TERI University | New Delhi, India | 3 February 2015 |
by Professor Arne Walther, (The Club’s Advisory Board Member) |
How many of you know of Bob Dylan and remember his famous song “For the Times – they are a’changin”? The credo of my generation.
Well, energy times they definitely are a’changin today. And there definitely is something that we can call “the Geopolitics of Energy”. The “G-word” has to do with how the location of energy resources, and the demand for energy resources, influence the policies of nations. Energy developments will continue to impact geopolitics. So too will geopolitics continue to impact energy developments.
(Slide 2: Multi-polar Energy World)
We recognize geopolitics, when we see nations make, break or shift alliances, flex political, commercial and military muscle and when they project power in peace and in war. Just like oil and natural gas lie below the surface of the Earth, what is more difficult to see in a world of shifting power dynamics is the below-the-surface role of geopolitics – how geopolitical perception and psychology make nations do, or refrain from doing, one thing or another when safeguarding national interests.
Energy goes to the very core of political, economic and environmental interests of individual countries as well as those of the global community. Energy security remains a national policy imperative in an energy-hungry world. Energy security and climate change are interlinked challenges. We would be shooting ourselves in the foot, if we seek to promote one at the ultimate expense of the other.
Energy has geopolitical impact indeed. Some things come readily to mind. The shale revolution and prospects for energy independence in the USA. Euro-crisis and economic slowdown in the industrialized economies. OPEC’s decision end of November last year not to cut production and thus to let oil prices fall still further. Russia’s policy in the Ukraine and sanctions imposed by others in reaction to that policy. The nuclear talks between the P5+1 countries and Iran. The question of Iran’s nuclear future impacts not only regional geopolitical developments, but also world markets for oil and natural.
Furthermore, the Arab Spring and the Islamic State. Climate change concern and transition to renewables. The UN initiative “Sustainable Energy for All” and the importance of energy for the Millennium Development Goals for 2015 and for global goals beyond. It is unfair and a geopolitical time bomb that a fifth of the world’s population continue to lack access to electricity. Access to the modern commercial energy that could lift multitudes out of poverty is another energy imperative that will impact geopolitics.
And perhaps above all, the centre of global economic and political gravity moving back to Asia where it has been centuries before – an Asia with her diversity, human and natural resources today along with her potential and optimism for the future. India is an integral part of this new and vibrant Asia.
(Slide 3: Today’s Set Menu)
There is a lot to say, many questions to ask and myriad issues and cases to dwell on when discussing both old, new and possible future geopolitics of energy in our globalizing age and multi-polar energy world. I will highlight what I see as a few.
Such as the question of whether our future is a renewable energy one, or a fossil energy one. What are some of the uncertainties? I will say a few words about Norway as an environment-conscious producer and exporter of energy – so that you have an idea of where I come from. Also highlight what is emerging as a “New Asian Energy Identity”, Asia where you come from and where we are right now. I will mention energy sanctions now being imposed on energy power-house Russia for geopolitical reasons. Then take you to the Arctic, a new petroleum frontier on the global energy landscape. Global energy governance and its limitations, energy nationalism, the political ambition of energy interdependence or energy independence are other things that I will touch upon before concluding that geopolitics of energy is something that we have to take into account as they continue to evolve at what might be an accelerating pace.
A Renewable or Fossil Energy Future?
Two months ago, I attended the International New York Times’ “Energy for Tomorrow” Conference in Kuala Lumpur to speak on the new geopolitics of energy. I listened with great interest to the renewable energy advocates focus solely on what they welcomed as a bright and very immediate future of renewables – especially solar, wind and safe nuclear fusion. For them, CO2-emitting fossil fuels were history. Resources that had not yet been produced should be left in the ground and under the seabed. Renewables and a low-carbon society mitigating climate change – that was their today and the future.
Perhaps their perspectives are the “New Geopolitics of Energy”?
Probably not, and certainly not yet, if we are to believe the IEA’s World Energy Outlook released last November. It expects fossil fuels oil, gas and coal to maintain their crucial role long into the future.
