March 2010 Archives

The tragic news of the 29 March twin suicide bombings of two Moscow Metro stations during the morning rush hour has produced outrage worldwide, with the Kremlin quickly adding that the attacks were carried out by the Caucasus Mujaheddin, a northern Caucasus-based militant Islamist guerrilla group that claimed responsibility for the bombing of a Moscow to St. Petersburg express train last November.

The grim death toll can be seen as yet another statistic in the Kremlin's ongoing war with Chechnya separatists that erupted in December 1994. Underneath and driving the savagery of the last 16 years is a resource that few commentators note - oil.

The two female suicide bombers were caught by closed circuit television (CCTV) cameras boarding the metro at Yugo-Zapadnaya station in the far southwest of the city in the early morning, assisted onto the train by two other women. According to the CCTV videos, the quartet seemed to be between 18 and 20; two of them were clearly of Slavic appearance.

The first bomber blew herself up at Lubyanka metro station at 7.56am. H er bomb, equivalent to about four kilograms of TNT, exploded at the height of rush hour and killed at least 25 people inside a train that had just pulled into the Lubyanka station. The explosive used was believed to be hexogen (RDX); the device was filled with iron scrap and screws for shrapnel. There has been to speculation that the second bomb, detonated at the Park Kultury station, was in fact supposed to have been detonated at the Oktyabrskaya station, next to the Ministry of the Interior.

Kremlin experts lost no time in asserting that the incident had implications far beyond Russia, claiming that the Caucasus Mujaheddin receives inspiration and financial support from unnamed networks both in the East and the West. As the death toll mounts, the bombings represent Moscow's worst terrorist attack since February 2004, when a suicide bombing killed at least 39 people and wounded more than 100 on a metro train.

What is certain at the moment is that the carnage will continue, as last month Chechen rebel leader Doku Umarov, fighting for an Islamic emirate embracing the northern Cacuasus, vowed to take the conflict to Russian cities, noting in an interview on an Islamist website, "Blood will no longer be limited to our cities and towns. The war is coming to their cities."

The attacks are a direct assault on Russian President Vladimir Putin, former KGB operative. The Lubyanka bombing is highly symbolic, as it is the subway stop for the employees of the KGB's successor organization, the FSB, a two-minute walk from Red Square. London Royal United Services Institute analyst Jonathan Eyal observed, "This is a direct affront to Vladimir Putin, whose entire rise to power was built on his pledge to crush the enemies of Russia ... It's an affront to his muscular image."

Few today remember that Putin's first job when appointed Prime Minister on 9 August 1999 by Russian President Boris Yeltsin was to build an oil pipeline bypassing Chechyna, as Transneft, Russia's pipeline monopoly, controlled the Baku-Novorossiisk line, the sole export route for Azerbaijani "early" oil exports, which crossed 95 miles of Chechen territory, a region which had been at war with the Kremlin since 1994. Following Putin's appointment Yeltsin held a council of war over Dagestan and Putin made a rash promise that he could end a crisis caused by the incursion of 2,000 rebels from Chechnya into Dagestan in "a week and a half or two weeks."

Work began on the bypass line on 26 October. The conflict combined with other issues reduced Azeri exports via Baku-Novorossiisk in early 2000 to an average of only 10,000 barrels per day (bpd.) In April 2000 construction finished on the $140 million, 204-mile Baku-Novorossiisk bypass via Dagestan to Tikhoretsk. The bypass had a potential capacity of 120,000 bpd, but by then Azerbaijan already had other plans, having worked with neighboring Georgia to develop an alternative pipeline route to Georgia's Black Sea port of Supsa, completely outside of Russian control. When Yeltsin resigned on 31 December 1999 Putin became acting President and has continued to lead the Russian state ever since, initially as President and since 2008 as Prime Minister.

Putin has made it a centerpiece of his policy to resolve Chechnya for once and for all, but as the Moscow bombings so, eleven years after his accession to power, Chechnya continues to roil Russia. The issues go back to the 1991 December collapse of the USSR. When the first Chechen war erupted in 1994, many observers were baffled as to why Moscow, which had peacefully let the Soviet Union implode, was so determined to hang on to Chechnya, a small poor mountainous region in the Caucasus measuring only 30 by 70 miles.

