Tag Archives: Energy

Multinational Corporations in the Oil Industry

NAFAC Week

By Monica Sullivan 

Diplomacy is not only a function of the military and the federal government, but it is very much an integral facet of multinational corporations. The diplomatic agenda pushed by American multinational organizations is one focused on building trust between nations as a way by which to further national security aims. Additionally, the spread of American businesses overseas allows for the introduction of business ventures into areas otherwise untouched by basic capitalist ideas. Since American multinational corporations are predominantly apolitical forces, their primary purpose is not to force a political agenda, as seen in other diplomatic outlets. However, multinational corporations still have the abilities to introduce other countries to the basic tenets of American democracy through the business interactions that take place. Due to the extent of interactions between American multinational business and other countries, these businesses are one of the most important outlets when it comes to shaping the perception of America abroad. For the scope of this paper, the interactions of American multinational oil companies will be examined. As multinational corporations are involved in the development of foreign infrastructure, their relationships abroad should be considered as a viable alternative for diplomatic action when military and state actors fail.

Within the oil industry, the presence of American multinational corporations have allowed the growth of otherwise improbable relationships and the promotion of U.S. values abroad. The presence of U.S. oil companies in the Middle East have allowed a line of communication to bridge the gap between the starkly different Western and Islamic worlds. American involvement in the Middle Eastern oil prospects began in post-World War I period as American business was eventually permitted under the British mandate. It was evident that U.S. military and economic power would be beneficial as the Middle East was unstable and its future looked to be volatile.Since the U.S. became involved in the oil scene in the 1920s, it has only used this connection to strengthen bonds between itself and Saudi Arabia. Despite the inherent benefits attributed to the multinational nature of oil companies, there are some considerable downfalls that must be taken into account.

With the power of oil companies as influential multinational corporation comes the risk associated with such a unique diplomatic tool. Foremost, oil is a constantly dwindling natural resource that doubles as a crucial economic commodity. Since the United States is not a primary source of oil production, it must rely on other foreign oil producers. Any fluctuation in foreign industry can plunge the world into recession. The delicacy of oil dependence in the world is not as apparent as it was during the Arab Oil Embargo of 1973. The sanctions forced upon the U.S. by OPEC as retribution for allying with Israel crippled America’s supply of oil. In turn, this also drove up the price of oil and gasoline to quadruple the price prior to the sanction.2 This crisis demonstrated the power Saudi Arabia derived from its oil production and the United States’ lack of oil control. Although the United States reduced its dependency on Arab oil after this incident, it became apparent the importance of American corporations maintaining viable and open relationships with foreign countries. The economic and military relevance of oil was underscored once more in 2002, as Saddam Hussein used his control of oil processing as leverage during military campaigns. His threats to destroy oil platforms were met with the response of special warfare to ensure that his rogue actions would not cause an economic recession in the midst of the Iraqi conflict.3

Prior to the U.S. invasion of Iraq, American multinational oil corporations were involved in humanitarian aid efforts to try to quell the mistreatment of the civilian population. However, this initiative, known as the Oil for Food program, devolved into an international scandal in which American corporations like Chevron received illegal kickbacks which undermined the goal of transmitting food to a population crippled by United Nations’ sanctions.4 The fact that Chevron was manipulating this program to its benefit demonstrates the possible risks associated with using multinational corporations as means for diplomacy.5 Multinational corporations are subject to the whims of their executives, thereby allowing for their private ethical perspectives to drive the corporation’s representation of American ideals in foreign states. Despite the bad reputations evoked by some multinational corporations, the overall purpose of these businesses is grounded in their desire to spread American interests abroad.