I was in Vienna last November for the OPEC Ministerial. The air was rife with “geopolitics of oil”. Some observers expected OPEC ministers to cut production to stop falling prices and possibly also cut production so much that the price of oil would increase to the detriment of oil-importing industrialised, developing and emerging economies, including India. Other observers even suggested that the USA and Saudi Arabia had conspired to let the price fall to put political pressure on Russia with regard to developments in the Ukraine and on Iran to soften that country’s stance in the P5+1 nuclear talks.
OPEC’s decision not to cut production triggered a further fall in oil prices. There was too much oil in the market. The OPEC decision had a lot to do with member countries, especially Saudi Arabia, Kuwait and the UAE wanting to maintain their global market share in a scenario of increasing US production of shale oil in an over-supplied market. That decision is a natural one for low-cost oil-producing countries with ample reserves and a comfortable financial situation. And cheaper oil is a very good thing for oil-importing industrialized and developing countries. A positive boost to a sluggish world economy.
Geopolitically, the OPEC decision was seen to be more than one purely driven by market considerations. Allowing prices to fall is a blow to Russian export earnings with even more immediate impact than the sanctions being imposed with a view to changing Russian policy in the Ukraine. Allowing prices to fall would furthermore strengthen the position of oil in the overall energy mix at the expense of renewables and slow down any transition to a low-carbon global economy. That would strengthen not only OPEC’s position in the oil market, but the geopolitical clout of OPEC members on the global and regional geopolitical scene as well.
At the same time, however, lower oil prices hurt higher-cost producers outside OPEC and even those OPEC countries, which need much higher oil prices to balance their budgets and avoid cutting social and other spending. Such spending cuts in oil-exporting countries would not please citizens and could translate into domestic political unrest, even regime change. And that could have knock-on effects complicating geopolitical developments regionally, if not globally.
Basically more of the same?
Global energy demand will continue to grow. That is a good thing when further fuelling economic and social development while not having adverse environmental impact.
(Slide 4: Global Energy Mix 2040)
The IEA expects that energy demand will increase by more than a third (37%) by 2040, a quarter of a century from now. Non-OECD Asia, which includes India and China, will consume 60% of that growth. China will overtake the USA as the largest energy consuming country, while India, South East Asia, the Middle East and sub-Saharan Africa later take over as the engines of global energy demand growth.
The IEA expects fossil fuels to account for three-quarters (74%) of the global energy mix by 2040, a 6% percent decrease from 2012, albeit in a bigger total energy basket. Natural gas, the fastest growing fossil fuel, is set to increase by 2% to 24%, oil decreases by 5% to 26% and coal decreases by 5% to 24%. In other words, coal, oil, gas and renewables would account for a quarter each of the global energy mix. And of the renewables bioenergy increases by 1% to 11%, nuclear increases by 2% to 7%, hydro increases by 1% to 3% and other renewables by 4% to 5% of the global energy mix.
(Slide 5: A mix that is slow to change)
The dominant share of fossil fuels in the global energy mix is slow to change. Today, it is the same as a quarter of a century ago – 82%. Even with the strong rise of renewables, fossil fuels are still expected to account for three quarters of the total global energy mix a quarter of a century from now. The infrastructure built up globally for production and use of fossil fuels is enormous and complex. And with a lot of investment is involved there are also many vested interests.
Nation states are just not delivering the ambitious action called for at international environment conferences and in their polices to mitigate climate change even as we witness and many, especially the poor in developing countries, suffer extreme kick-backs from nature itself due to climate change. Let us hope for ambitious results at the Climate Summit in Paris in December.
Uncertainties and vulnerabilities
Yes, energy times they are a’changin’ and in their wake follow new opportunities, challenges and uncertainties. New energy perspectives and developments that will have geopolitical, geo-economic and geo-environmental impact. A prominent Asian industrialist, who attended the World Economic Forum in Davos told me last week that “uncertainty” was the word most heard in this year’s gathering.