But oil greased the equation from the outset. The post-Soviet development of the Caspian's vast reserve of oil and natural gas quickly became Russia's fixation, with an ever increasing importance as the rest of the post-Soviet economy withered. Energy was the one export that the Russian Federation could still produce that was guaranteed an international market, and its importance has only risen with time.

As Argentina's oil battle with the United Kingdom rages on, the only other obstacle the South American country can throw at oil companies planning to drill near the Falkland Islands is to interdict U.K. ships or equipment - but regional expert Riordan Roett doubts the Argentines are "stupid enough to do that."

This would be a "very dangerous move" on the part of the Argentine government, said Roett, director of Latin American studies at Johns Hopkins University in Washington. Argentina, which went to war with the U.K. in 1982 over Falklands' sovereignty, is "very careful" about challenging the British in reaching the islands, Roett noted.

The dispute between the old foes erupted in February when U.K.'s Desire Petroleum towed an oil rig from Scotland to the South Atlantic to drill near the Falklands.

Experts tout the area beneath the islands contains as much as 60 billion barrels of crude oil but there are many doubts about this claim.

Geologists and political-risk specialists say such a vast deposit is possible -- after all, the Atlantic Coast downward from Brazil boasts a great deal of oil - but whether the Falklands is the next place to find such resources will be a question mark for "a couple of years," Roett said.

Oil and Latin American experts, moreover, have mixed opinions about whether U.K. oil firms actually need the Argentine government's help to siphon out any oil from the contested waters.

U.K. firms can do without Argentine infrastructure but much will depend on current technologies, Roett argued. If companies can retrieve and pour oil into super tankers, it can then be shipped back to the U.K. or wherever their clients are based "without worrying about Argentina -- unless the Argentinians were stupid enough to try to stop the tankers," he said.

Even if commercially viable oil at current prices or natural gas is found, projects would "somehow require the use of infrastructure in Argentina" such as ports and pipelines, Daniel Kerner, a Latin America analyst at the Eurasia Group in New York, told OilPrice.com. At the very least, he said, this infrastructure would help make the project more viable, otherwise all of the needed equipment would have to be shipped in, he added.

The price of a barrel of oil when potential Falklands' reserves are brought up in another few years will also play into how challenging exploration will be, Roett noted.

"Is it worth the investment? Are there rigs available? The South Atlantic is not a particularly hospitable place to do any kind of deep-water drilling. So we still have to find out whether or not the technology which exists is applicable to the Falklands."

Acting Nigerian President Goodluck Jonathan has moved decisively and rapidly to unify the Government under him, dismissing -- on March 17, 2010 -- the entire Cabinet which had been appointed by the now-incapacitated Pres. Umaru Musa Yar'Adua. This followed his move, the week before, to appoint Lt.-Gen. Aliyu Mohammed Gusau as the new National Security Advisor, a post which oversees all the intelligence and security services as well as the Armed Forces.

Sources told GIS/Defense & Foreign Affairs late on March 18, 2010, said that about half the ministers would be invited back into the new Cabinet.

The new cabinet would be announced within two weeks, and this should end the divided loyalties of the outgoing cabinet members, many of whom owed allegiance to Yar'Adua, and even to former Pres. Olusegun Obasanjo.

GIS/Defense & Foreign Affairs was able to confirm late on March 18, 2010, that Pres. Yar'Adua is still, in fact, alive, and on frequent kidney dialysis. However, given the fact that he has been in deteriorating health from this condition for a number of years, and the fact that doctors were unsure whether he would have even survived the past few days, there is now no question of him returning to office.