One of the most influential examples of the positive power of multinational corporations is direct advancement of African civilizations in Chad by ExxonMobil. American interests in Africa peaked following World War I, but were overshadowed in the years since, until 9/11. Africa was not of strategic interest to the U.S. until it was determined that it was a breeding ground for radicalized terrorists. Prior to the unfolding of 9/11, ExxonMobil explored Chad as an option for oil extraction. These plans for extraction detailed that how the country was to develop its infrastructure, education, and healthcare through the use of the money received from taxes and royalties from the oil produced.6 By investing in Chad, Exxon-Mobil was able to provide about $4.2 billion dollars of aid, whereas the United States was only providing about $3 million dollars of aid to the area.7 The United States’ positive presence in the area allowed for a smooth transition of American military and state presence in the years following 9/11, as the CIA established stations in the area to monitor and track terrorist cells thought to have been left over from Bin Laden’s time in Sudan during the 1990s. Whereas the military and state was primarily focused on missions regarding terrorist activity, Exxon was involved in turning their business aims into an opportunity for eliminating poverty in the region. The bonds forged between Exxon and the local population prior to the introduction of American operatives in the region made this transition much easier than if Chadians had no prior interactions with American people. This may be just one case study of the impact of the diplomatic power of an American multinational corporation, but it exhibits the mindset of the American business owners to further American ideals abroad. 

Multinational oil corporations do not only have to form relationships with other states, but they have to coordinate with each other. Looking to the future, American oil corporations will be faced with the challenge of competing with Saudi Aramco, the largest multinational corporation in the world. As this one entity has more power than any other American based company, it has the power to bend the U.S. to their will. The question that remains is: How will the American values modeled by multinational corporations abroad continue future diplomatic relations?

Monica Sullivan is a 3/C Midshipman at the United States Naval Academy. She majors in Political Science with a minor in Spanish language. In her free time, Monica enoys singing with the Protestant Chapel Choir.

Works Cited

Coll, Steve. Private empire: ExxonMobil and american power. London: Penguin, 2013.

“Q&A: Oil-for-food scandal.” BBC News. September 7, 2005. Accessed March 31, 2017. http://news.bbc.co.uk/2/hi/middle_east/4232629.stm.

“Chevron to Pay $30 Million to Settle Charges For Improper Payments to Iraq Under U.N. Oil For Food Program.” U.S. Securities and Exchange Commission. November 14, 2007. Accessed March 30, 2017. https://www.sec.gov/news/press/2007/2007-230.htm.

Myre, Greg. “The 1973 Arab Oil Embargo: The Old Rules No Longer Apply.” NPR. October 16, Accessed March 30, 2017http://www.npr.org/sections/parallels/2013/10/15/234771573/the-1973-arab-oil-embargo-thE-old-rules-no-longer-apply.

Yergin, Daniel. The Prize: The Epic Quest for Oil, Money & Power. London: Simon & Schuster, 2012.

References

1. Daniel Yergin. The Prize: The Epic Quest for Oil, Money & Power. 196

2. “The 1973 Arab Oil Embargo: The Old Rules No Longer Apply.”

3. Steve Coll. Private Empire, 154-176.

4. “Chevron to Pay $30 Million to Settle Charges For Improper Payments to Iraq Under U.N. Oil For Food Program.”

5. “Q&A: Oil-for-food scandal.”

6. Steve Coll. Private Empire, 154-176.

7. Steve Coll. Private Empire, 154-176.

Featured Image: Ed Kashi/Corbis

Australia World’s Largest LNG exporter by 2018: Understanding Maritime Security Challenges

By Mohid Iftikhar

 According to the Oxford Institute for Energy studies by 2018; Australia would become world’s largest liquefied natural gas exporter (LNG). It is of cardinal importance to understand Australia’s global significance both towards strategic direction and growth through its LNG exports. In an article by the Submarine Institute of Australia; “Future Long Range Submarine Force Vital…” Australian LNG trade will climb more than $60 billion by 2020. Hence, in connection it is essential to analyze maritime security dimensions for Australia’s LNG exports. According to Australia’s Department of Foreign Affairs and Trade;  Japan has been the largest export destination for Australia’s LNG over the last decade. In 2013, Japan was the destination for 92.4 per cent of Australia’s LNG exports by value, and 80.7 per cent by volume. Other major markets include China (4.2 per cent by value), the Republic of Korea (3.0 per cent) and Taiwan (0.4 per cent).”