And the uncertainties are many, not least for the global energy landscape. They can stem from actual or anticipated political and economic developments in individual countries and in the course of geopolitics. And violent forces of nature, terrorist attack and piracy do strike. Pure technical mishap does happen. All this is part of the equation and a lot to think about for government leaders and for industry itself.
Energy uncertainties and vulnerabilities, amplified by economic upturn here or economic downturn there, prompt countries and groups of countries to re-think fundamental energy security policies. Governments are painting their economic stimulus packages and policies in various shades of “green” opting for a future “low-carbon-emissions” society. The policy-tuning of one country to meet new challenges and to reduce its particular energy uncertainties can, however, exacerbate existing uncertainties or create new ones for others. After all, we live in an interconnected world.
In our policies to deal with energy uncertainties, we must also expect the unexpected. The “Black Swan” as the American risk analyst Nassim Nicolas Taleb writes in his book with the same title. While we attempt to deal with the many “known unknowns”, we have little choice but to let the “unknown unknowns”, whatever they are, happen. If unconventional oil and shale gas are “game changers” within the family of fossil fuels, what other expected and unexpected “game changers” inside and outside that fossil fuel family will appear in the years ahead? And what about game-changers due to technology, accidents and war?
A purposeful global energy dialogue and awareness of common interests can help us navigate in this complex state of affairs. Dialogue is not a goal in itself. It is a means to build confidence and help us to better seize win-win co-operative opportunity in our globalizing and increasingly interdependent world. Dialogue can preempt and correct misunderstandings and mistrust that otherwise could lead to conflict. It can enables wiser policy decision-making at national and international level. Dialogue is also an opportunity to promote long term and sustainable global economic growth that in turn can impact positively on geopolitics.
An Environment-Conscious Producer of Energy
Having put my country Norway on the map geographically a few minutes ago, let me put my country on the global energy landscape, and not least seascape, considering that our offshore oil and gas resources are extracted from under the seabed.
(Slide 6: Norway an Environment-Conscious Energy-Producer)
We Norwegians are environment conscious producers of energy. While in India coal generates 60 % and fossil fuels for 80 % of your electricity, in Norway all of 97 % of electricity, corresponding to 60 % of our total energy mix, is generated by emissions-free and renewable hydro-power. Hydropower was key to our industrial development one hundred years ago and is still flowing strong.
In the 1970’s, offshore oil and gas became our new add-on energy adventure. Petroleum activity is now the corner-stone of our economy and very important for the further development of our welfare state. It accounts for almost a fourth (23 %) of Norway’s GDP, almost a third (30%) of state revenue and half of our total exports. Petroleum activity is our largest industry in terms of value creation, state revenue and exports.
Extraction of oil and natural gas on the Norwegian continental shelf is steeped in geopolitics. Not least in the wake of the oil embargo of OPEC countries against the USA and a couple of European countries in the 1970s and the geopolitical imperative during the Cold War of avoiding undue dependence on supply of natural gas from the Soviet Union. IEA governments urged offshore exploration and production activity on the Norwegian continental shelf a high cost area where new advanced technology would be needed, because it would be a substantial indigenous OECD source of energy supply. Today, Norway supplies twenty per cent of the EU’s demand for natural gas.
Norway’s substantial and reliable exports of oil and natural gas contribute to security of energy supply of our trading partners. Norway is the world’s third largest exporter of natural gas (107 bcm), only Russia and Qatar export more. And a substantial exporter of oil, just below two million barrels per day (1.9 mbd) – that is about double India’s domestic production of oil. We have vast offshore areas yet to be explored and resources yet to be tapped, not least in the Arctic.
All our producing fields are offshore. We have a network of pipelines in the North Sea with landing points in to four EU countries. A total pipeline length (8 000 km) longer than the distance from Delhi to the North Pole, or if you want a return journey then the distance from Delhi to the outskirts of Moscow and back.
