Market cycles, power politics and the latest North – South energy trade conflict

Abstract

Energy trade periodically aligns Northern importing -consuming countries against predominantly Southern producing -exporting countries. Conflict appears to follow a cyclical pattern, whereby Northern firms invest in developing Third World hydrocarbon resources to meet consumer demand until market conditions enable unilateral efforts by host sovereigns to augment fiscal take and ownership share and to impose output restrictions, thereby elevating prices and revenues. Although markets eventually correct themselves, major consuming-country governments, to the extent that seller's markets attributable to exporter actions harm short-term consumer welfare and alternative options for restoring buyer's markets are lacking, have varying incentives to support military intervention. Shifting market conditions and power balances suggest six ideal-typical energy trade conflict strategies. Finally, to the extent that exporting states succeed in converting higher hydrocarbon revenues into energy-intensive economic growth, co-operative phases within this conflict pattern could yield to increasingly zero-sum interconsumer rivalry.Energy trade and foreign direct investment (FDI) are again pitting 'Northern' consumer and corporate interests against sovereign producers in the global 'South'.1 As the history of the oil sector indicates, multinational firms extracted Southern energy reserves to supply Northern consumption requirements until market conditions enabled Third World producingexporting countries to enlarge sovereign shares of asset values and gain control over extraction. Sustained price hikes then brought demand down, while bringing undeveloped geographical and geological frontiers into play, which multiplied exporters and strained collective output discipline, already attenuated by exporters' proclivity to raise output to serve expanding non-oil fiscal budgets. Recent upsurges in consumption and assertions of sovereign control over FDI suggest that a political -economic 'market cycle' is recurring.Paul A Williams is in the

İran ile Nükleer Müzakereler ve Türkiye’nin Avrupa’ya Uzanan Enerji Merkezi Rolü

“…Böylelikle Doğu Avrupa ülkeleri hem Rusya'nın enerji tedarikçisi konumunu silah olarak kullanma riskine hem de transit ülke Ukrayna'daki siyasal istikrarsızlıktan etkilenme ihtimaline maruz kalmıştır. Her ne kadar Rus siyasetçiler petrol ve doğalgaz satışlarının ticari bir mantıkla gerçekleştirildiğini söyleseler bile, Rusya'nın kendisine siyaseten daha yakın ülkelere fiyatlama bakımından çok daha büyük avantajlar sağladığı bilinmektedir (Williams, 2007). Öte yandan Polonya gibi kendilerine siyaseten mesafeli ülkeler yüksek faturalar ödemek zorunda bırakılmıştır.…”

EU–Russian Relations and Turkey's Role as an Energy Corridor

“…In early March 2008, the recurring Russo-Ukrainian dispute over Ukraine's unpaid gas bills led to Gazprom's halving of deliveries to Ukraine, where officials openly threatened to cut shipments to EU customers (White 2008). Although these disputes have roots in the USSR's collapse, which left an integrated infrastructure divided among competing states (Larsson 2007), they have been aggravated by high energy prices, which raised suppliers' costs of maintaining subsidies to FSU countries while enabling the Kremlin to punish those among the latter that have tried to exit the Russian sphere of influence (Williams 2007). Because the key FSU importers in question also serve as transit countries, they can shift the burden of supply cut-offs onwards to successive European consumers, thus giving some EU members a common interest with Russia in finding alternate export routes.…”

“…This price increase, which helped Russia retire Soviet-era sovereign debt and increase its foreign reserves from $12 billion in 1999 to $470 billion in 2007 (United States Central Intelligence Agency 2008), signalled that Russia could earn more hydrocarbon revenues without attending as much to the need to bolster its long-term capacity to increase output. Thus, Russia has slowed or even reversed the pace of liberalisation of the Russian upstream sector that was prompted by the buyer's market of the 1990s, as manifested in unilateral government-backed efforts to increase the share of state-led firms in various joint energy projects at the expense of foreign corporate investors (Williams 2007;Kramer 2008b). Reflecting a trend towards more frequent passage of domestic legislation that is less friendly to foreign corporate interests (Shan 2007), the post-Putin Medvedev government has legalised restricting development of Russia's offshore hydrocarbon reserves to national state-controlled entities (Rodova 2008b).…”

“…Scepticism about the financial viability of non-Russian controlled Caspian pipeline infrastructure then undergoing construction lingered as late as the US-led invasion of Iraq in March 2003, widely anticipated to unleash a deluge of cheap hydrocarbon supplies (Andrianopoulos 2003, p. 80;Banerjee 2003;Williams & Tekin 2008). However, by constricting that country's energy output, internal violence in postinvasion Iraq boosted hydrocarbon prices (Williams 2007) and improved the economics of Caspian-based projects. This underscores the fact that high prices support the entry of otherwise prohibitively expensive alternative sources and suppliers, lowering prices in the long term (Fusaro 2002, pp.…”

Economists' Controversies about the Causality between War and Economic Cycles

“…Sur la question de l'aggravation probable des tensions Nord-Sud liées au commerce de biens énergétiques, voirWilliams P. (2007), "Market cycles, power politics and the latest North-South energy-trade conflict", Third World Quarterly, 28 (1), pp. 45-58.…”