The Asia-Pacific region holds great value to the Australian LNG, as it is a market with long term demands. In context of trade, global LNG industry faces competition with Qatar, Malaysia, Indonesia, and the U.S, but Australia has marked its position. Examined by Oxford Institute for Energy studies in their paper “The Future of Australian LNG Exports….” Australia aims at establishing its international position in the energy market and particularly towards the Asia-Pacific. Geopolitics of the Asia-Pacific has progressed, multidimensional forces promoting global and regional development including security ambitions. In relation, the Chinese initiative of the Silk Road and the 21st Century Maritime Silk Route aim to connect Africa, Europe and Asia, and poses numerous questions in the field international relations and development. Chinese enterprise predicts greater demand of LNG in the region, according to the Asia Times there will be over 900 projects involving 60 countries in the New Silk Road Economic Corridor. Simultaneously, the existing conflicts in the South China and East China Seas are a potential source of maritime security predicament; asking if conflict is evitable amongst states?

Internationally, LNG will also help Australia’s goal to establish itself as a more active participant in the Asia-Pacific region, as outlined in the government’s 2012 white paper “Australia in the Asian Century.” Perhaps, Australia does have a concrete direction of international growth through LNG exports, at the same time maritime security remains equally essential. On the same course, the Australian Defense white paper from May 2009, “Defending Australia in the Asia-Pacific century: Force 2030”, does signify importance of maritime security and a self-dependent defense strategy in the oceans.

A liquefied natural gas (LNG) tanker operated by Energy Advance Co., a unit of Tokyo Gas Co., is moored at the company's Sodegaura plant in Sodegaura City, Chiba Prefecture, Japan, on Thursday, March 22, 2012. Japan's imports of LNG rose to a record last fiscal year as utilities turned to fossil fuels after the Fukushima nuclear disaster led to the shutdown of almost all the nation's atomic reactors. Photographer: Tomohiro Ohsumi/Bloomberg
A liquefied natural gas (LNG) tanker operated by Energy Advance Co., a unit of Tokyo Gas Co., is moored at the company’s Sodegaura plant in Sodegaura City, Chiba Prefecture, Japan, on Thursday, March 22, 2012.

Maritime security challenges are interlinked through adverse economic breakdown for LNG exports that fall under threats of terrorism and piracy. Possibly, terrorism remains a vital concern as LNG cargo can be targeted as floating bombs,  the statement is supported as quoted in the book “Organizational and psychological aspects of terrorism”  by the Centre of Excellence Defence Against Terrorism, “There is a concern amongst many maritime terrorist experts that a terrorist group could use a hijacked LNG tanker as a floating bomb. The amount of LNG held in a large tanker could generate an explosion of a similar size to a small nuclear bomb.” . Religious radicalization in the Middle East and terrorism in South Asia and Southeast Asia are both critical towards safety of Australian LNG shipments to their destinations. While transnational concerns have a firm relationship between maritime commerce and security, concurrently the 21st century has evolved geo-political concerns. The increasing power projections and geo-strategic goals in the Asia-Pacific are strongly connected to international maritime security. The wider hypothesis can be “Effect of Geopolitics in the Asia-Pacific towards Maritime Security.” The relationship between geopolitical dynamics and transnational crimes in the seas has shaped a new picture; while an important question is; would the latter capitalize on the stance? 

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U.S ambitions in the Indian and Pacific Ocean are towards deploying 60% of its naval fleet by 2020. Perhaps, sea lines of communication for Australian exports are not only critical towards intra and interregional trade, but geopolitics post 2020 will evolve the architecture of maritime security.  It is equally important to sustain international harmony in the maritime sphere of Asia-Pacific, but are China, USA and other rising powers willing to extend collaboration and coalitions for maritime security? Many experts and scholars from war studies and international relations agree towards the minimum possibility towards a military conflict in the Asia-Pacific, but they don’t completely rule out the fact. Power projections in the seas of Asia-Pacific remain a source of anxiety, and the deployment of submarines and destroyers in strategic positions produces a negative image.