State income from petroleum activity is transferred into a separate fund, the Government Pension Fund – Global, now the largest single sovereign wealth fund in the world and growing with assets currently valued at more than USD 860 billion – or almost 6 lakh crore Rupees. That is two times our GDP. All invested in equity, bonds and real estate abroad so as to shield our domestic non-oil economy from over-heating. One sixth of the Fund’s investments are currently placed in Asia. One half of one per cent in India i.e. twenty thousand crore Rupees in equities and 11 thousand crore Rupees in bonds. The Fund owns 1.3% of all the world’s listed companies, 2.5% of Europe’s listed companies.
Indigenous energy resources have been a “blessing” for Norway and a pillar in the development of our welfare state that puts Norway on the very top of the UNDP’s Human Development Index. We would like to see energy, not least oil, be a “blessing”, not a “curse”, for developing countries as well. An important part of Norwegian energy diplomacy is sharing our experience and expertise in a special programme “Oil for Development” in dialogue with resource-rich developing countries. We support them in their efforts to maximize income and manage their petroleum resources in an environmentally sustainable way that generates economic growth and promotes the welfare of the population. This means good governance, transparency and anti-corruption. We are also stepping up support to clean energy and low carbon solutions in our co-operation with developing countries.
A New Asian Energy Identity
From Norway, let me return to India and Asia not least because the centre of global economic gravity is on the move eastwards to Asia. Emerging economies led by China and India will increasingly influence our global energy future. What happens outside Asia in our globalizing world will, as before, impact Asian developments. What is new is that what happens in Asia today and tomorrow will to an increasing degree impact the world outside. This goes not only for the economic and political scenario, but also for efforts to enhance energy security and address climate change concern.
(Slide 7: The engine of energy demand growth moves to South Asia)
China is the main driver of increasing energy demand in the current decade, but India is expected to take over as the principal source of growth in the 2020s. Non-OECD Asia is expected to account for some 60 % of global growth in energy demand.
Reflecting the increasing importance of Asia and recognizing the importance also of regional dialogues, “Roundtables of Asian Energy Ministers” under the global umbrella of the International Energy Forum are taking place. These Roundtables gather energy ministers of the principal petroleum-exporting countries of West Asia – the Gulf – and energy ministers of the principal petroleum-importing countries of East, South and South-East Asia.
The first ministerial roundtable was convened by India’s then Petroleum Minister here in New Delhi in 2005. Subsequent roundtables have followed every other year alternately in Asian energy-importing and –exporting countries. The sixth one takes place in Qatar later this year. Testifying to the relevance and vitality of this now decade old process, Ministers have already decided meet for a seventh roundtable in Thailand in 2017 and an eighth roundtable in the United Arab Emirates in 2019 to deepen their discussions on basic issues of energy security, stability and sustainability on this regional Asian basis as these issues evolve.
This regional forum gathers energy ministers representing half of the world’s population, the bulk of the world’s remaining proven oil and gas reserves and very importantly the greater part of the surging global energy demand expected in the decades ahead. When two-thirds of the oil exports from the Gulf go eastwards in Asia and when three-fourths of East Asian imports come from the Gulf, clearly these Asian Ministers have something to talk about, while also recognizing that the Asian energy economy is integral to, and inseparable from, the global energy economy.
The potential of this political level dialogue goes without saying. A New Asian Energy Identity can have profound geopolitical impact. The energy interdependence of Asian countries is a natural and logical consequence of geography and economics. West Asia’s Gulf countries have abundant and low-cost oil and gas reserves for today and tomorrow. To the East in Asia is where West Asia, the Gulf countries find security of energy demand in exports to dynamic markets that can pay for oil and gas imports in a long term perspective. West Asia is where countries in East, South and South-East Asia find security of energy supply.
Russia as North Asia
Let us look north and get back to Russia, to current international sanctions imposed for geopolitical reasons against Russia. And also recall President Putin’s visit to Delhi in December last year for the annual Indo-Russian Strategic Summit. That visit had among other things important energy content both in the bilateral and in the geopolitical context.
Russian political relations and energy ties with neighbours are right now a very visible part of the evolving geopolitics of energy. Russia is the world’s second largest nuclear power and currently the world’s biggest oil producer. Russian gas pipelines into Europe are important for European energy security.
