-h slower rate this season, 7he glut that was 8uilt -aused natural gas pri-es to plummet from D1= to a low of D1,E2 rea-hed this +pril 1E, 7he redu-tion in pri-es was so steep that it has 8rought gas to a level that is 8elow most fields all0in -ost of produ-tion, 'hen the e-onomi-s are su-h that you are for-ed to sell 8elow -ost, produ-tion naturally -urtails, 7he natural gas rig -ount has fallen dramati-ally from a pea* of over 1,900 to .22 as at Buly 1A, as drilling new wells -eased to 8e profita8le,6 7he other fa-tor at wor* here is the de-line rate that all wells go through, !atural gas wells are most produ-tive after they are initially drilled and then de-line thereafter over their natural lifetime, 4oriContally drilled wells are unique in that their de-line rate is very steep after the first year, falling 8y a8out 70:, 7he growth in
year versus the . year average of 1,.1= 8-f3, For the last . years, the average inventory 8uild over the in;e-tion season has 8een 2,1=9 8-f, horiContal wells has -ontri8uted to an in-reased overall de-line rate,6 7he in;e-tion and storage num8ers show the glut 8eing removed6 &o far this season, in;e-tions are well 8ehind the . year average , 7he glut, whi-h 8egan this in;e-tion season at 90: a8ove the . year average inventory level is now only 1E: a8ove the . year average inventory level, From wee* 12 to wee* 2/ this year in;e-tions have totaled 799 8-f, -ompared to the . year average for that period of 1,0/7 8-f, a redu-tion of A0:, %f the trend -ontinues at A0: 8elow the . year average,

storage at the end of in;e-tion season (8eginning !ovem8er3 should 8e at A,791 8-f, only /0 8-f a8ove the . year average, 7he glut will effe-tively 8e removed ,6 1ut the story does not end here, 7he rate of in;e-tion relative to the . year average has 8een de-lining over the -ourse of the in;e-tion season , % tra-* the -urrent year = wee*
rolling average whi-h has 8een de-lining steadily relative to the . year = wee* rolling average, $ost re-ently the -urrent year = wee* average is =A: 8elow the . year = wee* average, %f the rate of in;e-tions -ontinues at that rate, this fore-asts a season end

inventory of A,927 8-f, whi-h is slightly 8elow the . year average, 6 'hat is the impli-ation of this fore-ast56 + removal of the supply glut should elevate the pri-e of natural gas to its full -y-le -ost of produ-tion plus a reasona8le profit, 'e are seeing 8asi- e-onomi-s at wor*, $ar*ets are in the long term pursuit of equili8rium, 'hen supply and demand
get out of 8alan-e, the pri-e me-hanism ad;usts to restore equili8rium, @<-essive supply 8rought pri-es down, Frodu-ers will e<hi8it rational 8ehavior in the long run, and they will -urtail produ-tion at pri-es that are 8elow -ost, 'e should e<pe-t no signifi-ant deviation

from this pattern of lower in;e-tions until equili8rium pri-es are a-hieved , meaning total -osts plus reasona8le profit,
(ifferent -ompanies operating in different fields have different -ost stru-tures so it is diffi-ult to ma*e a general statement a8out industry0wide -osts and therefore where pri-es will return to, 4owever, from what % have read from a variety of sour-es, % thin* that

-osts plus a reasona8le profit fore-asts D. 0 D9 natural gas, %t li*ely wonGt 8e a steady rise to that point, 8ut on-e the mar*et a--epts that the glut has 8een removed, pri-es should get there, 7he time frame for this to o--ur should 8e measured in months , not years, 5opping t$e bubble turns t$e aff and causes a supply crunc$ Business Insider 7/4( Hoo*ing +head to the !e<t ?il Fri-e &pi*e and the 7hreat of 'ar,) 7/=/2012 He<is I 12'3
7he diffi-ulty is that an analogous s-enario has unfolded 8efore, in the natural gas industry, ?ut of syn- with other -ommodities, the 8oom and 8ust in natural gas is giving us a glimpse of the future for un-onventional oil, 7he e<tra-tion te-hniques are the same ones that

have generated tremendous hype, while simultaneously setting up a ponCi s-heme in flipping land leases, -reating the per-eption of supply glut, -rashing the pri-e of natural gas in !orth +meri-a to far 8elow 8rea*0even, amplifying finan-ial ris* for in-reasingly inde8ted produ-ers, and threatening to put those same produ-ers out of 8usiness,6 7his is the dynami- that is set to lead !orth +meri-a into a natural gas

supply -run-h over the ne<t few years , as we dis-ussed re-ently in &hale "as 2eality 1egins to (awn,7hose involved in
un-onventional oil would do well to ta*e note,

)/+A %mpact Magnifier

An energy bubble collapse spills over to ot$er sectors and collapses t$e economy Ruppert, 12 # former Bos Angeles Police De&artment narcotics investigator turned investigative Aournalist -2Michael
)u&&ert6 2;e"are the Freen Investment ;u44le5, e cer&t from Confronting Colla&se6 *he Crisis of Energy and Money in a Post Pea% <il !orld, J0'' htt&600"""#chelseagreen#com0content0michael?ru&&ert?4e"are?the?green?investment?4u44le0?;)!9

It "ould 4e un"ise to instantly forget "hat ha&&ened "ith the dot?com and housing 4u44les# ;oth "ere illusions and "ell?orchestrated "ealth transfers from the middle and lo"er classes to the "ealthiest &eo&le in the country# *he housing 4u44le "as created and fanned "hite?hot 4y intentionally
deregulating the mortgage industry, fraud and a host of crimes "hich suc%ed &eo&le into 4uying homes they could not afford and could never ho&e to &ay for# A ton of money "as created and it "ent to the &eo&le "ho ran the schemes6 the largest 4an%s, mortgage lenders and &olitical cam&aign donors# !hen that 4u44le colla&sed, the ta &ayers "ere as%ed to 4ail out first ;ear Stearns and then Cannie Mae and Creddie Mac at total costs that "ill to& V' trillion dollars 4efore counting the <cto4er 7DDH 4ailout of VHDD 4illion and all those that follo"ed under many deli4erately confusing names into the first =uarter of 7DD8# As I "rite, the total 2value5 of various U#S# government 4ailouts has to&&ed V'D trillion# *his doesn>t count the U#S# 4an%s that have failed and are going to fail 4efore 4an%s are inevita4ly nationali@ed# *hose are the same 4an%s "here green energy com&anies "ill 4e forced to loo% for financing# Personally, I thin% that the sooner the 4ig 4an%s fail, the sooner &eo&le can get to devising local currencies, "hich is "hat they>ll need to survive any"ay# It is im&erative to start that &rocess "hile 4ridges are still standing and fresh "ater still runs# !e need to start the transition to local currencies "hile there is still electricity and "hile fi4er?o&tic ca4les are maintained and relatively ne"G "hile airlines fly and cell &hones o&erate# None of the a4ove ta%es into account all the cash that home4uyers &ut into do"n &ayments initially# *hat money "as lost too# *hat>s the same thing as the money that gulli4le investors &oured into the dot? com 4u44le# *he ones at the 4ottom of the &yramid are al"ays us, and it is al"ays our money that disa&&ears first# *he current monetary &aradigm offers no other o&tion# *he a4ove does not address the e=uity -energy9 that "as lost in each colla&se# *hese are real costs# In the mar%et crash of 7DD7 and 7DD1 -"hich I accurately &redicted, saying it "as only a &recursor to today>s events9 hundreds of 4illions of dollars of shareholder e=uity "ere destroyed 4y the fraud of maAor cor&orations# *hose dollars re&resented a lot more energy than "hat circulates today# *he Cederal )eserve has dou4led its ca&itali@ation in less than a year, having left it alone for the &revious nine decades# *he e=uity "as destroyed, 4ut the "ealth "as transferred# And e=uity is "here "ealth resides in the dying economic &aradigm# *here may 4e JD[ less e=uity in the Do" .ones than there "as in late 7DD(, 4ut there is more e=uity that has 4een hidden and disguised 4y those "ho hold it# ;ut even "ealth transfers have a la" of entro&y# *his is not a case "here all those investments "ere converted '6' into some other form# *he elites "ho thought they "ere immune are going do"n too, li%e dinosaurs "ho cannot gras& their im&ending e tinction# Even the <racle of <maha, !arren ;uffet, has discovered himself mortal# As the net"or%s 4lithely tal%ed a4out shareholder e=uity that "as lost at the 4eginning of the colla&se, they almost never

mentioned ho" many 4illions of dollars &ension funds, other institutional investors and individuals &ut 4ac% in to the mar%ets "hen they 4ought more shares at ne"ly lo"ered &rices# !hen 4u44les 4urst, those on the 4ottom literally &ay t"ice # *he first time, "hen they 4uy stoc%s that later
tan%, and again "hen they &urchase ne" shares, ho&ing to ma%e u& for the e=uity they lost "hen the &revious 4u44le 4urst# Does this sound li%e an out?of?control gam4ling addiction to youU !hat ha&&ened "as that the &eo&le at the to& got 2their5 money out, at the to&# *hey sold their shares 4efore the 4u44le 4urst# *hat>s "hy they call it 2&um& and dum&#5 An American &resident cannot let this ha&&en "ith a 2Freen Economy5 for three reasons# Cirst, the *reasury is em&ty and the United States no" has

its largest 4udget deficit ever, "ith the national de4t e

ceeding V'' trillion# It doesn>t have many 4ailouts and these do a4solutely nothing to solve the fundamental &ro4lem# *hey only im&air the system>s a4ility to res&ond to ne" challenges, li%e feeding you "hen the time comes# Second, the infrastructure costs to assist in some %ind of

left,

sta4le transition and to maintain 4asic services as oil and gas fade a"ay are going to 4e astronomical# *hird, the Freen Economy has got to &roduce and deliver usea4le solutions =uic%ly# !e cannot afford energy 4ridges to no"here that ma%e great &rofit for investors 4ut &rovide little or no real?"orld 4enefit # If the Freen
Economy doesn>t do this, then the nation "ill 4e left "ith a non?functioning energy infrastructure#

Turns t$e entirety of t$e case 3 t$e burst will ma"e all problems worse Bictor and Nanose" 11 ? &rofessor at the School of International )elations and Pacific StudiesG AND*** :anose% O M;A
from $arvard -Xictor, David F# :anose%, Kassia# 2*he Crisis in Clean Energy6 Star% )ealities of the )ene"a4les Cra@e5# August, 7D''# Pro=uest O;)!9 After years of staggering gro"th, the clean?energy industry is headed for a crisis # In most of the !estern countries leading the industry, the &u4lic

)/+A Turns +ase

su4sidies that have &ro&elled it to 7/ &ercent annual gro"th rates in recent years have no" 4ecome &olitically unsustaina4le# *em&orary government stimulus &rograms?"hich in 7D'D su&&lied one?fifth of the
record investment in clean energy "orld"ide?have merely delayed the 4ad ne"s# Bast year, after 7D years of gro"th, the num4er of ne" "ind tur4ine installations dro&&ed for the first timeG in the United States, the figure fell 4y as much as half# *he mar%et

value of leading clean?energy e=ui&ment manufacturing com&anies has &lummeted and is &oised to decline further as government su&&ort for the industry erodes# *he coming crisis could ma%e some of t$e toug$est foreign policy c$allenges facing the United States?from energy insecurity to the trade deficit to glo4al "arming?even more difficult to resolve # *he revolution in clean energy "as su&&osed to hel& fi these &ro4lems "hile also creating green Ao4s that "ould &o"er the economic recovery# Some niches in clean energy "ill still 4e &rofita4le, such as residential roofto& solar installations and
4iofuel made from ;ra@ilian sugar cane, "hich is already com&etitive "ith oil# ;ut overall, the &icture is grim# *his is true not only for the United States 4ut also for the rest of the "orld, 4ecause the mar%et for clean?energy technologies is glo4al#

<atar .A

&( gas production crus$es <atar gas wealt$ World 5olitics )evie", U11, .uly 7/, Flo4al Insider6 3atarIs Natural Fas Industry,
htt&600"""#"orld&oliticsrevie"#com0trend?lines08/(70glo4al?insider?=atars?natural?gas?industry *he 3atari energy cor&oration 3atargas recently signed a deal "ith Argentina to &rovide 'R &ercent of the Batin American countryIs natural gas needs for 7D years# In an email intervie", Fiacomo Buciani, Princeton glo4al scholar and scientific director of the international energy &rogram at the Paris School of International Affairs, discussed 3atarIs natural gas industry# !P)6 !hat is the e tent of the glo4al li=uefied natural gas -BNF9 mar%et, and "hat is 3atarIs share, including its maAor BNF trade &artnersU Fiacomo Buciani6 *he glo4al BNF trade has 4een ra&idly e &anding and can 4e e &ected to continue to do