Transnational criminals today have accelerated in their modus operandi by advancing in strategic intelligence through contemporary technologies. The cyber domain remains sophisticated, but has its cons that can be favorable to criminals for locating LNG shipments through GPS tracking and etc. On the same note, the Straits of Malacca remain the central route for Australian LNG shipments to pass towards East Asia; the year 2014 had accounted for 75% of the world’s piracy attacks in the area. Further, in an article from BloombergView “Islamic State Is Rapidly Expanding in Southeast Asia” quoted as Southeast Asia is a key recruitment center for ISIS, the nexus between terrorism in Southeast Asia and Jihadi extremism from the Middle East evolves a broader challenge in the maritime route for Australian LNG shipments.

It is a question of international economic security towards safety of Australian LNG shipments, in two parts. First preventing an economic breakdown for Australia and second the dependence of importer states for their national operations and productivity. International development requires a sustainable mechanism of integration between states, and the Asia-Pacific region is evolving complex dynamics that inculcate development, geopolitical, race, and transnational challenges. Demand of LNG in the Asia-Pacific will extensively grow in forthcoming years; Australia will be a significant contributor towards the same. But geopolitics in the Asia-Pacific is defining competition in facets of arms race, strength and modern imperialism. Transnational crimes such as terrorism, radicalization and piracy are a threat to Australian LNG shipments capitalizing on geopolitical objectives in a camouflaged manner. Simply, while there is a debate going on amongst great and rising powers of who is right in the Asia-Pacific, transnational criminals are emerging through the sideways planning catastrophic events. 

The Asia-Pacific region in the maritime domain requires consensus building from global and rising powers. A direction towards international development, ownership of vital ocean resources and disputes on maritime boundaries are aspects that ignite geopolitical race. First the international framework under the United Nations convention on the Law of Seas (UNCLOS) must be followed by all states, which allows interpretation of rules and laws, simplifying dimensions of the international maritime mechanism. The International Ship and Port Facility Security (ISPS) Code by the International Maritime Organization (IMO) chalks out a coherent framework for safety of sea ports and vessels, uniformity applying the same particularly from maritime nations will allow combating transnational threats.  Second, to maintain international harmony in the oceans and minimizing threats from transnational challenges; stakeholders of the Asia-Pacific must devise a collective and collaborative strategy based on joint intelligence sharing. Safety and security of LNG shipments are not only important for Australia, but global operations  depend on it. Though Australia has collaborated with various states in Asia-Pacific towards maritime security, it is equally essential to initiate a productive platform towards dialogue that will allow the Asia-Pacific century to become a reality. Maritime security for Australia and other states can be strengthened by adapting the existing international framework towards laws and regulations of the seas; perhaps, this could initiate discussion and consenting on alliance and cooperation in the oceans.

Mohid Iftikhar has Masters of Philosophy in Peace & Conflict Studies from National Defence University, Pakistan and Bachelor in Business Administration from University of Southern Queensland, Australia. He has completed a short course on Defence & Security Management in collaboration with Defence Academy, UK, Cranfield University and NDU, PK.  He is a member of Center for International Maritime Security and Associate member, the Corbett Centre for Maritime Policy Studies, King’s College London. At present, he is working for the Federal Ministry of Planning Development & Reform in Pakistan.This article was prepared  by Mohid Iftikhar in his personal capacity. The opinions expressed in this article are the author’s own and do not reflect of any Organization or Institute. 

Innovation at the Naval Postgraduate School: JIFX 15-2

 

The U.S. Navy looks set to lead a bit of joint maritime innovation experimentation in February. According to the U.S. Naval Postgraduate School (NPS)’s Joint Interagency Field Experimentation (JIFX) Program website, the latest interagency field experimentation , set to run 9-13 February, will have a maritime setting and focus.  NPS will host  “JIFX 15-2” at the Department of Transportation’s Maritime Administration Facility in Alameda, CA, in a port facility and aboard a military cargo ship.  Per the primary request for information from NPS, people wanting to conduct experiments on “any and all technologies relevant to the maritime domain” were encouraged to apply. While the initial deadline for such applicants has past, those looking to attend as an observant can still do so here until 04 February.