The USA, EU and others are implementing energy and other sanctions against Russia in response to what they condemn as Russia’s violation of international law in the Ukraine. That has in turn sparked Russian counter-reactions. The development of the South Stream pipeline, whereby Russian gas exports to Europe could have bypassed the Ukraine, has been cancelled. US and European energy sanctions also hurt plans to develop of petroleum activity in the Russian Arctic. One-fifth of the world’s remaining yet-to-be-found petroleum resources, we believe, can be found in the Arctic. Most of that in the Russian part of the Arctic.
Geopolitically motivated energy sanctions by countries that long have been a main source of Russia’s energy export earnings might work and fulfill their geopolitical objective. But, then again, they might not. Instead of reversing current Russian policies, they might strengthen popular support in Russia for those very policies and result in a Russian “energy pivot” to Asia. A “pivot” fuelled by accelerated development of Russia’s own resources in the east and driven by increasing exports to an energy hungry India and China. Then we could refer to Russia as “North Asia” in an even newer “Asian Energy Identity”.
In that geopolitical context, it is interesting to note President Putin’s visit to India last December and the emphasis placed on energy. A good match considering both Russia’s position as an international energy powerhouse with problems in relation to traditional customers as a result of the sanctions on the one hand and considering Prime Minister Modi’s emphasis on energy security to boost India’s economic development on the other.
In fact, the two leaders confirmed in their official joint statement on the visit that the “special and privileged partnership” between Russia and India will be strengthened. They acknowledged the natural complementarities in the area of energy and India’s quest for energy security. Bilateral energy cooperation will be expanded in oil and gas, electric power production, nuclear energy, renewable energy sources and energy efficiency.
Among the agreements signed was a shared “Strategic Vision Strengthening Cooperation in Peaceful uses of Atomic Energy”. The agreement underscores that Russia and India view nuclear energy as a clean and viable source of energy and will strive to complete the construction of and commissioning of not less than twelve units in the next two decades.
The joint statement also underscores that Russia and India will work together to further strengthen regional multilateral energy cooperation. It recognises that the first Asia-Pacific Energy Forum (APEF), held in Vladivostok in 2013 had laid the foundation for an enhanced regional dialogue under the auspices of the UN Economic and Social Commission for Asia and the Pacific.
From Asia to the Arctic
From South and North Asia, let us move to another region, a new frontier, of potentially great importance for global security of oil and gas supply. To the Arctic, where the continents of Asia, North America and Europe meet and where the ice sheet is melting at an alarming rate.
(Slide 8: Energy Resources in the Arctic)
As the ice sheet is getting smaller and smaller due to climate change, international interest in the Arctic is getting bigger and bigger. More than a fifth of the yet-to-be-discovered reserves of oil and natural gas in the world could be found here. State-of-the-art technology is called for in this challenging and high-cost environment. Norway is already producing and exporting oil and natural gas from her part of the Arctic.
While conflict and political unrest may characterize many of the other petroleum provinces of the world, the Arctic stands out as a stable and peaceful region. Our mantra is “High North – Low Tension”. This above-ground factor increases interest in the below-ground petroleum promise of the Arctic, where both onshore and offshore petroleum developments are expanding into new areas. The biggest concentration is in the Russian Arctic.
When the Russian flag was planted on the North Pole seabed in 2008, exaggerated media speculation anticipated a modern day Klondike and free-for-all gold-rush scenario with legal disputes and increased military activity to extend or protect national interests.
It is important to note that all land in the Arctic already belongs to established nation states. It is equally important to note that the area surrounding the North Pole is not land. Under the ice is water, an ocean in fact. We already have a robust international legal regime governing the sea here as elsewhere, the core of which is the United Nations Convention on the Law of the Sea (UNCLOS). It stipulates that a coastal state has sovereign rights on its continental shelf, including the exclusive right to explore for and exploit its natural resources. Centre stage in the Arctic offshore are the five coastal states – Norway, Russia, the USA, Canada and Denmark because of Greenland – who enjoy the same rights and responsibilities there as nation states enjoy elsewhere in accordance with international law.