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so# According to ;PIs Statistical )evie" of !orld Energy, in 7D'D, 78(#R1 4illion cu4ic meters -;CMs9 of gas "ere trans&orted internationally as BNF# <f this amount, 3atar accounted for (/#(/ ;CMs, or roughly one?=uarter of the total# *his year, 3atarIs rated BNF ca&acity reached (( million tons, "hich is e=uivalent to 'D/ ;CMsG hence, 3atarIs role is li%ely to increase# In 7D'D, 3atarIs main customers "ere the U#K#, India, .a&an and South Korea# !P)6 !hat are the &rinci&al drivers of
gro"th for 3atariIs BNF sales, and "hat are the maAor o4staclesU Buciani6 3atar em4ar%ed on an am4itious &rogram to develo& the North Dome gas field ?? the largest in the "orld ?? in the '88Ds# *he field had 4een discovered 4y Shell in '8(' and declared not commercially via4le# Production only started in '8H8, 4ecause no mar%et could 4e found for the gas 4efore then# 3atar o&ted

early on for e &orting gas in li=uefied form# A4u Dha4i had 4een the first to do soG various &i&eline &roAects "ere
discussed to interconnect the Fulf Coo&eration Council countries or 4ring 3atari gas all the "ay to Euro&e, 4ut none too% off# BNF investment su4se=uently intensified starting in the 4eginning of this century, due to ra&idly e &anding demand in the Car East and Euro&e and, nota4ly, the e &ectation that the United States "ould need to su4stantially increase im&orts from distant sources in the form of BNF# $o"ever, 4y the end of the first decade of this century it 4ecame clear that the 4oom in

nonconventional gas &roduction in the U#S# "ould &revent any su4stantial increase in BNF im&orts# *he &rice of gas in the United States has fallen to such a lo" level that BNF from 3atar "ould only 4ring a very meager &rofit, if any# At the same time, the glo4al financial crisis and the doldrums in "hich 4oth the .a&anese and the Euro&ean economies have fallen have caused a decline in gas demand# 3atar thus found itself "ith a serious overca&acity &ro4lem, "hich it has sought to alleviate through sales to ne", more?distant customers and
through greater reliance on s&ot sales, es&ecially in Euro&e, "here it com&etes "ith &i&eline gas from )ussia and Algeria# *he tide turned again follo"ing the Cu%ushima nuclear &o"er &lant accident in .a&an# Suddenly, .a&an sought to greatly

increase its BNF im&orts to =uic%ly reduce its reliance on nuclear# In the "a%e of the accident, Fermany and S"it@erland
have decided to gradually &hase out their &o"er &lants and 4uild no ne" ones, "hile Italy has confirmed that it "ill forgo &ursuing nuclear &o"er# Although the official Ferman government discourse is that nuclear "ill 4e su4stituted for "ith rene"a4le sources, the latter are intermittent in nature, and increased reliance on &o"er generation from gas is an almost

unavoida4le conse=uence# <atar /atural gas wealt$ is "ey to middle east stability Reuters )21), H0'R0# MIDEAS* M<NE:?Economics, &olitics under&in 3atar aid to North Africa,
htt&600"""#reuters#com0article07D'70DH0'R0egy&t?=atar?idUSBREH.D(I*7D'7DH'R D<$A, Aug 'R -)euters9 ? !ith a &lan to de&osit V7 4illion in Egy&tIs central 4an%, 3atar

is 4ecoming one of the to& financial 4ac%ers of the struggling country as it signals an intention to &lay a 4ig role in re4uilding North African economies after last yearIs u&risings# Barger foreign donors have 4een cautious a4out lending money to economies hit 4y the Ara4 S&ring, 4ut 3atar ? "ith a &o&ulation of Aust '#( million ? is using its natural gas "ealth to esta4lish itself as an economic force in the region# *he aid a&&ears to have 4oth &olitical and economic motives, di&lomats and analysts say# ;y su&&orting economies in North Africa, 3atar hel&s to limit further social unrest that mig$t spread to t$e 7ulf# Mean"hile, some of its aid involves investment that could 4e very &rofita4le if North African economies eventually resume gro"ing ra&idly# W3atar is attem&ting to achieve maAor &olitical and economic goals "ith its dynamic foreign &olicy in resha&ing North Africa in the "a%e of the Ara4 S&ring ,W said *heodore Karasi%, director of research at the Institute for Near East and Fulf Military Analysis in Du4ai# *he V7 4illion de&osit from 3atar "ould 4e a significant 4oost to Egy&tIs foreign reserves, "hich have more than halved since the start of last year
to V'J#J 4illion in .uly# *he Egy&tian finance minister said on Monday that the first V/DD million &ayment from 3atar "as e &ected "ithin a "ee%# *he announcement follo"ed ne"s in .une that state?o"ned 3atar Petroleum -3P9 "as involved in a V1#( 4illion financing &ac%age to 4uild an oil refinery on the outs%irts of Cairo, one of the 4iggest industrial &roAects announced since Egy&tIs revolution# 3P International committed over V1R7 million to 4uy a 7(#8 &ercent sta%e in the &roAect# And last <cto4er 3atari Diar, the &ro&erty arm of 3atarIs sovereign "ealth fund, signed a V/JJ million contract to develo& t"o real estate &roAects in Egy&t, in Cairo and Sharm el?Shei%h# Since Egy&tIs revolution, only Saudi Ara4ia a&&ears to have made a larger financial commitment to the country# It transferred V/DD million to the Egy&tian central 4an% in May last year, and in .une this year it &rovided a further V'#/

4illion to su&&ort Egy&tian government finances, according to officials in CairoG it has also &romised VJ1D million in &roAect aid and a V(/D million line of credit for oil im&orts# *he International Monetary Cund has 4een discussing a V1#7 4illion loan to Egy&t, 4ut agreement has so far 4een delayed 4y changes in the Egy&tian government and the IMCIs concern a4out the "isdom of the countryIs economic &olicies# 3atar has also thro"n an economic lifeline to *unisia, "hich in A&ril raised V/DD million at a 7#/ &ercent interest rate via a &rivate &lacement of de4t to 3atar# In May the 3atari government said it "as reviving &lans to 4uild a 4uild a V7 4illion oil refinery in *unisia after years of delays, &otentially e &anding the North African countryIs refining ca&acity more than fourfold# In Morocco, 3atarIs &lans include a /D?/D investment Aoint venture "orth V7 4illion, agreed late last year, to hel& the country fund maAor develo&ment &roAects# 3atarIs sovereign "ealth fund, Ku"aitIs Al AAial Investments and A4u Dha4iIs sovereign "ealth fund Aa4ar Investments have also agreed "ith MoroccoIs Cund for the Develo&ment of *ourism to inAect 7D#H 4illion dirhams -V7#/ 4illion9 into a ne"ly created vehicle called !essal Ca&ital to focus on develo&ing ne" tourism resorts in Morocco# M<*IXES Pu4licly, 3atar has 4een noncomittal a4out the motives for its su&&ort of North

African economies, 4eyond saying it "ants to s&read &ros&erity and foster good ties "ith all countries# WDonIt you thin% this is a good &olicy for a small countryUW 3atarIs Emir Shei%h $amad 4in Khalifa al?*hani said in an
intervie" "ith U#S# television &rogramme RD Minutes in .anuary, "hen as%ed a4out its efforts to 4uild 4ridges in the region# Its motives a&&ear &artly ideological, ho"ever# In contrast to Saudi Ara4ia, "hich has 4een sus&icious of the Muslim ;rotherhoodIs &otential to stir social unrest in the Fulf, 3atarIs close ties to the ;rotherhood e tend over decadesG it has &rovided e ile to &rominent ;rotherhood mem4ers, the most &rominent of them Egy&tian Shei%h :ousef al?3arada"i, vie"ed as the movementIs s&iritual leader# *he victory of the ;rotherhoodIs Mohamed Mursi in Egy&tIs .une &residential elections finally gave 3atar the chance for a close alliance "ith Cairo# W*heir 4rand of Islam is acce&ta4le to the 3ataris, and they are &o"erful6 a "inning com4ination,W said a Doha?4ased source close to the government, "ho declined to 4e named 4ecause of &olitical sensitivities# *he de&osit in Egy&tIs central 4an% hel&s the 3ataris Wmaintain their alliance structure "hile at the same time increasing their &o"erW, the source said# A second source in Doha "ith ties to the government said6 W*he 3ataris have an interest in securing domestic sta4ility in Egy&t# *hey donIt "ant to see a situation "here their o"n guys are struggling#W ;ut the motives are also economic# In recent years 3atar, li%e other Fulf Ara4 countries, has em4ar%ed on a &olicy of investing around the "orld to &re&are for the eventual de&letion of its energy resources# In North Africa, its investments since last year have focused on energy and 4an%ing, t"o sectors "hich can 4e e &ected to gro" 4ecause of young &o&ulations and relatively high &o&ulation gro"th rates, as "ell as on tourism# Among 3atarIs regional investments since the Ara4 S&ring, 3atari Diar said last <cto4er that it "ould 4uild an VHD million tourism and leisure com&le over JD hectares in *unisiaIs southern city of *o@eur, a to& tourist destination# 3atarIs state?4ac%ed 3Invest sealed a deal to hive off the investment 4an%ing 4usiness of Egy&tIs ECF $ermes through a Aoint venture in "hich 3Invest "ould o"n RD &ercent ? a deal "hich "ould &rovide money for ECF, the Middle EastIs 4iggest home?gro"n investment 4an%, to e &and across the region# And 3atar National ;an%, the Fulf countryIs 4iggest lender, "hich is /D &ercent government?o"ned, agreed to 4uy a maAority sta%e in MoroccoIs Union Marocaine des ;an=ues# W Fiven the amount 3atar has to invest, it

is loo%ing for o&&ortunities in the region that offer commercial return and0or &olitical leverage ,W
said a Doha?4ased economist# W*he three North African countries that have undergone &olitical transition naturally offer a rare o&&ortunity to increase 3atari engagement, 4oth 4ecause these countries have urgent needs for investment and assistance, and 4ecause the ne" governments are more naturally sym&athetic to 3atar than the outgoing regimes#W

xtinction Russell, E -.ames A# )ussell, Senior Becturer, National Security Affairs, Naval Postgraduate School, N8 -S&ring9 2Strategic Sta4ility )econsidered6 Pros&ects for Escalation and Nuclear !ar in the Middle East5 IC)I, Proliferation Pa&ers00, `7R, TThtt&600"""#ifri#org0do"nloads0PP7RT)ussellT7DD8#&dfTT9 Strategic sta4ility in the region is thus undermined 4y various factors6 -'9 asymmetric interests in the 4argaining frame"or% that can introduce un&redicta4le 4ehavior from actorsG -79 the &resence of non?state actors that introduce un&redicta4ility into relationshi&s 4et"een the antagonistsG -19 incom&ati4le assum&tions a4out the structure of the deterrent relationshi& that ma%es the 4argaining frame"or% strategically unsta4leG -J9 &erce&tions 4y Israel and the United States that its "indo" of o&&ortunity for
military action is closing, "hich could &rom&t a &reventive attac%G -/9 the &ros&ect that Iran>s res&onse to &re?em&tive attac%s could involve unconventional "ea&ons, "hich could &rom&t escalation 4y Israel and0or the United StatesG -R9 the lac% of a

communications frame"or% to 4uild trust and coo&eration among frame"or% &artici&ants # *hese systemic "ea%nesses in the coercive 4argaining frame"or% all suggest that escalation 4y any the &arties could ha&&en either on &ur&ose or as a result of miscalculation or t$e pressures of "artime circumstance# Fiven these factors, it is distur4ingly easy to imagine scenarios under "hich a conflict could =uic%ly escalate in "hich the regional antagonists "ould consider the use of chemical, 4iological, or nuclear "ea&ons# It "ould 4e a mista%e to 4elieve the nuclear ta4oo can someho" magically %ee& nuclear "ea&ons from 4eing used in the
conte t of an unsta4le strategic frame"or%# Systemic asymmetries 4et"een actors in fact suggest a certain increase in the &ro4a4ility of "ar O a "ar in "hich escalation could ha&&en =uic%ly and from a variety of &artici&ants# <nce such a "ar starts, events "ould li%ely develo& a momentum all their o"n and decision?ma%ing "ould conse=uently 4e sha&ed in un&redicta4le "ays# *he international community must ta%e this &ossi4ility seriously, and muster every tool at its dis&osal to &revent such an outcome, "hich "ould 4e an un&recedented disaster for the &eo&les of the region, "ith su4stantial ris% for the entire "orld#

Warming .A

/atural gas xports cause warming Romm 1) -.oe, Senior Cello" at American Progress, editor of Climate Progress, assistant secretary of energy for energy
efficiency and rene"a4le energy in '88(, Ph#D# in &hysics from MI*, 2E &orting Bi=uefied Natural Fas -BNF9 Is Still ;ad Cor *he Climate E And A Xery Poor Bong?*erm Investment,5 H?'R?'7, htt&600thin%&rogress#org0climate07D'70DH0'R0R88RD'0e &orting? li=uefied?natural?gas?lng?4ad?for?climate?&oor?long?term?investment09 And as "e>ve seen, BNF shi&&ed from the U#S# is much "orse from a F$F &ers&ective than regular

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gas, so 4y the time a lot of ne" BNF terminals are u& and running in this country , it seems li%ely that BNF?fired &lants overseas "ill 4e have a higher F$F intensity than the average &lant in the electric generation system needed to 4e any"here near a non?catastro&hic emissions &ath # !e do not "ant to 4uild a glo4al energy system around natural gas -see IEA>s 2Folden Age of Fas Scenario5 Beads to More *han RqC !arming and <ut?of?Control Climate Change9# At the time, the UK FuardianNs story &ut it "ell6 At such a level, glo4al "arming could run out of control, deserts "ould ta%e over in southern Africa, Australia and the "estern US, and sea level rises could engulf small island states# *he e tra emissions from BNF all 4ut eliminate "hatever small, short?term 4enefit there might 4e of 4uilding 4illion?dollar e &ort terminals and other BNF infrastructure, "hich in any case "ill last many decades, long after a sustaina4le electric grid "ill not 4enefit one Aot from re&lacing coal "ith gas# Asserting any net 4enefit re=uires assuming the ne" gas re&laces only coal E and isn>t used for, say, natural gas vehicles, "hich, as noted, are "orse for the climate or that it doesn>t re&lace ne" rene"a4les# If even a modest fraction of the im&orted BNF dis&laces rene"a4les, it renders the entire e &enditure for BNF counter&roductive from day one# )emem4er, a maAor 7D'7 study on 2technology "arming &otentials5 -*!Ps9 found
that a 4ig s"itch from coal to gas "ould only reduce *!P 4y a4out 7/[ over the first three decades -see 2Natural Fas Is A ;ridge *o No"here A4sent A Car4on Price AND Strong Standards *o )educe Methane Bea%age29# And that is 4ased on 2EPA>s latest estimate of the amount of C$J released 4ecause of lea%s and venting in the natural gas net"or% 4et"een &roduction "ells and the local distri4ution net"or%5 of 7#J[# Many e &erts 4elieve the lea%age rate is higher than 7#J[, &articularly for

shale gas# Also, recent air sam&ling 4y N<AA over Colorado found J[ methane lea%age, more than dou4le industry claims# A
different 7D'7 study 4y climatologist Ken Caldeira and tech guru Nathan Myhrvold finds 4asically no 4enefit in the s"itch "hatsoever E see :ou Can>t Slo" ProAected !arming !ith Fas, :ou Need N)a&id and Massive De&loyment> of ^ero?Car4on Po"er# *hat study ta%es into account the near?term im&act of the construction of ne" infrastructure# ;<**<M BINE6 Investing

4illions of dollars in ne" shale gas infrastructure for domestic use is, at 4est, of limited value for a short &eriod of time if "e &ut in &lace 4oth a C<7 &rice and regulations to minimi@e methane lea%age# E &orting gas vitiates even that limited value and so investing 4illions in BNF infrastructure is, at 4est, a "aste of resources 4etter utili@ed for de&loying truly lo"?car4on energy# At "orst, it hel&s accelerates the "orld &ast the 7qC -1#RqC9 "arming threshold into *erra incognita E a &lanet of am&lifying feed4ac%s and multi&le simultaneous catastro&hic im&acts# xtinction (tein, 11 R07R07D'' -Science editor for the maga@ine the
Canadian9 htt&600"""#agoracosmo&olitan#com0home0Cront&age07DD(0D707R0D'1H'#html9 "The scientific debate about human induced global warming is over alone the happily shopping general public - still

but policy makers - let seem to not understand the scope of the impending tragedy. Global warming isn't just warmer temperatures, heat waves, melting ice and threatened polar bears. Scientific understanding increasingly points to runaway global warming leading to human extinction", reported Bill Henderson in CrossCurrents. If strict global environmental security measures are not immediately put in place to keep further emissions of greenhouse gases out of the atmosphere we are looking at the death of billions the end of civili!ation as we know it and in all probability the end of humankind's several million year old existence, along with the extinction of most flora and fauna beloved to man in
the world we share.