One of the many specific areas of interest for this JIFX includes (e) Deployable Infrastructure, Power & Water:

  1. Deployed Infrastructure Building and Maintenance. Support building partnerships and stability operations through building infrastructure capabilities. Ability to reduce time and money spent increasing safety and operational capacity. Areas of interest include solutions that can assist in dust abatement, forward operating base maintenance with roads, runways, tarmacs construction & repair, expeditionary shelter support and efforts addressing fortification and ballistics. Using non-specialized equipment needed for most applications, rapidly deployable and customizable to the region of operations as needed.
  1. Deployable Lighting Technologies. Light Emitting Diodes (LEDs) are preferred. Potential solutions would be blackout capable and would be easily camouflaged for stealth day/night operations and would need to be ruggedized for all weather use and minimize energy requirements.
  1. Energy efficiencies. Solutions sought will explore renewable energy sources for mobile and austere environments; reductions in fossil fuel consumption; fused sources including diesel, wind, solar, etc.; energy saving technologies for shelter, transportation, and portable IT systems (to include DC systems, chill water cooling, ambient cooling, cloud computing); alternative shelters and HVAC (heating, ventilation & air conditioning) systems that address a reduction in energy needs, deployable field feeding systems that take into account weight, size, and avoid fuel-fired cooking appliances; deployable self-sustaining waste-to-energy  systems capable of handling approximately 1 ton per day, fit into a 1/3 of a 20ft ISO container, and with no hazardous emissions.
  1. Water Generation and Purification Systems. Solutions other than commercially procured bottled water and current Reverse Osmosis Water Purification Units (ROWPUs) are sought. Potential solutions might include atmospheric water solutions, black & gray water re-use systems, and new reverse osmosis technologies that incorporate reductions in energy demand.
  1. Safe (non-propagation/non-flammable) Lithium batteries or any related technologies (underwater submersible or like-type platforms).

This post was originally published on the Blue Value Facilities Engineering Blog and was re-published by permission. 

Cyprus: The Mediterranean Pivot

CyprusBy Chiara Proietti Silvestri

In recent years the Eastern Mediterranean has increased its international strategic importance following significant discoveries of hydrocarbons. In this region the recent offshore findings of natural gas are radically changing its geostrategic and economic status. But before achieving the ambitious objective of becoming a net exporter of energy, the countries of the Eastern Mediterranean, and Cyprus in particular, must confront regional challenges and interests of the major powers in the area – be they economic, politico-strategic, or due to the required energy infrastructure.

Two years after the great discoveries of the Leviathan and Tamar fields off the Israeli coast in 2009, it was, in December 2011, Cyprus’ turn. The U.S. company Noble Energy reported an initial discovery of offshore gas in block 12 of Aphrodite, with an energy potential estimated at between 5-8 trillion cubic feet (140-230 billion cubic meters). Evidence suggests that this area is an extension of the Levant basin: it is still the subject of an initial exploratory phase, and these initial estimates are considered conservative, with the prospect of rising in the coming years. There is therefore a potential wealth for the island of enormous proportions. According to some experts, Cyprus could potentially be sitting on a goldmine of at least 60 trillion cubic feet (1.7 trillion cubic meters) of gas. Not considering the possibility of petroleum it could generate revenues of up to $400 billion once commercially exploited.

The declared objective of the government of Nicosia is to use the geo-strategic position of Cyprus, between Europe and the Middle East, to make the country a true energy hub, with a central role in commercial transit and in the provision of European energy. This is a perspective, however, that does not consider the tensions and several unresolved questions that could hinder the energy development of the island, essential in reviving an economy itself in deep crisis.