(Slide 9: The Arctic – not a new Klondike)
For Norway, our High North and Arctic is a most important area of strategic focus in the years ahead, on land and on our offshore continental shelf. Norway is a polar nation and an Arctic coastal state with jurisdiction over extensive natural resources. Our policy is one of dialogue with the states that have interests in the region. It is a policy of strengthening institutionalized multilateral co-operation, such as that we have in the Arctic Council. Norway was in the forefront in bringing about the consensus decision at the meeting of Arctic Council Foreign Ministers in 2013 to admit India and some other countries, including China, as new Permanent Observers in the Council.
India has long-standing Arctic credentials. Developments here are of legitimate interest also to non-Arctic countries, such as India. Your former Minister of External Affairs Salman Khurshid visited the Norwegian Arctic in June 2013. The first foreign Foreign Minister to visit the new Arctic Council Secretariat in our “Arctic capital” in Tromsø after the Arctic Council decision on admit new permanent observer countries.
Minister Khurshid went even further north to visit the Indian research station in the Svalbard Archipelago, 79 degrees North, and Svalbard University, both places meeting Indian scientists and researchers. We are happy for the close bilateral co-operation that we have with India in the Arctic.
Our policy also underscores the importance of co-operation with Russia, currently limited by Norway’s restrictive measures as part of wider international sanctions against Russia. After forty years of negotiations, Norway and Russia concluded in 2011 an agreement on the delimitation of our continental shelves in the Barents Sea and the Arctic dividing fifty-fifty in a formerly disputed offshore area two-thirds the size of Uttar Pradesh. This opens interesting prospects for petroleum activity on both the Norwegian and Russian sides of the delimitation line. In fact, just two weeks ago the Norwegian the Government invited national and international companies to apply for production licenses on the Norwegian side of the delimitation line with a view to awarding licenses in the first half of next year.
What then do governments have to think about in our new energy era that require best possible global dialogue and cooperation? Many things. This slide suggests ten trends that in a way sum up much of what I want to leave with you in my presentation today.
(Slide 10: New Energy Era – Ten Trends)
- Increasing energy demand. We have to improve efficiency
- Fossil fuels will still be paramount. We must look to low-carbon alternatives because of
- Environmental and climate change concern
- Increasing uncertainties and vulnerabilities
- Competition for and among energy resources
- Resource nationalism. Interdependence or independence?
- Increasing bilateral and regional co-operation
- Good governance and transparency
- We must deal with energy poverty. Equitable access to energy is imperative
- Political and economic gravity shift to Asia
Global Energy Governance
The IEA’s Executive Director, Maria van der Hoeven, writes in her foreword to this year’s World Energy Outlook that “The global energy system is in danger of falling short of the hopes and expectations placed upon it”.
I would be even less generous and say that the global energy system and probably most other global systems as well always have fallen short of hopes and expectations – mine in any case.
Globalization, changing political, economic, environmental and social conditions, along with the ascent of Asia in an evolving world order are redefining geopolitics and challenge the institutional architecture for international co-operation in energy as in other areas. Energy securtity remains a policy imperative.
(Slide 11: Dialogue and Cooperation)
There are many international organisations and institutions dealing with energy issues on a regional and wider global level. Some are open-ended. Some have limited membership. Some are decision-making. Some are not. Most address only certain types of energy and not others. Some have a dramatic political backdrop. New institutions of limited energy scope and country membership are being added to the plethora of existing ones. There are also many institutions, such as financial and environmental institutions, set up to deal with other issues than energy and that make decisions of consequence to energy policies and markets.
There is today no global, intergovernmental institution with supranational decision-making power to deal comprehensively with all forms of energy. Given the strategic importance of energy to the national interests of each and every country, I do not see governments any time soon, or at all, surrendering the beef of their national decision-making prerogative in energy to supranational decision-making in organisations or other wide-ranging and legally-binding forms of supranational global energy governance.