/at gas exports prevents solar development .umaine 1) ?? senior editor?at?large c CNNMoney -;rian, J0'(0'7, W!ill gas cro"d out "ind and solarUW htt&600tech#fortune#cnn#com07D'70DJ0'(0yergin?gas?solar?"ind0UiidZ$PTBN9
Crac%ing technology has given the U#S# a 'DD?year su&&ly of chea& natural gas# !hatIs its im&act on coal, nuclear, "ind, and solar &o"erU Ine &ensive natural gas is transforming the com&etitive economics of electric &o"er

)/+A (olar nergy 4in"

generation in the U#S# Coal &lants today generate more than JD[ of our electricity# :et coal &lant construction is grinding to a halt6 first, 4ecause of environmental reasons and second, 4ecause the economics of natural gas are so com&elling# It is 4eing cham&ioned 4y many environmentalists as a good su4stitute for coal 4ecause it is cleaner and
emits a4out /D[ less car4on dio ide# Nuclear &o"er no" generates 7D[ of our electricity, 4ut the &lants are getting old and "ill need to 4e re&laced# !hat "ill re&lace themU <nly a fe" nuclear &lants are 4eing 4uilt in the U#S# right no"# *he economics of 4uilding nuclear are challenging ?? itIs much more e &ensive than natural gas# IsnIt the "orry no" that chea& natural gas might also cro"d out "ind and solarU :es# *he de4ate is over "hether natural gas is a 4ridge fuel to 4uy time "hile rene"a4les develo& or "hether it "ill itself 4e a &ermanent, maAor source of electricity# !hat do you thin%U <ver the &ast year the de4ate has moved 4eyond the idea of gas as a 4ridge fuel to "hat gas means to U#S# manufacturing and Ao4 creation and ho" it "ill ma%e the U#S# more glo4ally com&etitive as an energy e &orter# *he PresidentIs State of the Union s&eech "as remar%a4le in the "ay it "ra&&ed the shale gas 4oom into his economic &olicies and Ao4 creation# I 4elieve natural gas in the years ahead is going to 4e

the default fuel for ne" electrical generation# Po"er demand is going to go u& '/[ to 7D[ in the U#S# over this decade 4ecause of the increasing electrification of our society ?? everything from iPads to electric Nissan Beafs# Utilities "ill need a &redicta4le source of fuel in volume to meet that demand, and natural gas 4est fits that descri&tion# And that "onIt ma%e the environmental community ha&&yU !ell, natural gas may 4e a relatively
clean hydrocar4on, 4ut itIs still a hydrocar4on# So "ind and solar "ill have a hard time com&etingU )emem4er that "ind and solar account for only 1[ of our electric &o"er, "hereas natural gas is 71[, and its share "ill go u& fast# Most of that 1[ is "ind# Natural gas has a ne" role as the &artner of rene"a4les, &roviding &o"er "hen the "ind is not 4lo"ing and the sun is not shining# !ill solar scaleU Solar is still under '[ of U#S# electric generation , and even though its costs have come do"n dramatically, they must

come do"n a lot more# Solar is generally much more e &ensive than coal and natural gas# :ou have to remem4er that energy is a huge, ca&ital?intensive 4usiness, and it ta%es a very long time for ne" technologies to scale# *he eu&horia that comes out of Silicon Xalley "hen you see ho" =uic%ly a
*"itter or a :ou*u4e can emerge doesnIt a&&ly to the energy industry#

4in"s

+ap H
xpanding natural gas demand and infrastructure is t$e operative lync$pin of a cycle of capitalist exploitation' t$ere is an et$ical obligation to interrupt t$is drive towards destruction of t$e globe' c$arman )"12 PKaren, *rashing the Planet for Natural Fas6 Shale Fas Develo&ment *hreatens
Cresh"ater Sources, Bi%ely Escalates Climate Desta4ili@ation, Ca&italism Nature and Socialism, 7'6J, (7?H7?;)!Q

Des&ite increasing evidence of the danger and irreversi4le ecological damage j in areas "here hori@ontal
hydrofrac%ing for natural gas is ta%ing &lace,j governments around the "orld a&&ear to 4e em4racing this ne" method ofj resource e &loitation# *he United States encourages gas drilling "ith morej than V'1#/ 4illion of su4sidies, most of "hich "ere authori@ed in the 7DD/ Energy Policyj Act#JR As a result, for five years &rior to 7DD8, a ty&ical U#S# gas com&any &aid D#1 &ercent ta on itsj &rofit instead of the standard cor&orate ta rate of 1/ &ercent#J( *hough most of the su4sidies a&&ly to thej e &loration rather than the &roduction &hase of natural gas e traction, to"nshi&s and residentsj don>t collect ta es

or royalties until gas &roduction reaches a certain level# Fasj com&anies, ho"ever, receive su4sidies "hether or not their "ells &roduce,j thus leasing land, e &loration, and drilling are essentially ris%?free activities,j &ossi4ly even if com&anies a4andon drilled "ells "ithout cleaning them u&#JHj A 7DDJ la" that deems oil and gas a NNmanufactured good>> &ermits com&aniesj to claim 4illions of
dollars in ta deductions, shifting much of the cost of gas &roduction toj American ta &ayers#J8 Another su4sidy allo"s com&ani es to "rite off (D?'DDj &ercent of their outlay for e=ui&ment, su&&lies, and other costs of drilling#/Dj <ther su4sidies guarantee that the gas industry &ays almost nothing forj the cost of gas distri4ution and gas &i&elines#/' Fas com&anies and theirj investors are also allo"ed to "rite off losses, ena4ling them to shelter otherj income#/7 Currently, efforts are under"ay in the U#S# Congress for su4stantialj ne" su4sidies to s"itch fuels in the trans&ortation sector 4y encouraging thej "ides&read ado&tion of cars and truc%s that run on natural gas#/1j *he various su4sidies and incentives "ere ado&ted ostensi4ly to 4oost domestic natural gas &roduction toj ma%e the U#S# energy inde&endent# $o"ever, as Investing Daily &oints out, NNit>s im&ortant to remem4erj that energy mar%ets are glo4al#>>/J A raft of recent international deals indicates that much of the gas drilledj in the U#S# is intended for the international energy mar%et# In Novem4er 7DDH, U#S#?4ased Chesa&ea%ej Energy, a maAor investor in the Marcellus Shale, sold the second largest su&&lier of natural gas in Euro&e,j the Nor"egian com&any Statoil$ydro, a 17#/ &ercent sta%e in its Marcellus leases, a deal that could add thej e=uivalent of 7#/ to 1 4illion 4arrels of oil to Statoil$ydro>s reserves#// Investing Daily re&orts that also inj 7DDH, Chesa&ea%e Aoined ;P in a V'#8 4illion Aoint venture in the Cayetteville Shale in Ar%ansas# In earlyj 7D'D, Chesa&ea%e formed a V7#7/ 4illion Aoint venture "ith the Crench energy giant *otal that gives *otalj a 7/ &ercent sta%e in Chesa&ea%e>s assets in the ;arnett Shale in *e as# India>s largest com&any, )eliance,j 4ought a J/ &ercent sta%e in Pioneer Natural )esources> gas leases in the Eagle Cord Shale in southernj *e as after &urchasing a JD &ercent sta%e in Atlas Energy>s Marcellus Shale holdings# <il giants )oyalj Dutch Shell, E onMo4il, and ConocoPhilli&s are also ma%ing significant investments in unconventionalj natural gas in the U#S# and else"here, as are Chinese com&anies#/RPro&onents argue unconventional natural gas is clean and

needed as a NN4ridgej fuel>> that "ill hel& reduce greenhouse gas emissions to hel& cur4 glo4alj climate desta4ili@ation until "e can transition a"ay from coal# ;ut this claimj neglects to account for 4oth the energy re=uired and the resulting emissionsj from e tracting, &rocessing, and distri4uting the gas*i#e#, the use of fossilj fuels to 4uild &i&elines, truc% the enormous amounts of "ater needed forj
hydrofrac%ing, drill "ells, manufacture the chemicals for the frac%ing fluids,j run the com&ressors, and treat and trans&ort the "aste"ater#/( Nor doesj it consider the loss of car4on sin%s from forests cleared for drilling#/H Noj scientific &eer?revie"ed analyses of greenhouse gas emissions measuring thej entire fuel cycle for shale and other unconventional gas sources have yet 4eenj com&leted and &u4lished# Cornell ecologist )o4ert !# $o"arth is analy@ing total greenhousej gas emissions from Marcellus Shale gas develo&ment# $is &reliminary data suggest that 4ecausej of the difficulty of o4taining the more diffuse shale gas, these

additionalj emissions are li%ely to 4e at least three times the greenhouse gas emissionsj for e tracting, &rocessing, and trans&orting diesel fuel and gasoline#/8j Much more of a concern, ho"ever, is the

lea%age of methane into thej atmos&here during all stages of drilling, &rocessing, trans&orting and 4urningj the gas# Methane, "hich is (7 times more &o"erful a greenhouse gas &erj molecule than C<7,RD is the maAor com&onent of natural gas# $o"arth notesj that the numerous incidents of e &losions and contaminated "ells in shalej gas drilling areas in Pennsylvania, !yoming, and <hio in recent years revealj &ath"ays for methane to esca&e into the atmos&here6 NN*he concentrationsj of methane necessary for an e &losion are at least 'D,DDD?fold higher thanj those normally in the atmos&here, and this lea%age from contaminatedj ground"ater is &ro4a4ly =uite significant in terms of the greenhouse?gasj foot&rint of shale gas#>>R' Although $o"arth>s study is not yet com&lete, his &reliminary resultsj indicate that the greenhouse gas foot&rint of Marcellus Shale gas is

NN&ro4a4ly atj least t"ice as great as the emissions from Aust 4urning the gas# *hat is, shalej gas is not a clean fuel and a&&ears to 4e a &oor choice as a transitional fuelj over the coming decades if the U#S# is serious a4out addressing glo4al climatej disru&tion# >>R7 *"o California scientists,
Mar% .aco4son from Stanford University and Mar% Delucchij from the University of California at Davis, have laid out a &lan to eliminate fossil fuel use in every countryj on the &lanet and re&lace it "ith clean, rene"a4le energy*currently e isting "ind, solar, geothermal, tidalj and hydroelectric &o"er technologies*in Aust ten years#R1 *heir &lan calls for NNmillions of "ind tur4ines,j "ater machines, and solar installations#>>j !hile they ac%no"ledge the num4ers are large, they &oint out that massive societal

transformations havej ta%en &lace 4efore, for e

am&le "hen the U#S# retooled its automo4ile manufacturers during !orld !arj II to 4uild 1DD,DDD aircraft, and other countries &roduced another JHR,DDD# *hey also ac%no"ledge somej technical hurdles, 4ut none that seem insurmounta4le# *he 4iggest road4loc% a&&ears to 4ej the Auggernaut of

ca&italist ideology and &o"er that in the face of escalatingj ecological catastro&he refuses to give u& its short?term &rofit?driven deathj gri& on the &lanet#

5lan Ramps up domestic oil production 3 s$ifting imports and causing a saudi flood lass et al' 12 - *he $istory of U#S# )elations "ith <PEC6 Bessons to Policyma%ers .areer Elass and Amy Myers .affe $E $
IS*<): <C U#S# ) EBA*I<NS !I*$ <PEC6 B ESS<NS *< P <BIC:MAKE)S ;y .A)EE) EBASS SEP*EM;E) 7D'D htt&600"""#4a%erinstitute#org0&u4lications0Amy[7D.areer[7DU#S#[7D)elations[7D"ith[7Dcover[7Dsecured#&df O;)!9 *he <4ama rhetoric and other similar language among U#S# &oliticians &rom&ted Saudi Prince *ur%i

0il

Al?