Cyprus oil concessionsFirst, the strong political destabilization resulting from the 1974 Turkish military invasion, which produced a de facto division of the island between the Turkish-Cypriot north and the Greek-Cypriot south. The discovery of energy resources in the southern part of Cyprus, as well as an absence of results from research conducted thus far into the offshore areas of the north, have added a new and relevant source of friction in relations between Nicosia and Ankara. The island’s peculiar political situation could therefore constitute a brake on the development of the country’s economy, capable of affecting decisions regarding investment by foreign companies, especially those who have strong interests in Turkey. The latter, in fact, threatened repercussions for those companies that intend to enter into agreements to exploit resources with the Cypriot government. Such is the case for Eni S.p.A. which has seen the suspension of all projects undertaken with Turkey, due to its exploration agreement signed with Nicosia in January. Ankara, in fact, maintains that such energy resources are located in international waters and that they should benefit all of the island’s inhabitants, and not only Greek-Cypriots. Turkish interests, profoundly connected to energy, therefore emerge. Furthermore, relations between Cyprus and Israel, in particular those relating to a possible project for the liquefaction of gas for export, feed the prospect of an energy partnership. This could provide an alternate route for transporting gas to Europe and Asia, obstructing the great Turkish mission to become a regional energy hub. According to several analysts, this prospect was one of the reasons behind the rapprochement between Turkey and Israel, which enabled the former to maintain its centrality as the country of transit, and the latter to optimize conditions for its gas exports. While in the long-term the economic advantages of cooperation between Nicosia, Tel Aviv, Athens, and Ankara might be more convincing, in the short-term, energy pressures feed tensions in an already established hot spot.

It is probable that Turkey’s firm stance on the Cyprus question is one of the reasons behind the Russian decision not to accept the bailout plan hastily proposed by Nicosia in exchange for licenses for the exploitation of gas fields. To this must be added, among others, the European position and the special relationship between Berlin and Moscow, sealed by the agreement on the Nord Stream gas line, which might have suffered setbacks if Putin had decided to approve a bailout plan for a member country within the EU. Moscow’s position, then, is understandable when considering the multiplicity of interests that the country shares with other regional players, such as Germany, Greece, and Turkey: these can be safeguarded only by a strategy of ambiguous realpolitik. Although the issue of the Cypriot bailout has put pressure on the relationship between Nicosia and Moscow, it is difficult to imagine a rupture of relations between the two countries, instead of a redefinition in the interests that still bind them. Moscow, in fact, has long-standing ties with the island of Aphrodite, ranging from banking and finance to real estate and military strategy. There are strong suspicions, for example, regarding the role played by Cyprus in the trafficking of weapons from Russia to Damascus.

Brussels, for its part, seems determined to impose comprehensive change on the Cypriot business model and on its banking system, thus affecting its status as a tax haven for the offshore investments of Russian magnates. Discoveries of gas in the Cypriot Sea represent a great opportunity for Europe to diversify energy supplies, with respect to Russia’s dominant role. Cyprus’s economic problems, however, which have led to the forced levy on bank deposits, also herald strong domestic discontent: the EU should not exacerbate the economic situation because, as the multiple demonstrations on the island show, anti-European sentiment is particularly widespread among the population and could become a source of political instability. This could obstruct a possible solution to the conflict with Turkey, a central obstacle in Ankara’s access to Brussels.

The framework outlined above seems far from optimistic given that, at least in the short- to medium-term, the European controls on bank accounts, the withdrawal of Russian support, and Turkish pressure all clamp the island in a vice that will only increase internal malaise and aggravate the downturn in the national economy. A situation which seems as if it will not improve until exploitation of the energy resources of the Aphrodite gas field is at full capacity, something that might require several years.

On the contrary, within an extended timescale the need for cooperation between the main players involved only increases due to pressures deriving from the stabilization of the Cypriot economy and the gradual exploitation of the rich intra-European gas fields. Turkey has already signaled to this effect: conscious of its role as transit towards international markets, Ankara has proposed to Nicosia its help in the development of gas, as long as the benefits of such discoveries should, as noted previously, be shared by all the inhabitants of the island. In conclusion, one aspect is more certain than others: without a resolution of the dispute over sovereignty of the island, an issue that has dragged on for 40 years now, eventual regional cooperation seems difficult to envisage.

Chiara holds the position of Junior Analyst in the energy consulting firm RIE (Industrial Research and Energy) of Bologna and collaborates with Energy Magazine. She holds a degree in International and Diplomatic Sciences from the University of Bologna (Forlì campus). Her interests mainly relate to energy issues, including energy policies in the Middle East, nuclear energy, and the processes of public debate and consensus. You can follow her on LinkedIn and Twitter (@ orienta_giovani).

This article was cross-posted by permission and appeared in its original form at TheRiskyShift.com.