That does not mean that what we have is an international energy “disorder” out there. What we do have and can develop further is a cooperative “global energy policy interrelationship”. A comprehensive network of inter-governmental energy institutions and co-operative contacts among countries at political and technical level, on bilateral, regional and global basis. An interrelationship, where international organizations and financial institutions along with other stakeholders have their role to play in addition to governments. And not to forget that core to all this is the energy industry itself going about its business to find, produce and bring energy efficiently, dependably and affordably to the consumer.
To make this interrelationship more effectual, new institutions and processes, as well as established ones, must take account of the evolving world order and its geopolitics, where also the emerging economies assume their rightful and responsible say.
Economic development, environment and energy security concern as well as the geopolitics of energy are focus issues for Heads of Government in their domestic and foreign policies. More and more drivers of energy developments, and more and more of those being driven, want their say for very different reasons. There are many “trade-offs” to be made. Sometimes you have to choose one good option to the detriment of other good options, when energy imperatives are pitted against economic, social welfare and environmental concerns as well as national security and geopolitical concerns.
And when crucial political and economic trade-offs have to be dealt with, they find their way to the desks of those at the very top of the political decision-making pyramid. Perhaps the current scenario calls for Heads of Government to meet together on energy to sort out the various trade-offs that would have to be made in our globalizing world of increasing and more complex interdependencies. To guide the development of a “new global energy consensus” in a better organized world.
National and international energy systems drive and are driven by politics and governance, by technology and production, by markets and society and by financial actors. If the ambition of global energy governance is an expression of internationalism, it has to be compatible with the many individual expressions of energy nationalism for it to be sustainable and fair.
In a sense, the “Arthashastra” still holds true. The duty of the ruler is threefold: “raksha” – protection of the state from external aggression, “palana” – maintenance of law and order within the state and “kshema” – safeguarding the welfare of the people. It certainly helps to have a steady flow of affordable energy for a ruler to deliver on those three counts. Energy security is important.
Today, rulers and ruled would add to that three-pronged imperative and expression of “nationalism” the importance of their energy production and use polluting the environment as little as possible. But actually doing something about, I fear, only up to a point.
When oil and gas prices are high, we hear complaints from importing countries about the “energy nationalism” of exporting countries. “Energy nationalism” usually appears as a negative and confrontational label used by some for what they see as wicked and unjust policies of greedy resource owners out to harm economically, or pressure politically, vulnerable countries that are dependent on energy imports.
I would, however, not limit the concept of “energy nationalism” to resource host countries. Even countries that lack sufficient indigenous energy resources pursue, in my view, policies of “energy nationalism” in the sense that they seek the energy resources of others, as cheaply and as reliably as possible, for their own domestic social and economic development.
And here, just as those countries that are blessed with energy resources would use their position of resource advantage to pursue wider economic and political objectives, so too would countries that lack such resources use their position of advantage in other areas to pursue their wider economic and political objectives. And the latter would include policy measures to secure their energy supply as cheaply as possible and in a way that necessarily will affect the vital interests of energy-exporting countries.
Let me also include national policies of energy independence, relying only on your own domestic resources, under the label of “energy nationalism”.
“Energy nationalism” has been around for quite some time. As long as there are nation states to call the energy shots, it will not disappear. It should not surprise us that governments see a political imperative in making the most out of their particular national and natural endowment for the social and economic development of their countries and welfare of their people.
“Energy nationalism” is as any other natural resource nationalism natural. It can be either good or bad. It is good when it is win-win, benefiting the social and economic development of the host country concerned, while also benefiting the interests of co-operating countries and companies. It is bad when it is win-lose – benefitting one, but detrimental to vital interests of the others. International dialogue can identify win-win opportunity and preempt misunderstandings that could otherwise lead to conflict.
Energy independence or interdependence
Energy security is a core national interest. There are, however, two sides of the energy security coin. Energy-importing countries want security of energy supply. Energy exporting countries want security of energy demand. Some countries seek energy independence, others energy interdependence, in their quest for energy security.
Some would argue that dependency on others on something so important and strategic as energy, especially oil and natural gas, constitutes a political and economic risk that should be reduced to a minimum, if it cannot be avoided altogether.