Caisal, the former long?serving director of Saudi Intelligence and former am4assador to the United States, to "rite a sur&risingly
4l unt editorial in the Se&tem4er0<cto4er 7DD8 Coreign Policy# *he editorial too% the <4ama administra tion and the U#S# goal of achieving energy de&endence to tas%, noting that, 2*he allure of demagoguery is strong, 4ut U#S# &oliticians must muster the courage to scra& the fa4le of energy inde&endence once and for all#5 Calling the conce&t of energy inde&endence

2unrealistic, misguided, and ultimately harmful to energy&roducing and Oconsuming countries, ali%e,5 Prince *ur%i argued that there is no technology in the foreseea4le future that can com&letely re&lace oil# $e noted that U#S# energy needs "ill have to 4e met "ith a mi of 4oth rene"a4le and fossil fuels# Cor that reason,
the &rince suggests that the <4ama administration should focus on 2en ergy interde&endence5 rather than energy inde&endence, as 2the fates of the United States and Saudi Ara4ia are connected and "ill remain so for decades to come#5 R Prince *ur%i suggested

that the term 2energy inde&endence5 commonly used 4y the United States is often used 2as little more than a code for arguing that the United States has a dangerous reliance on my country of Saudi Ara4ia, "hich gets 4lamed for everything from glo4al terrorism to high gasoline &rices#5 $ighlighting Saudi Ara4ia>s role
for the last thr ee decades of "or%ing to ensure the sta4ility of the "orld>s energy su&&ly, Prince *ur%i stressed in his Coreign Policy editorial that the %ingdom has invested more than V'DD 4illion to e &and its sustained &roduction

ca&acity to '7#/ million 40dEena4ling Saudi Ara4ia to accommodate the loss of the second? and third?largest <PEC &roducers overnight, if need 4e# H Plans for a first tranche of V'J 4illion in Saudi oil investments 4y 7DD8 "ere aimed to achieve this rate of sustaina4le &roduc tion 4y no"# $o"ever,
this goal could only 4e accom&lished if national oil com&any Saudi Aramco "ere successful in stemming the natural decline in its aging fields to t"o &ercent &er annum# *his has 4een hard to accom&lish and the %ingdom>s sustaina4le &roduction ca&acity is not 4elieved to 4e much a4ove '' million 40d# 8 <ne maAor &roAect that "as su&&osed to re&lace declining &roduction from mature fields "as ne" &roduction from the offshore Manifa field# *he develo&ment of the Manifa field, "hich is su&&osed to reach 8DD,DDD 40d in the coming years, is said to 4e at leas t t"o years delayed, ma%ing it harder for the %ingdom to reach its sustaina4le oil &roduction goals# Ma nifa is unli%ely to reach more than J/D,DDD 40d 4y 7D'1, and achieve its target level only in 7D'/# Cuture investments are e &ected to 4e more e &ensive, as the %ingdom has com&leted e &ansion of &roAects involving less com&le reservoirs an d no" must tac%le more challenging geologic areas "ith less &orous roc%# !ith tric%ier reservoirs in e isting fields no" needing to 4e ta&&ed, Saudi Aramco e &ects its costs to go u&# As&irations to e &and e &l oration to ne" areas such as the dee&"ater )ed Sea "ill 4e tech nically difficult for Saudi Aramco# ;y his second year in office, President <4ama tem&ered his focus on energy inde&endence, noting that the move from fossil fuels to clean energy "ill re=uire time and 4e costly# Still, the &resident noted6 2###"e can>t afford not to change ho" "e &roduce and use energyE4ecause the long?term costs to our economy, our national se curity, and our environment are far greater#5 U#S# )elations "ith <PEC '1 Indeed, the costs of trying to eliminate oil im &orts in the short run "ould 4e incredi4ly e &ensive# U#S# oil im&orts of roughly '' million 40d are the e=ui valent of 'H#( tera"att hours of energy# *o re&lace

all of this im&orted oil "ith no n?fossil energy sources "ould 4e the e=uivalent of adding almost eight times the current U#S# total ca&acity for nuclear &o"er generation -assuming 7J?hour, 'DD &ercent
o&erations9# *he United States currently o&erates 'D1 nuclear &lants# *here are also more than 7/D million oil fuel?4ased motor vehicles in the United States# <n average, Americans retire (/ &ercent of moto r vehicles over a sevenyear &eriod# *hus, the

infrastructure demands alone in shifting the e=uiva lent of 'H#( tera"att hours of oil 4ased energy use are immense, 4oth in terms of scale and timeline for retiring e is ting motor vehicle and energy &roduction facility stoc%s# U#S# President ;arac% <4ama and <PEC <PEC mem4ers may have a&&lauded
the election of ;arac% <4ama to the U#S# &residency much li%e the maAority of th e international community did in Novem4er 7DDH, 4ut the grou& made it evident early on that <PEC doesn>t see eye?to?e ye "ith President <4ama on the energy &latform that he es&oused during the American &resid ential cam&aignEincluding a commitment to once and for all eliminate American de&endence on foreign oil# Fiven the scale u& and timing issues, as reflected in Prince *ur%i>s o& ed , leaders from <PEC oil

&roducing countries remain s%e& tical of the <4ama administra tion>s &ush for rene"a4le energy develo&ment, electric cars, and the administration>s initially am4iti ous commitment to slash U#S# greenhouse gas -F$F9 emissions and su&&ort a gl o4al climate treaty# 05 +6s best defense against alternative energy would be to drop t$e price of oil to levels t$at would render alternative energy as commercially unprofitable # ;ut the &roducer grou& is not currently actively concerned a4out the threat of alternative energy or electrification of the trans&ortation sector 4ecause it doesn>t 4elieve that such technologies can 4e scaled u& commercially to a significant level "ithin the ne t t"enty or thirty years# <PEC leaders are more concerned

that a U#S# or glo4al climate regime not ta or &enali@es &etroleum in a su4stantial fashion that significantly disadvantages oil?4ased fuel# A U#S# 4order car4on ta that h its all U#S# im&orts, including oil im&orts from Saudi Ara4ia, might 4e vie"ed as a more serious trade &ro4lem than U#S# &olicies to &romote alternative energy# ;ut so far, <PEC has not had to "orry too mu ch a4out the <4ama admi nistration moving ahead forcefully "ith overly am4itious energy and clim ate &olicy &lans# Instead, the ne" administration has 4een hamstrung "ith a struggling U#S# econo my# *he administration>s long struggle to &ass maAor health care reform 4et"een 7DD8 and the s&ring of 7D'D has dam&ened its chances of &assing su4stantial climate legislation either late r this year or into ne t year, and President <4ama has also had to co&e "ith the fallout fr om the "ea% accord &roduced from the Decem4er 7DD8 U#N# climate tal%s held in Co&enhagen# *hus, <PEC>s charge has 4een mainly focused on reacting to &ros&ects that tightened fuel economy standards "ill cur4 gro"th in oil use in the U#S# mar%et over time# Bess than t"o months after the U#S# &residen tial inauguration, <PEC signaled good"ill to"ard President <4ama "hen the grou& convened in Xienna in March 7DD8 to assess mar%et conditions and steered clear of a&&roving ne" su&&ly reduc tions# <PEC seemed reluctant to send the <4ama administration a negative signal at such an early stage# And, the grou& gave strong consideration to the im&act that a cut in out &ut "ould have on a str uggling glo4al economy# Key <PEC leaders "ere also cautious that the organi @ation>s deli4erations not a&&ear to undermine a critical F?7D heads of stat e summit the follo"ing month#

5olitics
ven if t$ey win t$e plan is popular, implementation force a fig$t Rampton =K)EK13 staff re&orter at )euters -)o4erta )am&ton, 2 UPDA*E '?U#S#?Me ico deal on e
&anded Fulf oil drilling still in lim4o, Mon A&r 78, 7D'1 86'8&m htt&600u%#reuters#com0article07D'10DJ0780usa?me ico?oil? idUKB7NDDF'M)7D'1DJ78900K: * <4ama heads to Me ico on *hursdayG energy on the agenda * U#S# has not im&lemented drilling agreement

signed a year ago * U#S# Congress no" 4eginning to loo% at language * $ouse "ants e em&tion from Dodd?Cran% disclosure rule9 ? More than a year after the United States and Me ico signed a much?lauded deal that "ould remove o4stacles to e &anding dee&"ater drilling for oil in the Fulf of Me ico, the agreement has still not 4een finali@ed 4y the United States# *he delay, for "hich &eo&le close to the administration 4lame Congress "hile )e&u4licans in Congress 4lame the administration , is certain to 4e discussed "hen President ;arac%
<4ama visits Me ican President Enri=ue Pena Nieto in Me ico City on *hursday# Me ico immediately ratified the &act in A&ril 7D'7, 4ut the United States has so far 4een una4le to &ass a sim&ly "orded, one?&age la" to &ut the agreement

into force# *he deal, formally %no"n as the *rans4oundary $ydrocar4ons Agreement, &rovides legal guidelines for dee&"ater drilling in the '#/ million acres -RDD,DDD hectares9 of the Fulf that straddle the U#S#?
Me ico 4oundary#

(olvency

1nc solvency
4ong timeframe for solvency 3 large scale investments and regulations Myers et' Al 1)-!illiam C# Danvers, Staff Director Kenneth A# Myers, .r#, Staff Director U#S# F<XE)NMEN* P)IN*INF
<CCICE ((?/R( !AS$INF*<N 6 7D'7 A MIN<)I*: S*ACC )EP<)* P)EPA)ED C<) *$E USE <C *$E C<MMI**EE <N C<)EIFN )EBA*I<NS UNI*ED S*A*ES SENA*E O;)!9

A %ey difference 4et"een the uniti@ation agreements envisioned under the *;A and traditional PSAs is that &hysical 4arrels &roduced "ill 4e allocated to the legal Aurisdictions of the United States and Me ico, &resuma4ly in &ro&ortion to the amount of reserves found on their res&ective sides of the 4order# *he Me ican 4arrels, &resuma4ly, "ill 4e &ro&erty of PEMEL as a state entity and the U#S# 4arrels "ill 4e treated under standard terms of U#S# licensing in the Fulf of Me ico# It is unli%ely that ,

from the U#S# &ers&ective, the *;A "ill meaningfully increase U#S# domestic oil &roduction in the near term# *he maritime 4order area is dee& "ater and "ould re=uire massive investments# Such investments are &ossi4le and should 4e encouraged 4y the U#S# government, ho"ever, it will ta"e years to get t$roug$ regulatory $urdles and normal pro;ect development needs # $o"ever, the *;A "ould unloc% the
maritime 4order region from moratoria, there4y offering long?term o&&ortunities to increase U#S# domestic &roduction# *he *;A should 4e seen as a net &ositive to hel&ing reduce U#S# de&endence on im&orts from trou4lesome regions and 4oosting domestic economic activity, and therefore the *;A should 4e vie"ed as a 4enefit for U#S# energy security# ;enefits of &hysical 4arrels of oil &roduced are &otentially much greater in relative im&ortance on the Me ican side of the 4order, "hich is e &eriencing decline in %ey fields, and that "ould 4e su4stantially 4eneficial to U#S# interests in Me ican economic gro"th#

ATA Mexican Relations

1nc Mexican relations


(tatus !uo solves relations Arc$ibold and ($ear, 13 -)andal C# Archi4old and Michael D# Shear, /010'1, 2<4ama *ells Me ico Audience of Ne" Era in )elations5, htt&600"""#nytimes#com07D'10D/0DJ0"orld0americas0o4ama?see%s?to?4anish?stereoty&ical? image?of?me ico#htmlUTrZD_&age"antedZ&rint900EM MELIC< CI*: E President <4ama, s&ea%ing to an enthusiastic cro"d of young &eo&le here, on Criday declared a ne" era in relations "ith Me ico that "ill focus on strengthening the countries> economic ties and that "ill &lay do"n the 4attle against drug gangs that has dominated the discourse for several years#
$ours after a &rivate dinner "ith President Enri=ue PeMa Nieto of Me ico, "ho has made an overhaul of la"s to foster economic gro"th the highlight of his five?month?old term, Mr# <4ama urged Americans to loo% &ast stereoty&es of

Me ican violence and des&air, and em4race the country>s strengthening democracy and economic health# 2!e agree that the relationshi& 4et"een our nations must 4e defined not 4y the threats that "e face, 4ut 4y the &ros&erity and the o&&ortunity that "e can create together, 5

Mr# <4ama said to vigorous a&&lause 4efore an audience of high school and college students at the National Anthro&ology Museum# After suggesting a fe" days ago that security relations 4et"een the United States and Me ico could 4e 4etter, Mr# <4ama hardly mentioned the su4Aect in his s&eech or in earlier remar%s on *hursday, a sign the to&ic has given American officials &lenty of headaches# *housands of &eo&le have 4een %illed in 4attles 4et"een Me ican drug gangs and the &olice and military, "hile the flo" of cocaine and mariAuana flourishes# ;usiness analysts have said Me ico>s economy "ould 4e even further along "ithout its violence# ;ut investment has gone for"ard, and the economy is a sunnier su4Aect over allG the United States is Me ico>s largest trading &artner and Me ico is the United States> third largest, 4ehind Canada and China# Poverty remains dee& here# Mr# PeMa Nieto ac%no"ledged this "ee% that three of five Me icans scra&e 4y on informal Ao4s and that "ages have so stagnated that they are no" lo"er than China>s, contri4uting to a sense among the mem4ers of the &u4lic that they are not yet feeling 2Me ico>s moment,5 as the government slogan "ould have it# ;ut a surge of investment in manufacturing, technology and other sectors has hel&ed lift the middle class and consumer s&ending and contri4uted to gro"th levels in the national economy that have 4een dou4le those of the United States in the &ast t"o years# Still, economic and trade tal%s have caused &lenty of friction and disagreements, too# Me ican government officials, in &rivate tal%s "ith Mr# <4ama, homed in on long, costly "aits for truc%s and "or%ers at the international 4order in 4oth directions, 4ut far more severe going into the United States# *he 4ac%u&s gre" significantly "ith the United States security clam&do"n on the 4order after the attac%s of Se&t# '', 7DD', and 4udget constraints and the &olitical reality of the mood for tighter 4order security may inhi4it 4uilding ne" or larger stations or adding man&o"er to them# ;ut senior administration

and Me ican officials suggested &u4lic?&rivate &artnershi&s could finance renovations# 2*here "as certainly recognition on 4oth sides that this is something that "e need to focus on,5 said one senior United States official "ho &artici&ated in the meetings# 2It 4rings together the issue of 4order safety, 4order security, immigration and trade#5

ATA 0il .ependence

1nc oil dependence


(tatus !uo solvesGs$ale *arvey, 1) environment corres&ondent -Ciona $arvey, ''0'70'7, 2US can 4ecome "orldIs 4iggest oil &roducer in a decade, says IEA5, htt&600"""#theguardian#com0environment07D'70nov0'70us?4iggest?oil?&roducer0&rint900EM *he US can shed its longstanding de&endence on Saudi Ara4ian oil "ithin the ne t decade ,
redra"ing the "orldIs &olitical systems and &otentially leading to runa"ay glo4al "arming# In a re&ort released on Monday, the "orldIs foremost energy "atchdog, the International Energy Agency -IEA9, said the US "ould 4enefit from so?called

unconventional sources of oil and gas, including shale gas and shale oil, derived from frac%ing O 4lasting dense roc%s a&art to release the fossil fuels tra&&ed "ithin# *hese sources could fuel the USIs energy inde&endence, and ma%e the country the "orldIs 4iggest oil &roducer 4y 7D'(# ;ut, if &ursued "ith
vigour, they "ould also lead to huge increases in greenhouse gas emissions that "ould &ut ho&es of cur4ing dangerous climate change 4eyond reach#

ATA nergy .iplomacy

1nc energy diplomacy


nergy .iplomacy fails and undermines credibility %smayilov 12 - continuity and change in @er4aiAan>s nergy di&lomacy 4y6 Murad Ismayilov, ;a%u
htt&600"""#academia#edu0HDRH'70ContinuityTandTChangeTinTA@er4aiAansTEnergyTDi&lomacy &u4lished a&ril 7Dth 7D'D O ;)!9 Energy di&lomacy has a&&arently failed to create a collateral effect leading to a =uic% resolution to the conflict over Nagorno?Kara4a%h on terms favora4le to ;a%uG no &anacea for all its &ro4lems# And the

longer, therefore, does ;a%u vie" energy di&lomacy as a "estEno longer vie"ed as an honest and almighty 4ro%erEis no" seen as either un"illing or una4le to 4ring a4out "hat ;a%u "ould consider a fair resolution to the conflict# Second, )ussia]s challenge to Feorgia]s territorial integrity in August 7DDH, com4ined "ith the "est]s demonstrated ina4ility to 4loc% or re&el Mosco" on that &oint, $ave effectively wor"ed to furt$er undermine t$e credibility of t$e west , in that it served to Aeo&ardi@e 4oth the

"estqs commitment to the regional states] security and territorial integrity and its ca&acity to live u& to that commitment# Not only did the "est, including the United States, fail to &revent the )ussian assault, 4utEin its aftermathENA*< failed to e tend a long? &lanned invitation for Feorgia to Aoin its Mem4ershi& Action Plan -MAP9 and rather chose to delay the country]s mem4ershi& in the organi@ation for an indefinite future#

1nc energy diplomacy badGu"raine


4egitimi:ation of Russian nergy .iplomacy strategy causes 7eorgia and &"raine intervention Ruff 21-)ussia>s !*< am4itions _ Feorgian anguish Print E?mail May D(, 7DDH May (, 7DDH A4dul )uff a%a 2)uff Stuff5,
Pa%istani <4server htt&600georgiandaily#com0inde #&h&Uo&tionZcomTcontent_tas%Zvie"_idZ'(R/_ItemidZ'17 O ;)!9 )ussia thus used energy di&lomacy to contain the resistance from these essentially anti?)ussian CSU

states# U%raine and Feorgia are s&earheading the fight against )ussian in many "ays irritating the Kremlin strategists# Strained relations 4et"een )ussia and Feorgia have gro"n steadily "orse in recent "ee%s for geo? &olitical and !*< reasons# 4ong#standing tensions between Russia and 7eorgia over two separatist regions in 7eorgia $ave flared dangerously in recent days wit$ eac$ country accusing t$e ot$er of provocative actions t$at ris" war' A4%ha@ia and <ssetia have

4een "ooed 4y )ussia to cede from Feorgia annoying Feorgian government# )ecent re&orts a4out Feorgian forces are &lanning for an onslaught on these regions have 4een resented 4y Mosco" and "arned of military reaction from the Kremlin# )ussia denied re&orts late last "ee% that it "as de&loying additional &eace%ee&ing troo&s to A4%ha@ia, 4ut the Coreign Ministry said it

"ould use 2all &ossi4le measures,5 including a military res&onse, to defend its citi@ens that live in the

re&u4lics# Many residents in the re&u4lics have )ussian &ass&orts# )ussia>s strenuous efforts to enter !*< are 4eing 4loc%ed 4y a fe" of CSU states "ith a vie" to outsmarting )ussia and e &licitly sho" their anger# Negotiators aiming to s&eed u& )ussia>s entry into the !orld *rade <rgani@ation overcame o4Aections from Feorgia during tal%s in Feneva, after *4ilisi threatened to 4loc% negotiations 4ecause of Mosco">s decision to 4oost su&&ort for Feorgia>s se&aratist re&u4lics#

&"raine intervention spar"s global nuclear war' Hingston, Ce4ruary )22E -;rian, Norman Paterson School of International Affairs O CICP, 2U%raine6 A )is% Assessment
)e&ort5, &# htt&600"""#carleton#ca0cif&0a&&0serve#&h&0'7'J#&df?;)!9 )ussia6 )ussia see%s to influence the "ea%ened U%raine, inflaming Crimea declares inde&endenceG U%raine

et$nic#Russian separatismG resists, &erha&s seeing an e ternal "ar as a distraction from internal strifeG )ussia comes to the aid of Crimea0ethnic?)ussians resulting in open warfare 4et"een )ussia and U%raine# *he !est6 *he !est also suffers from the glo4al recession, 4ut -&erha&s follo"ing a &eriod of in"ard loo%ing &rotectionism9 reali@es that it cannot allo" )ussian success in U%raineG open $ostilities erupt between Russian and /AT0 forces triggering World War %%% and t$e strong possibility of nuclear war, or at least the dra"ing in of many other countries#

1nc atA russia rels


Russia wont embrace energy diplomacy 3 5utin statements and public support prove it wouldn6t be in t$eir interest Qaffe and (oligo 21-Militari@ation of Energy6 Feo&olitical *hreats to the Flo4al Energy System Amy Myers .affe and
)onald Soligo P )EPA)ED IN C<N.UNC*I<N !I*$ AN ENE)F: S*UD: SP<NS<)ED ;: *$E . AMES A# ; AKE) III I NS*I*U*E C<) P U;BIC P <BIC: AND * $E I NS*I*U*E <C E NE)F: E C<N<MICS , . APAN M A: 7DDH htt&600"""#4a%erinstitute#org0&u4lications0IEE.Militari@ation#&df ? ;)!9 )ussia>s current energy strategy a&&ears to have t"o drivers# <ne is to 4uild u& the assets, si@e and

strength of the maAor )ussi an state energy entiti es such as Fa@&rom and )osneft , &rotecting their &otential cont ri4ution to the )ussian economy and their &o"er against foreign com&etitors# Secondly, )ussia has &ositioned itself to utili@e its com&arative advantage in energy resources for &olitical and economic ends # A recent 1H &ercent of )ussians surv eyed 4elieve that %ee&ing the status of su&er&o"er for )ussia 4est meets their individual and family interests more than strengthening democracy and freedom of s&eech -'7 &ercent9, "ith only economic gro"th mattering more to average )ussians th an enhancing )ussia>s status on the

&oll ta%en in )ussia as &art of an academic study on energy and environmen tal issues 4y the )ussian Academy of Science sho"s that

"orld stage# Bess than 'D &ercent of those su rveyed thought continue d &rivati@ation "as im&ortant, "hile at least a third favored stat e regulation and su&&ort of 4asic industries# More than RH &ercent felt foreign investment in the oil and gas sector "as 2not acce&ta4le at all#5 *hus, the Kremlin>s &olicies of dismantling :u%os and sus&ending com&etitive mar%et &rinci&als had 4road &u4lic su&&ort as did using energy to asse rt its international &osition# Putin>s &rimary focus in his second term "as

domestic, not only on consolidating the &o"er of the )ussian state to &rotect the Kremlin from &olitically?motivated 4usinessmen 4ut also on guaranteeing Mo sco">s firm gri& on )ussian energy develo&ment and su&&ly routes# !ith the Fa @&rom ta%eover of maAor )ussian oil firm Si4neft, )ussian
government?controlled and ?o "ned com&anies 4ecame res&onsi4le for a4out one?third of the count ry>s total oil out&ut#

1nc atA saudi prolif


/o (audi 5rolif 3 your aut$ors are alarmists *obbs and Moran 1) -Dr Christo&her $o44s is a Beverhulme )esearch Cello" at the Centre for Science and Security
Studies "ithin the De&artment of !ar Studies at KingIs College Bondon# !ould a nuclear Iran really trigger a ne" arms race in the Middle EastU 4y Christo&her $o44s and Matthe" Moran, """#theguardian#com0"orld07D'70dec0'80iran?nuclear?middle?east? arms?race ?;)!9 *a%e Saudi Ara4ia, for e am&le# Iran has long 4een at &olitical and ideological odds "ith the %ingdom across the Fulf# And at

first sig$t, it seems li"ely t$at (audi Arabia would follow %ran down t$e nuclear pat$' In Ce4ruary, Saudi officials "ere re&orted as claiming that )iyadh "ould launch a Wt"in?trac% nuclear "ea&ons

&rogrammeW in the event of a successful Iranian nuclear test# An article &u4lished in the Bondon *imes in Ce4ruary PrQ descri4ed a scenario "here4y Saudi Ara4ia "ould attem&t to &urchase "arheads from a4road "hile also adding a military dimension to its &lanned civil nuclear &rogramme at home# Boo% more closely, ho"ever, and there is a much stronger case to 4e made

against Saudi nuclearisation# ;eyond the KingdomIs &rimitive nuclear infrastructure O the country lac%s sufficient e &erience and e &ertise in &ractically all areas of the nuclear fuel cycle O Saudi Ara4iaIs &olitical and strategic conte t does not favour the ac=uisition of nuclear "ea&ons # Crom a barters (audi oil for &( conventional arms and an implicit commitment to (audiIs defence' In recent years, the role of !ashington as the silent guarantor of )iyadhIs security has gro"n a&ace "ith the structural changes in the Middle East# *he fall of the &ro?Saudi Mu4ara% regime in

security &ers&ective, the relationshi& 4et"een Saudi Ara4ia and the United States has held firm since the '8JDs, des&ite a num4er of challenges O most nota4ly the &artici&ation of a num4er of Saudi nationals in the 80'' terrorist attac%s# T$e relations$ip

Egy&tG &rotests and insta4ility in ;ahrain and :emenG the colla&se of the &ro?Saudi government in Be4anonG and civil "ar in Syria have u&ended the esta4lished regional order and made )iyadhIs &osition less secure# In this conte t, and given the determination of the United States to &revent nuclear &roliferation in the region, a move 4y Saudi Ara4ia to ac=uire nuclear "ea&ons holds fe" &ositives for )iyadhIs security calculus# Crom and economic &ers&ective, Saudi Ara4iaIs &olicy outloo% e em&lifies Etel SolingenIs seminal theory on the relationshi& 4et"een economic li4eralism and nuclear restraint# Solingen argues that &olitical coalitions favouring the reduction of state control over mar"ets and increased privatisation and

foreign investment 3 are less li"ely to adopt a nuclear posture t$at would endanger t$eir economic interests' In this regard, Saudi Ara4iaIs em&hasis on facilitating the gro"th of foreign investment is significant# )iyadh has cultivated e tensive trade relations "ith most international &o"ers, %een to attract foreign investment as a means of reducing over?reliance on oil and gas, increasing em&loyment

o&&ortunities for the local &o&ulation -&o&ulation gro"th of almost t"o &ercent e=uates to a need for some 7DD,DDD ne" Ao4s &er year9, and reinvigorating the Saudi &rivate sector# T$e ac!uisition of nuclear weapons would $ave far#

reac$ing conse!uences, stalling progress and bringing progressive economic isolation, t$us drastically c$anging t$e nature of t$e "ingdomIs international trade relations' SaudiIs interests are 4est served 4y nuclear restraint# In an article &u4lished in the latest issue of *he International

S&ectator, "e argue that there are strong arguments for nuclear restraint in the cases of other regional &layers as "ell# Crom security guarantees and the &rovision of advanced conventional "ea&ons ? in Decem4er 7D'', follo"ing the United States agreed a V'#( 4illion deal to u&grade Saudi Ara4iaIs Patriot missile defence system, for e am&le O to facilitating increased integration into the international economy, there are a range of measures that can &ersuade a state to forgo nuclear "ea&ons# Ultimately, many see a

domino?effect as the logical res&onse to Iranian nuclearisation# ;ut "hen the sta%es are this high, it is im&ortant to loo% at all sides of the de4ate# Crom another &ers&ective, t$ere is substantial evidence to suggest t$at regional proliferation is not a very li"ely outcome at all'

ATA conomy

1nc economy
($ale boom already solves ($au", 1) -^ain Shau%, R0'10'7, 2Shale 4oom to fuel '#/ million Ao4s 4y 7D'/, study says5, htt&600"""#chron#com04usiness0article0Shale?4oom?to?fuel?'?/?million?Ao4s?4y?7D'/? 1R17/(7#&h&900EM *he shale gas 4oom "ill account for nearly '#/ million ne" Ao4s 4y 7D'/, em&loying hundreds of thousands of "or%ers across JH states even though some com&anies are cutting 4ac% on &roduction, according to a study released !ednesday# Soaring investment in unconventional gas &roduction accounted for ' million Ao4s in 7D'D and "ill continue to have an effect on the national economy , contri4uting V'8( 4illion to annual U#S# gross domestic &roduct 4y 7D'/, according to the re&ort 4y research and analysis firm I$S Flo4al Insight# *hat total
"ill increase to V117 4illion 4y 7D1/, according to the re&ort# .o4 gro"th related to unconventional gas &roduction, in 4oth &roducing and non?&roducing states, "ill increase to 7#J million 4y 7D1/, according to the research#

ATA 5 M ?