Others would argue that energy interdependence is inevitable and makes sense in a globalizing world. They would add that win-win energy interdependence not only ties countries closer together economically, but also has the positive spill-over effect of improving political relations between countries and with that the overall geopolitical climate as well. A case in point would be the European Coal and Steel Community using energy to tie erstwhile enemies in war so close in peace that war would not be possible. This cooperation in energy sparked the further economic and political cooperation that developed into the European Union. And today, the creation of an Energy Union within the European Union is being discussed.
As an industrialized, energy surplus country, Norway takes active part in international energy dialogue and co-operation. We co-operate with other industrialized, mainly petroleum- importing countries, our main political partners and energy export markets in the International Energy Agency, the IEA.
Norway has important interests in common and good relations also with other petroleum producers in and outside of OPEC, the Organization of Petroleum Exporting Countries. However, Norway is not a member of OPEC, nor do we have any formalized production agreements with that organization. But we have good relations with oil and gas exporting countries in and outside of OPEC on an individual basis.
I had the honour of serving as the Chairman of the Governing Board of the IEA some years ago. One of my priorities at the time was for the IEA, a limited member organization, to improve its global outlook by means of more purposeful cooperative contacts with India, Russia and China as well as petroleum-exporting countries in OPEC.
Norway and India are active partners in another group of countries – the International Energy Forum. The IEF is a forward-looking venue for global dialogue at political level among ministers of both energy-importing and exporting countries. Here energy ministers of not only IEA and OPEC countries, but also ministers of developing countries and emerging economies meet on an individual basis to share information and policy objectives as they discuss energy security and sustainablilty. Let me add that I am very grateful to the support by the Indian government when I was elected and served as the first Secretary General of the IEF, headquartered in Saudi Arabia.
The energy diplomacy of India in the “Great Energy Game” of nations has, indeed, become increasingly interesting to watch. Your policies and developments will have increasing impact. While core national interests of energy-importing as well as energy-exporting countries, of industrialized as well as developing countries, will continue to define what is desirable and possible in terms of energy governance, nationally, regionally and globally in our multi-polar energy world.
And what better national emblem to have than Ashoka’s lions standing back-to-back looking East, West, North and South. Indeed, a very wise geopolitical outlook that I trust is still embedded in you.
In that vein, it is interesting also to note the importance that energy was given when US President Obama came for the Republic Day Summit just last week, another example of India’s top level energy diplomacy that must be seen also in its geopolitical context.
The End of Geopolitics of Energy
Energy is not an end in itself. But a means for governments to fuel economic and social development of their countries and the global community. New patterns of energy cooperation can shape new geopolitical realities. Some established geopolitical realities may raise stumbling blocks for wise and sustainable new patterns of energy cooperation. New geopolitical realities that replace, merge or clash with established ones will impact patterns of energy cooperation.
Francis Fukuyama wrote a best-seller entitled the “End of History” a quarter of a century ago. Perhaps one day someone will write one on the “End of the Geopolitics of Energy”. That would have to be in a world where every nation produces its own energy, whether renewable or not. A world of energy independence for every country, in which no country is coveting the energy resources of others and doing something about it. Then, we would not speak of “new or even newer Geopolitics of Energy”, because there would be “No Geopolitics of Energy”. Geopolitics of Energy would have become an obsolete concept.
I am not expecting that anytime soon. Meanwhile, the world will need more and cleaner energy, used in a more efficient way, accessible and affordable to a larger share of the world’s population. The challenge for political and industry leaders lies in operationalizing this energy imperative in a fair and sustainable way. NGOs, other stakeholders and ordinary citizens will and should make their voices heard as well in the complex mosaic of geopolitics and energy, where everything continues to be linked to everything else. And where there will always be “New Geopolitics of Energy” – evolving, never standing still for long.
(Slide 12: “For the times they are a’changin’)
Thanking you for your attention and looking forward to our further discussion, let me stop where I started – with Bob Dylan – and introduce you to a climate refugee, who, as this last slide shows, has to “admit that the waters around him have grown” as consequence of climate change and who had “better start swimmin’ or he’ll sink like a stone”.