1nc pemex
(tatus !uo solves 5 M ? liberali:ation +ulotta* and +respo**, 9 *&artner at King _ S&alding "ho focuses on Batin America AND **counsel at King _ S&alding "ho focuses on energy -Ken Culotta and .ohn Cres&o, 10H0(, 2Me icoIs Batest Ste& *o"ards Energy Bi4erali@ation5, htt&600"""#la"1RD#com0articles07D'JD0me ico?s?latest?ste&?to"ards?energy? li4erali@ation900EM <n .une 7R, 7DDR, the Me ican Congress voted a constitutional amendment that altered nearly RH years of oil and gas &olicy in that country# Since the early t"entieth century, Me ico has 4een the country most hostile to &rivate oil and gas investment in the "orld# !ith the coal 4ed methane amendment , com&rising all of t"o lines of te t, Me ico a&&ears to have made a maAor de&arture from former &olicy , e em&ting coal 4ed methane -natural gas tra&&ed "ithin underground coal formations9 from e clusive e &loitation 4y the Me ican government# !ith this small change, the Me ican congress, for the first time since the "holesale e &ro&riation of all &rivate oil and gas concessions in the '81Ds, has o&ened the door to direct &rivate &artici&ation in the e &loitation and develo&ment of Me ican natural gas resources#

5artial privati:ation solves 5 M ? reform .oao 5eixe (?'/?7D1)G "riter for <il&rice#com Can Enri=ue PeMa NietoIs Energy )eforms Ma%e Me

ico a MaAor <il E &orterU htt&600oil&rice#com0Batest?Energy?Ne"s0!orld?Ne"s0Can?Enri=ue?Pea?Nietos?Energy?)eforms?Ma%e?Me ico?a?MaAor?<il? E &orter#html

All oil reserves are state &ro&erty, and Me ico has huge &otential, ho"ever, the only com&any , Petr+leos Me icanos -PEMEL9, "ith the rights for e &loration, &rocessing, and selling of the oil, do not have the resources to ma imise e traction# Since 7DDJ Me ican oil out&ut has fallen 4y 7/[, "hich is a &ro4lem as the government receives nearly a third of its revenue from the oil industry# PeMa Nieto has decided to encourage gro"th in the sector 4y o&ening it u& to foreign investors, s&ecifically ;ra@il>s Petro4ras# In an intervie" "ith the Cinancial *imes 4ac% in 7D'' he said that PEMEL 2can achieve more, gro" more and do more through alliances "ith the &rivate sector#5 In order to o&en the industry to &rivate investors such as Petro4ras, PeMa Nieto must &ass a reform agenda through the nation>s congress G a congress "here his &arty does not hold a maAority# *his means that he "ill rely u&on su&&ort from o&&osition &arties to gain the necessary t"o?thirds vote
that he needs to achieve his &lans#

0ngoing 5 M ? reform opens up s$ale and deepwater oil to exploration 3 t$at solves production issues Eric Martin and Carlos Manuel Rodrigue:, (?'1?7D1)G re&orters for ;loom4erg ;usiness"ee% in Me ico City, Me

ico May Cinally Fet a Modern <il Industry htt&600interamericansecurity"atch#com0me ico?may?finally?get?a?modern?oil?industry0

<&ening u& the oil sector may 4oost gross domestic &roduct 4y as much as D#H &ercent a year, according to research firm Ca&ital Economics# Com4ined "ith the discovery of significant amounts of shale gas in northern Me ico, ta&&ing dee&"ater oil could create an era of lo" energy costs for the country# Inviting outsiders to invest in Peme could also transform the &sychology of 4usiness in Me ico# *o change Peme , PeMa Nieto "ill have to challenge entrenched interests, from the unions to local officials, "ho have all
4enefited from Peme >s largesse# If he succeeds he could tac%le other mono&olies and duo&olies in &o"er generation, telecom, and ca4le television that ma%e life so e &ensive for Me icans#

)nc no liberali:ation
5emex won6t reformGstructural and political problems (tratfor 1) glo4al intelligence com&any -2In Me ico, <4stacles *o Develo&ing <ffshore <il Cields5 7J de Ce4rero de 7D'7,
htt&600"""#stratfor#com0sam&le0analysis0me ico?o4stacles?develo&ing?offshore?oil?fields9 00K:

Peme and the Me ican government are under increased &ressure to change the status =uo # Me icoIs oil &roduction is declining and there is little greenfield e &loration under "ay in Me ico# *he Me ican government, "hich relies on oil revenues for a4out 1D?JD &ercent of its income , is most affected 4y the decline in domestic oil &roduction# Des&ite the danger, infle i4ility resulting from com&etition among the three main &olitical &arties and &ersistent nationalism surrounding &u4lic o"nershi& of natural resources ma%e it in the short term# unli%ely that Me ico "ill 4e a4le to change its &etroleum o"nershi& structure It is not even clear if or "hen the Me ican Senate "ill a&&rove the agreement signed this "ee%G indeed, senators are currently &rotesting the "ay the Calderon administration handled negotiations# Me icoIs left?"ing )evolutionary Democratic Party "ill &ro4a4ly o&&ose the agreement in the Senate , "hile CalderonIs

National Action Party -PAN9 can 4e e &ected to vote for it# $o"ever, the PAN lac%s a maAority in the Senate and "ill have to find allies in the Institutional )evolutionary Party -P)I9, "hose &residential candidate is currently the frontrunner for the .uly ' election# Considering electoral com&etition 4et"een the PAN and the P)I, a com&romise on the trans4oundary agreement is unli%ely to occur 4efore the election# *his %ind of deadloc% is e em&lary of the &olitical conditions that have sent

Peme scram4ling for "ays around the constitutional restrictions # *hese include a recent failed attem&t to

ta%e over the 4oard of S&anish energy com&any )e&sol :PC and a 4riefly floated idea to create a third?&arty com&any "ith ;ra@ilian state?controlled oil firm Peroleos ;rasilieros# Most recently, Peme announced its intention to s&earhead its o"n offshore drilling, "ith u& to 1D "ells &lanned in the ne t four years# Fiven the com&anyIs state, such &roAections seem o&timistic#

ATA Manufacturing

1nc manufacturing
Mexican manufacturing dominance inevitable +oy, 13 -Peter Coy, R07(0'1, 2Cour )easons Me ico Is ;ecoming a Flo4al Manufacturing Po"er5, htt&600"""#4usiness"ee%#com0&rinter0articles0'1D'87?four?reasons?me ico?is? 4ecoming?a?glo4al?manufacturing?&o"er900EM Me ico is 4eginning to 4eat China as a manufacturing 4ase for many com&anies des&ite its higher crime rate,

according to a ne" re&ort from ;oston Consulting Frou&# Me ico>s gain is a &lus for the U#S# 4ecause Me ican factories use four times as many American?made com&onents as Chinese factories do, says the consulting firm# $ere are Me ico>s four %ey advantages6 '# Manufacturing "ages, adAusted for Me ico>s su&erior "or%er &roductivity, are li%ely to 4e 1D &ercent lo"er than in China 4y 7D'/# China>s ra&idly and "ill 4e slightly higher 4y 7D'/# And la4or

"ages have soared# *hey "ere a4out one?=uarter as high as Me ico>s in 7DDD 4ut are catching u& &roductivity remains higher in Me ico, even though the

ga& is narro"ing# *he crossover &oint "as 7D'7, "hen unit la4or costs in China -i#e#, "ages adAusted for &roductivity9 gre" to e=ual those in Me ico# ;y 7D'/, Me ico "ill 4e around 78 &ercent less e &ensive# 7# Me ico has more free?trade agreements than any other country# *he North American Cree *rade Agreement gives Me ican goods easy access to the "orld>s largest mar%et, the U#S#, as "ell as to Canada# ;ut that>s not all# Me ico has free?trade agreements covering JJ countries# *hat>s more than the U#S# -7D &artners9 and China -'H9 com4ined# 1# Me ican manufacturing has a significant advantage in energy costs# Natural gas &rices in Me ico are tied to those of the U#S#, "hich are e ce&tionally lo" 4ecause of a glut of su&&ly on the mar%et# China &ays
from /D &ercent to '(D &ercent more for industrial natural gas# Me ico also has an edge over China in electricity costs, although &o"er isn>t as chea& in Me ico as in the U#S# J# Industry clusters, es&ecially in autos and a&&liances, are

gro"ing# Me ico has develo&ed a national e &ertise in certain industries, "hich ma%es it more attractive for com&anies to locate or e &and &lants there# ;ecause Me ico is a maAor auto manufacturer, H8 of
the "orld>s to& 'DD auto &arts ma%ers have &roduction in the country# *he com&anies are concentrated in five Me ican states, reducing trans&ortation costs# In a&&liances, more than (D manufacturers are in the country, ranging from com&onents ma%ers to assem4lers of 4oth small and large a&&liances#

+$inese military moderni:ation now -loomberg, 13 -;loom4erg, 10/0'1, 2China ;oosts Defense S&ending as Military Moderni@es Arsenal5, htt&600"""#4loom4erg#com0ne"s0&rint07D'1?D1?D/0china?4oosts?defense?s&ending? as?military?moderni@es?its?arsenal#html900EM China "ill 4oost defense s&ending 'D#( &ercent this year as the government moderni@es its military arsenal and ado&ts a more assertive stance in territorial dis&utes "ith its neigh4ors# Military s&ending is set to rise this year to (JD#R 4illion yuan -V''8 4illion9 from RR8#' 4illion yuan, the Ministry of Cinance said in a re&ort# China has the second?4iggest military 4udget in the "orld after the U#S#, "hich s&ent nearly si
times more on defense than China last year and is no" cutting those outlays# Defense s&ending as a &ercentage of gross domestic &roduct remained unchanged in 7D'7 from a year earlier at '#1 &ercent as the country u&grades its fleet of fighter Aets, shi&s and missiles# *he Communist Party says its moderni@ation doesn>t &ose a threat, "hile .a&an and other nations in the region argue

China has 4ecome more hostile in dis&utes over territory in the resource?rich "aters of the East and South China seas# 2*he increase is consistent "ith their long?term moderni@ation &lans, 5 said *aylor Cravel, a &rofessor at the Massachusetts Institute of *echnology "ho studies China>s relations "ith its neigh4ors# 2Any time you see a dou4le?digit increase in defense s&ending, es&ecially "hen no4ody else in the region is
gro"ing their 4udget at those rates, it generates an iety and concern#5 U#S# Cuts *he military outlays is in contrast "ith the U#S#, "here defense e &enditures totaled VR((#7 4illion in inflation? adAusted dollars in 7D'7, do"n 1 &ercent from 7D''# In Decem4er, congressional negotiators agreed on VRJD#( 4illion in defense s&ending for this year# Automatic s&ending cuts from the so? called se=uester may trigger further reductions# In the last year, China>s Navy commissioned its first aircraft carrier

and a frigate "ith stealth ca&a4ilities# *he country com&leted its first manned s&ace doc%ing, launched a home?gro"n satellite navigation system and &rogressed "ith its aerial drone

&rogram# China has also 4oosted its cy4er?"arfare ca&a4ility, according to technology e &erts#
Com&uter?security firm Mandiant Cor&# said in a re&ort last month that the Chinese army is &ro4a4ly the source of hac%ing attac%s against at least 'J' com&anies "orld"ide since 7DDR# *he Ministry of Defense later said the accusations "ere 2inaccurate and un&rofessional#5 Fovernment <utlays Defense s&ending rose Aust over '' &ercent last year# As a &ercentage of FDP, defense s&ending "as '#1 &ercent in 7D'7, the same as in 7D'' and do"n from '#J &ercent in 7DDR# Defense s&ending is &roAected to 4e /#1 &ercent of total government outlays in 7D'1, unchanged from 7D'7 and do"n from /#/ &ercent in 7D'', according to data com&iled 4y ;loom4erg# China and .a&an have traded accusations over islands claimed 4y 4oth sides in the East China Sea# Chinese &rotesters ransac%ed .a&anese 4usinesses after .a&an &urchased the islands in Se&tem4er# Bast month, .a&an said China used fire?control radar t"ice on .a&anese targets# Chinese shi&s also 4loc%ed the Phili&&ines last year from ins&ecting Chinese fishing 4oats in a reef the Phili&&ines calls Panatag Shoal and China refers to as $uangyan Island# *hose moves may have 4ac%fired against China 4y aligning countries in the region against it, Phili&&ine Coreign Affairs Secretary Al4ert Del )osario said on .an# 'D, after meeting his .a&anese counter&art, Cumio Kishida# .a&an is &aying 2careful attention5 to the dou4le?digit gro"th in China>s military s&ending, Chief Ca4inet Secretary :oshihide Suga told re&orters today in *o%yo# 2It is desira4le for China to increase trans&arency in its defense and military &olicy, including e &enditures#5 Pressing Claims At the same time, China has avoided using its military to &ress its claims in maritime dis&utes, sending marine surveillance shi&s into "aters surrounding the contested islands "ith .a&an# Some in the army have also counseled caution# Peo&le>s Bi4eration Army Feneral Biu :uan, the son of former President Biu Shao=i, said in an editorial in the Flo4al *imes ne"s&a&er on Ce4# J that China>s economic gro"th is in a critical &hase and shouldn>t 4e interru&ted 4y accidents# China>s official defense 4udget doesn>t include items that other countries "ould count, such as research and develo&ment and foreign arms ac=uisitions, said *ai Ming Cheung, an associate &rofessor at the University of California, San Diego# *he 4udget for domestic security "ill increase H#( &ercent to (R8#' 4illion yuan, less than the '7#J &ercent rise last year# China has s&ent more on internal security than on national defense since 7D'D# Freat Po"er Increased military s&ending

reinforces 2the &erce&tion throughout the region that China is committed to striving for great &o"er status,5 Denny )oy, a senior fello" at the $onolulu?4ased East?!est Center "hose "or% focuses on Chinese security
issues, said 4efore the 4udget "as announced# China is &lanning to im&rove the trans&arency of its army and "ill hold JD e ercises "ith the military and &aramilitary in 7D'1, $an Ludong, a &rofessor at the University of National Defense under the Peo&le>s Bi4eration Army, "rote in the Flo4al *imes March '# Even as its 4udget e &ands, the military has also ta%en u& a frugality cam&aign announced 4y Communist Party Feneral Secretary Li .in&ing# *he army should give &riority to high?tech "ea&ons,

training and information technology, and tighten control over rece&tions, cele4rations and overseas tri&s, the official Linhua Ne"s Agency said last month, citing a ne" regulation# In a Ce4# 7D re&ort, Linhua said the military had also told
soldiers to recoo% unfinished rice and turn leftover vegeta4les into 2various &ic%les and a&&eti@ers5 to cut do"n on "aste#

+$inese %5R protections increasing ?in$ua, 13 -Linhua, J0'80'1, 2ChinaIs IP) &rotection continues to im&rove6 official5, htt&600ne"s# inhuanet#com0english0china07D'1?DJ0'80cT'1717187'#htm900EM ;EI.INF, A&ril '8 -Linhua9 ?? China has consistently im&roved its la"s and regulations regarding intellectual &ro&erty rights -IP)9 and 4oosted IP) &rotection in recent years, an official said Criday# *ian Bi&u, commissioner of the
State Intellectual Pro&erty <ffice, said at the o&ening ceremony of a "ee%?long cam&aign to &romote IP) a"areness that intellectual &ro&erties granted and registered 4y the office have 4een gro"ing at a fast &ace# W Since the im&lementation of a

national IP) strategy in 7DDH, the countryIs mar%et &layers have 4ecome more ca&a4le of IP) creation, utili@ation, &rotection and management,W *ian said# Intellectual &ro&erty rights are 4eginning to sho"
their effects in enhancing national core com&etitiveness and transforming the countryIs economic gro"th model, the commissioner said# Data sho" that the num4er of invention &atents granted 4y the office Aum&ed 7R#' &ercent year on year to hit 7'(,DDD &atents last year# China also continued to o"n the largest num4er of trademar%s, "ith a total of R#J million effective registered trademar%s 4y the end of last year, according to *ian#

)nc military moderni:ation onw


+$ina is expanding its military now *arold, 13 -Scott $arold, associate &olitical scientist for the non&rofit, non&artisan )AND Cor&oration, 10'70'1, 2China>s defense s&ending mystery5, htt&600glo4al&u4lics=uare#4logs#cnn#com07D'10D10'70chinas?defense?s&ending? mystery0900EM China has once again announced a maAor e &ansion in its defense s&ending, leaving outside o4servers to again
de4ate "hat this all could mean# Unfortunately, the &lanned 'D#( &ercent increase for 7D'1 &osed more =uestions than it ans"ered6 Is it a sign of a more assertive China that "ants to &ursue regional dominanceU Is it an indication of a country see%ing to redress long?term "ea%nesses in its militaryU <r is it a sign of a domestic leadershi& that can>t say no to the military at a time of &olitical transitionU *he fact is that it>s a 4it of all of these# In a4solute terms, the official Chinese defense 4udget is slated to rise from a&&ro imately V'DR#J 4illion in 7D'7 to V''8 4illion this year# -*he !hite $ouse, mean"hile, &ro&osed a V//1 4illion 4udget for the U#S# Defense de&artment in fiscal 7D'79# *his means that, after su4tracting out e &ected inflationary costs, the Peo&le>s Bi4eration

Army "ill have a&&ro imately V'7 4illion more in 4udget this year than last# Since the late '8th century, Chinese nationalists have dreamt of 4uilding a &o"erful military to restore China to a &osition of &ride in the international system, "ith some ho&ing to go further and achieve a dominant &osition in East Asia# Chinese
analysts can also see that the ca&a4ilities of the U#S# military are in most "ays su&erior to those of China, a situation they &erceive as even more distur4ing in light of the U#S# 2re4alancing5 to the Asia?Pacific# An enhanced commitment to

strengthening its military serves these internal needs "hile at the same sending a message to the "orld that China is &re&ared to meet any challenge that may arise from an increasingly com&licated e ternal environment# *o the east and south lie maritime territories claimed or held 4y other states that China ho&es to

claim for itself# *he tightening of U#S# alliance relations across East Asia &oses ne" challenges for China>s military leaders to &lan against# North Korea>s nuclear &rogram further com&licates matters# More from FPS6 $o" to avoid China?.a&an clash At the same time, China also needs to devote resources to the tas% of transforming a large, outmoded ground?centric force into a more mo4ile and net"or%ed military that is also ca&a4le of o&erating in the naval, air, s&ace, electro?magnetic and cy4er domains as "ell# *he Chinese military is also 4eing called on to &re&are for ne" missions, such as conducting counter?&iracy o&erations off the $orn of Africa or evacuating Chinese nationals "hen emergencies occur overseas, and these re=uire additional ca&a4ilities and resource commitments# *he decision to e &and defense s&ending also carries clues a4out the Party>s need to %ee& the military ha&&y, the ne" leadershi&>s confidence and ne" President Li .in&ing>s a4ility to &ut his o"n stam& on &olicy from the start# Li a&&ears to 4e more in charge than either $u .intao or .iang ^emin "ere at com&ara4ly early stages in their o"n transitions to &o"er# At a minimum, Li and his ne" leadershi& team a&&ear to have felt comforta4le enough in their ne" &osts to slo" the gro"th of defense s&ending, even if they continued to e &and s&ending as a "hole# :et, the Chinese Communist Party>s heavy em&hasis on nationalism as a Austification for its o"n legitimacy has meant the leadershi& must continue to invest in national defense and ensure that the military remains satisfied "ith its 4udgetary su&&ort# *he details of ho" ;eiAing &lans to allocate its 7D'1 defense outlays are un%no"n, 4ut China>s neigh4ors are hungry for ans"ers# If the increased e &enditures are dedicated to ac=uiring &o"er &roAection ca&a4ilities such as research on ne" "ea&ons systems, im&roved cy4er "arfare a4ilities, &rocurement of more land?attac% missiles and anti? satellite "ea&ons, ac=uisition of stealthy armed drones, su4marine?4uilding, or &rocurement of air? and sea?lift ca&a4ilities that could 4e used to invade *ai"an, China>s neigh4ors "ould li%ely 4e an ious# In contrast, if such funds are s&ent &rimarily on ground force moderni@ation and air defenses O systems more defensive in nature O they "ould li%ely 4e less concerned# If such funds go &rimarily to"ards the construction of im&roved 4arrac%s housing, food, clothing, energy costs and salaries for enlisted soldiers, sailors, and aviators, the region "ould 4e less "orried still# ;ut the reality is that foreign o4servers are unli%ely to %no" ho" these funds are s&ent for some time to come, if ever# China>s &olitical system gives little oversight of the military 4udget to legislators, civil society, or the media, leaving it to the to& leadershi& of the Chinese Communist Party and the Peo&le>s Bi4eration Army alone to decide ho" defense funds are s&ent and to release only such information on funding allocation as they see fit# *his lac% of trans&arency and accounta4ility also means some military funds are almost certainly si&honed off in corru&tion# China is

clearly committed to 4uilding a strong and moderni@ed military , es&ecially against a 4ac%dro& of an

increasingly com&le e ternal security situation# At the same time, the 4udget increase serves a &arallel goal O that of cementing the critical 4ond 4et"een the ne" leadershi& and the military#

.efense spending increasing *ille, 13 -Kathrin $ille, 10/0'1, 2China 4oosts defence s&ending 4y 'D#([5, Pro=uest900EM China "ill increase its official defence 4udget 4y 'D#( &er cent this year, continuing a nearly un4ro%en run of dou4le?digit hi%es over the &ast t"o decades# *he government on *uesday said military

s&ending "ould gro" to )m4(7D4n -V''R4n9 in 7D'1# It included the figure in a draft 4udget su4mitted to the National Peo&leIs Congress, the countryIs ru44er stam& &arliament# $o"ever, the latest increase underscores a trend of slo"er gro"th in Chinese

defence s&ending, in line "ith a slo"er rate of economic gro"th# !en .ia4ao, the outgoing &remier, said China "ould aim for (#/ &er cent economic gro"th this year ? unchanged from 7D'7 4ut lo"er than &revious targets# ChinaIs gro"ing military ca&a4ilities

have created unease among its neigh4ours and !ashington# Its increasingly assertive stance in enforcing its vast maritime claims is also alarming countries such as .a&an, the Phili&&ines and Xietnam# Bast "ee%, for e am&le, ChinaIs first aircraft carrier ? "hich is used for training ? sailed south from its home &ort of Dalian for the
first time, and anchored in 3ingdao, amid an escalating ro" "ith .a&an over a grou& of islands in the neigh4ouring East China Sea, "hich are claimed 4y 4oth countries#

ATA Add#ons

)nc atA biofuels add#on


t$anol production decreasing -loomberg, 13 -;loom4erg, '0J0'1, 2Ethanol <ut&ut in U#S# Ca&s Cirst :early Decline Since '88R5, htt&600"""#4loom4erg#com0ne"s07D'1?D'?DJ0ethanol?out&ut?in?u?s?ca&s?first?yearly? decline?since?'88R?'?#html900EM Ethanol &roduction in the U#S# fell 1#7 &ercent to HD(,DDD 4arrels a day last "ee%, ca&&ing the first decline in 'R years as record corn &rices crim&ed &rofits# <ut&ut averaged H/8,DDD 4arrels a day in 7D'7, or '1#7 4illion gallons on an

annuali@ed 4asis, do"n from '1#H 4illion in 7D'', according to ;loom4erg calculations 4ased on an Energy De&artment re&ort today# Stoc%&iles fell to 7D#7 million 4arrels in the seven days ended Dec# 7H from 7D#1 million# Ethanol is made from corn in the U#S# and &rices for the grain are at a record for this time of year after a drought scorched cro&s in the Mid"est, data com&iled 4y ;loom4erg sho"# Im&orts increased to H(,DDD 4arrels a day from 7R,DDD the &revious "ee%, the de&artment said# Ethanol?4lended

gasoline made u& a4out H( &ercent of the total U#S# gasoline &ool, do"n from H8 &ercent in the "ee% ended Dec# 7' and the

lo"est since .an# R, 7D'7# Denatured ethanol for .anuary delivery fell D#' cent to V7#'(H a gallon on the Chicago ;oard of *rade# *he futures have fallen 7#7 &ercent in the &ast year#

-iofuels decreasing 5er"ins, 11 -)o4ert Per%ins, '70'10'', 2Flo4al 4iofuels gro"th set to slo" on "ea% ;ra@il &ros&ects6 IEA5, htt&600"""#&latts#com0latest?ne"s0&etrochemicals0Bondon0Flo4al?4iofuels? gro"th?set?to?slo"?on?"ea%?;ra@il?HR871(H900EM *he &ace of glo4al 4iofuels &roduction gro"th "ill 4e slo"er than &reviously forecast over the ne t five years due to "ea%er &ros&ects for ;ra@ilian ethanol and as the US mar%et 4ecomes saturated, the
International Energy Agency said *uesday# U&dating medium?term forecasts made in .une, the IEA said it sees glo4al 4iofuels gro"th from 7D'D to 7D'R at Aust JDD,DDD 40d, versus /DD,DDD 40d &reviously# It no" e &ects 4iofuels su&&ly to reach 7#77 million 40d in 7D'R, u& from '#H77 million 40d in 7D'D# ;ra@ilian ethanol &roduction in 7D'' is no" e &ected to decline 4y (/,DDD 40d to 1(/,DDD 40d due to a &oor sugar cane harvest and high sugar &rices, the IEA said# <ver the ne t five years, the IEA has reduced its outloo% on average for ;ra@ilian ethanol out&ut 4y an average 'DD,DDD 40d, reaching /1D,DDD 40d in 7D'R# WChallenging &roduction economics and underinvestment in cane &roduction and ethanol distillery ca&acity

loo%s li%ely to &ersist over the medium term,W the IEA said in its latest monthly re&ort# In the US, ethanol &roduction gro"th is li%ely to slo" over the medium?term, the IEA said, "ith the year?end e &iry of a J/ cent0gallon 4lenders ta credit set to slo" distillery investment amid increasing saturation in the US mar%et# *he IEA said
US ethanol out&ut is still li%ely to reach 8HD,DDD 40d in 7D'R, in line "ith the )ene"a4le Cuels Standard, 4ut revised do"n its outloo% 4y an average 7D,DDD 40d over the 7D'7?7D'J &eriod# US 4iodiesel &roduction "as also revised do"n , 4y 'D,DDD 40d on average from 7D'7?7D'R, the IEA said# In Euro&e, *he IEA revised do"n its 4iofuels &roduction estimate 4y 'D,DDD 40d for 7D'D?7D'R, largely due to lo"er 4iodiesel out&ut#

-iofuels decreasing now 0rwel, 1) -Feorge <r"el, J0710'7, 2!ea% Margins Drive Im&erial>s e?;iofuels into ;an%ru&tcy5, htt&600oils&ot7#dtnenergy#com0eTarticleDD7J'1DJD#cfmU Z4'',D,"900EM e?;iofuels BBC, an Indiana?4ased rene"a4le fuel com&any that>s a su4sidiary of Im&erial Petroleum Inc#, recently filed for Cha&ter ( 4an%ru&tcy "ith the U#S# ;an%ru&tcy Court for the Southern District of Indiana, and is in the &rocess of "inding do"n
the 4usiness, the com&any>s chief e ecutive told *elvent D*N during an intervie" on A&ril 'H# .effrey *# !ilson said e?;iofuels filed 4an%ru&tcy &a&ers on A&ril J, a day 4efore he "as 4rought on 4oard as ne" CE< of the rene"a4le fuels com&any# $e is also &resident and CE< of the &arent com&any, Im&erial Petroleum# $e said e?;iofuels, "hich &roduced 1D million gallons a year of ethanol from 7DD( until Aust 4efore the 4an%ru&tcy filing, "as una4le to survive the current economic environment "here4y high

corn &rices and limited demand for fuel ethanol have com4ined to s=uee@e margins for ethanol &roducers#

%ncreased government investment in biofuels is "ey Trinder, 11 -Sarah *rinder, ''0'D0'', 2US ethanol needs investment, innovation to overcome future hurdles5, htt&600"""#icis#com0Articles07D''0''0'D08/D(DD10us?ethanol?needs? investment?innovation?to?overcome?future?hurdles#html900EM ;A)CEB<NA -ICIS9??*he US ethanol industry needs investment, innovation and commitment from the government as "ell as regulatory 4odies in order to overcome a num4er of future challenges, a rene"a4le fuels e ecutive said on *hursday# Although US e &orts of ethanol have more than dou4led to an estimated HR/m gallons0year in 7D'' from JDDm gallons0year in 7D'D, regulations such as the Euro&ean rene"a4le energy directive -)ED9 and fuel =uality directive -C3D9 could dam&en e &orts, said Ma *homasson, glo4al manager of C$S
)ene"a4le Cuels# $o"ever, it is evident that the num4er of US ethanol &lants certified 4y the International Sustaina4ility and Car4on Certification -ISCC9 ? a Euro&ean?4ased voluntary scheme "hich certifies 4iomass and 4ioenergy as sustaina4le in accordance "ith the )ED ? is gro"ing, "ith around '7 &lants a&&roved# *his means around '#'84n gallons of sustaina4le material are availa4le for e &ort, *homasson said at the C< Bicht !orld Ethanol and ;iofuels conference# Another hurdle the industry faces in the US is achieving greenhouse gas savings of /D[ 4y 7D'(# *homasson said US ethanol "ill 4e una4le to achieve these targets unless it changes from corn to a cleaner feedstoc%, such as sugarcane, or &roduces cellulosic ethanol# Increasing cellulosic &roduction of ethanol, ho"ever, "ould demand a significant investment and e &ansion of cellulosic ethanol ca&acities# $o"ever,

the investment community remains "ary of ethanol due to its volatile margins and feedstoc% &rices# More fluid mar%et conditions could attract investors 4ut the removal of the US Xolumetric Ethanol and E cise *a Credit

-XEE*C9 ? a &olicy "hich su4sidises ethanol &roduction in the US ? and the amendment to im&ort tariffs on US ethanol in Euro&e could lead to mar%et illi=uidity# *his is due to the &ossi4ility that fe"er US im&orts, s&ecifically E8D -8D[ ethanol 4lended gasoline9, "ill arrive in Euro&e as their &rices "ill no longer 4e as com&etitive "hen com&ared to domestic Euro&ean &roduct# *homasson 4elieves that this "ill result in the need for Euro&ean and ;ra@ilian ethanol &rices to increase in order to attract im&orts from the US if the movement of &roduct 4et"een countries is to remain fluid# If the US is to overcome these challenges,

*homasson 4elieves that investment, innovation and commitment from the government and regulatory 4odies "ill 4e %ey#

)nc atA gas $ydrates add#on


(tatus !uo solves researc$, but actual usage is impossible Ruppel, 11 PhD c MI* in Solid Earth geo&hysics, Fas $ydrates ProAect U#S# Feological Survey -Carolyn )u&&el, 2Methane $ydrates and the Cuture of Natural Fas5, htt&600mitei#mit#edu0system0files0Su&&lementaryTPa&erTSPT7TJT$ydrates#&df900EM Introduction Cor decades, gas hydrates have 4een discussed as a &otential resource , &articularly for countries
"ith limited access to conventional hydrocar4ons or a strategic interest in esta4lishing alternative, unconventional gas reserves#

Methane has never 4een &roduced from gas hydrates at a commercial scale and, 4arring maAor changes in the economics of natural gas su&&ly and demand, commercial &roduction at a large scale is considered unli%ely to commence "ithin the ne t '/ years# Fiven the overall uncertainty still associated "ith gas hydrates as a &otential

resource, they have not 4een included in the EPPA model in MI*EI>s Cuture of Natural Fas re&ort# Still, gas hydrates remain a &otentially large methane resource and must necessarily 4e included in any consideration of the natural gas su&&ly 4eyond t"o decades from no"# Des&ite the relative immaturity of gas hydrates )_D com&ared to that for other unconventional gas resources, the accom&lishments of the &ast decade, summari@ed in detail 4y Collett et al# -7DD89, have advanced gas hydrates along the &ath to"ards eventual commercial &roduction# *he U#S# De&artment of Energy -D<E9, as directed 4y the Methane $ydrates )_D Act of 7DDD and the su4se=uent Energy Act of 7DD/, has &artnered "ith other government agencies, academe, and industry in field, modeling, and la4oratory &rograms that have &roduced numerous successes -Doyle et al#, 7DDJG Paull et al#, 7D'D9# *hese accom&lishments have included the refinement of methods for &re?drill estimation of hydrate saturations and safe com&letion of logging and coring &rograms in gas hydrate?4earing sediments in 4oth dee&"ater marine and &ermafrost environments# !ithin the ne t J years, US federal?industry &artnershi&s are scheduled to oversee advanced logging and direct

sam&ling of resource?grade -high saturation9 gas hydrates in sand de&osits in the dee&"ater Fulf of Me ico and com&letion of a long?term test of &roduction methods on the Alas%an North Slo&e# In .a&an, the government?su&&orted methane hydrates &rogram -no" called M$7'G *suAi et al#, 7DD89 has also relied on

coo&eration among the &rivate, &u4lic, and academic sectors over &ast decade and &lans to conduct an initial &roduction testing of resource?grade gas hydrates in the dee&"ater Nan%ai *rough in 7D'7# *he current M$7' effort has gro"n out of earlier advanced 4orehole logging and dee& coring in '888?7DDD -MI*I9 and in 7DDJ -ME*I9, as descri4ed 4y *suAi et al# -7DDJ, 7DD89 and CuAii et al# -7DD89# Canada has also "or%ed "ith a consortium of &artners to com&lete three maAor drilling &rograms in the &ermafrost of the Mac%en@ie Delta -e#g#, Dallimore et al#, '888G Dallimore and Collett, 7DD/G Dallimore et al#, 7DDH9# Canada "as the first country to ever &roduce small volumes of gas from hydrates during short duration -u& to a fe" days9 &roduction tests at these "ells# Since 7DD/, India -e#g#, Collett et al#, 7DDHG M# Bee and Collett, 7DD8G :un et al#, 7D'D9, Korea -Par% et al#, 7DDHG )yu et al#, 7DD89, China -^hang et al#, 7DD(G !u et al#, 7DDH9, and &rivate sector interests o&erating offshore Malaysia -$adley et al#, 7DDH9 have also launched maAor, successful dee&"ater hydrate drilling e &editions, and Korea drilled the Ulleung ;asin again in the second half of 7D'D -S#)# Bee et al#, 7D''9# As 4efits costly e &loration &roAects "ith uncertain short?term &ayoffs, the glo4al effort to investigate the &otential of gas hydrates as a resource has often 4een carried out "ith significant coo&eration among countries, su4stantial su&&ort from governments, and maAor leadershi& from 4oth the government and academic research sectors# Even

after more research, %ey challenges are li%ely to remain in locating gas hydrates, assessing the si@e of the resource, develo&ing via4le &roduction strategies, and understanding the economics of eventual gas &roduction from gas hydrates "ithin the conte t of natural gas su&&ly as a "hole# ;ac%ground

Sometimes du44ed 2methane ice5, methane hydrate is a naturally?occurring fro@en com&ound formed "hen "ater and methane com4ine at moderate &ressure and relatively lo" tem&erature conditions# Methane hydrates re&resent a highly concentrated form of methane, "ith a cu4ic meter of ideali@ed methane hydrate containing D#H m1 of "ater and more than 'RD m1 of methane at standard tem&erature?&ressure conditions# Ethane, &ro&ane, and car4on dio ide, and similar gases can also form gas hydrates, and individual molecules of these gases are often incor&orated into gas hydrates that contain &redominantly methane# ;oth on a glo4al volumetric 4asis and in terms of areal distri4ution, methane hydrates are the most im&ortant ty&e of natural gas hydrate# In contrast to conventional natural gas, methane hydrates occur only in sediments characteri@ed 4y "ell?%no"n &ressure and tem&erature conditions, meaning that e &loration activities can 4e strictly limited to s&ecific @ones# *he &ressure?tem&erature conditions consistent "ith methane hydrate sta4ility are "ides&read on Earth# At &ressure?tem&erature conditions outside the sta4ility @one, methane is no longer 4ound in 2methane ice5 and e ists only as free gas or gas dissolved in &ore "aters# An estimated 88[ of "orld"ide gas hydrate occurs in ocean sediments, and the a&&ro&riate tem&erature and &ressure conditions &redominate "ithin the u&&er tens to hundreds of meters of seafloor sediments at "ater de&ths ranging from 1DD to /DD m on the shallo" end to greater than JDDD m# In theory, methane hydrates are also sta4le on the seafloor and in the "ater column in large s"aths of the "orld>s oceans# Fas hydrates do not &ersist long in the "ater column, and seafloor gas hydrates are not

significant as a resource# Neither ty&e of gas hydrate "ill 4e discussed in detail here# <nshore, methane hydrates occur

almost e clusively in areas "ith thic% &ermafrost# *he a&&ro&riate tem&erature and &ressure conditions can occur over a @one that is ty&ically several hundreds of meters thic% and that encom&asses the 4ottom &art of the &ermafrost?4earing section and the to& of the su4&ermafrost sedimentary section# Des&ite the "ides&read occurrence of gas hydrate, the de&osits are

not u4i=uitous "ithin the gas hydrate sta4ility @one# *he %ey factor limiting gas hydrate formation in most
locations is the lac% of sufficient gas# A lac% of free "ater in sediments can also limit gas hydrate formation, 4ut this situation occurs almost e clusively in s&ecific geologic settings -very lo" &ermea4ility formations9 or &ossi4ly near the 4ase of the sta4ility @one# *he amount of methane tra&&ed in gas hydrates remains uncertain# In &re?'88D studies, estimates of the amount of methane tra&&ed in glo4al gas hydrate de&osits varied 4y many orders of magnitude from e'D'( ft1 or 'D/ trillion cu4ic feet -*CCG McIver, '8H'9 to 'DH *CC -*rofimu%, '8(19# During the same &eriod, Kvenvolden -'8HH9, Fornit@ and Cung -'88J9, and $arvey and $uang -'88/9 &roduced oft?cited and inde&endently?determined intermediate values# Even "ith the su4stantial increase in data a4out gas hydrate occurrences since the mid?'88Ds and more so&histicated numerical modeling, estimates of the total volume of gas se=uestered in gas hydrates have continued to vary, ranging from '#J to '#( 'D/ *CC -Mil%ov, 7DDJG ;uffett and Archer, 7DDJ9 to J#7 'DR *CC -Klauda and Sandler, 7DD19 "ith some intermediate estimates -'#J 'DR *CCG !ood and .ung, 7DDH9 over the &ast decade# In the most recent revie" of this su4Aect, ;os"ell and Collett -7D''9 concluded that an estimate of 'D/ *CC of methane tra&&ed in gas hydrates -gas?in? &lace or FIP9 is a reasona4le figure, 4ut they strongly em&hasi@e that the FIP num4er is not meaningful for resource?4ased studies# Most of the methane included in the FIP estimate is &ro4a4ly tra&&ed in gas hydrates that are &resent in lo" saturations -s'D[ of &ore s&ace9 in fine?grained, lo" &ermea4ility marine sediments# Such disseminated, lo"?saturation gas hydrate is nearly

im&ossi4le to detect "ithout drilling and is unli%ely to ever &roduce commercial =uantities of gas# Crom an energy &ers&ective, a more im&ortant figure is the amount of methane tra&&ed in resource?grade de&osits, estimated
at 'DJ *CC in marine settings and several hundred *CC in &ermafrost?associated de&osits -;os"ell and Collett, 7D''9# *his estimate of FIP in resource?grade methane hydrates is e1/[ more than the 7D'D estimate for glo4al natural gas reserves -eRRDD *CCG EIA, 7D'D9 and nearly 'DD times greater than the annual glo4al consum&tion of gas# It is im&ortant to note that there are as yet no

&roved reserves of gas hydrate since gas has never 4een &roduced from gas hydrate for more than a fe" days in research tests#

)nc atA oil spills add#on


/o impact to oil spills +roc"er, 11 -David Croc%er, J01D0'', 2<il S&ills Are Not 2Environmental Catastro&hes55 htt&600"""#4ehind4luelines#com07D''0DJ01D0oil?s&ills?are?not?enviromental? catastro&hes0900EM <4viously, oil s&ills are messy and un&leasant O and to 4e avoided# ;ut are they 2catastro&hes5 in the &erfervid language of contem&orary environmentalism O events causing irre&ara4le or even &ersistent damageU Clearly not# Cirst, consider some facts# During !orld !ar II, thousands of shi&s "ere sun% and millions of gallons of oil s&illed# In merchant tonnage alone, the US lost over ',/DD shi&s "ith hundreds more damaged# *he Fermans san% J7 oil tan%ers off the US east coast and oil fouling the seasca&e "as a fact of life during the "ar years# Since the "ar, "e>ve seen numerous oil s&ills large and small O "ith "hat resultU In fact, the oceans see& oil# Peo&le gro"ing u& on the US Fulf coast live "ith tar 4alls "ashing u& on the 4each# Each year, the e=uivalent of t"o E on Xalde@es see& into the Fulf O to no effect other than feeding ada&ted 4acteria# So, "hat>s the 4ig deal "ith the ;P s&ill last yearU A&&arently, not much# Crom the Flo4e and Mail6 $ere>s some ne"s you may not have heard6 <ne year after the "orst oil s&ill in history, the Fulf of Me ico is nearly 4ac% to normal# *hat>s right6 Armageddon didn>t ha&&en# Instead of terri4le harm to the 4ios&here, the Dee&"ater $ori@on s&ill has caused only mild &ro4lems# In fact, 4ecause of the fishing 4ans im&osed after the s&ill, there are more fish than ever# Shar% and mac%erel &o&ulations have e &loded# 2)ed sna&&er are
un4elieva4le right no",5 one fisherman said# 2:ou could &ut a roc% on the end a string and they>d 4ite it#5