Acting Pres. Jonathan, who has taken over the function of Head-of-State and Head-of-Government, does not have time on his side. There are strong pressures to pretend that Pres. Yar'Adua is still recovering, and merely waiting to be restored to health and to office. The body which would ratify a transition of full power to Vice-Pres. Jonathan -- now Acting President -- is the Senate which must act to confirm a successor if the National Executive Council pronounces the President no longer fit to hold office, but if the President is declared no longer capable of holding office, and the full authority of the Presidency is passed to Dr Jonathan by Senate vote, then the office of President of the Senate could -- under existing political party practice (within the ruling People's Democratic Party) -- rotate to a senator from a different region.

If the Vice-President was to move from his additional duties as Acting President to President, then a new Vice-President would need to be chosen. Meanwhile, there is still considerable in-fighting among the various Abuja power groups, and particularly within the group around the extremely ambitious and avaricious Mrs Turai Yar'Adua. No Nigerian First Lady has been able to wield the power which Mrs Yar'Adua amassed rapidly because of the declining health of her husband, and many orders were sent out by her in his name.

Quite apart from the hold which the wife of Pres. Yar'Adua has on a coterie of her husband's staff and supporters -- which gave her considerable access to influence and money until the past week -- there are many rice bowls attached to the status quo, such as the Presidency of the Senate and the Speakership of the House of Representatives. There has been little incentive, from the personal standpoint of many in the Abuja hierarchy, to change things, and thus the fiction is preserved that Yar'Adua is still President.

Now, however, in the face of decisive action by Acting Pres. Jonathan, the camp around Mrs Yar'Adua is fracturing and bickering. Moreover, the success which Acting Pres. Jonathan has had in galvanizing the Nigerian polity in a matter of a few weeks has made him popular.

There seems little doubt but that Mrs Yar'Adua, who is believed to have amassed perhaps hundreds of millions of dollars in the brief period of her husband's Presidency, will face legal action by the government which succeeds her husband.

For the time being, however, it may well even suit Acting Pres. Jonathan to not fight this situation, as long as he is able to get Nigerian governance back on track. He has the credentials, and now the leverage, to work credibly on calming the Niger Delta crisis, given that he is from the region as the former Deputy Governor, and then Governor, of Bayelsa State, one of the key Delta energy-producing areas, and a state with considerable unrest. He is also demonstrating that he is far more capable than most analysts had thought, even though he has lacked a strong political power base of his own in the past.

A maritime boundary dispute between Ghana and Côte d'Ivoire that erupted this month casts doubt on future international oil claims near the contested area and raises questions about the reaction of foreign investors to the uncertainty.

Earlier this month, Côte d'Ivoire appealed to the United Nations to delineate its offshore border with Ghana, a bid seen as controversial since Russia's Lukoil discovered oil reserves only days before off Ghana's coast. Ghana's Jubilee field will also begin operations later this year and give the country commercial oil-producer status.

Ghana found oil in 2006 and analysts estimate it has one billion to two billion barrels in proven oil reserves; Côte d'Ivoire is probably in the same range or has slightly less oil.

The Ghanaian parliament passed a boundary commission bill this week, according to media reports, which have also asserted that Côte d'Ivoire does not expect discussions to regress into a fight over oil rights. The commission would outline the country's land borders and mark the limits of its maritime boundaries.

While an actual war may not be looming between the African neighbors over the rightful ownership of offshore resources, potential "unclear title right at the margin" will most certainly be a problem, argued Peter Pham, director of the Africa Project at the New York-based National Committee on American Foreign Policy and an associate professor at James Madison University in Harrisonburg, Virginia.

"I think both sides have a stake in settling this, because if there's uncertainty, no one is going to invest anywhere near the disputed area for fear of having bought a license that's worthless," Pham cautioned.

A change of "one or two degrees" with respect to where a line is drawn out to sea can have a "huge impact 100 miles offshore," and neither side will be in a position to profit from resources found there, Pham told OilPrice.com.

The Côte d'Ivoire challenge is being closely monitored by U.S. companies. The West African region, located in an Atlantic basin, is close to the United States and attracts U.S. companies, said Sebastian Spio-Garbrah, a New York-based analyst covering Africa at the Eurasia Group, a research and consulting firm.

Nigeria's controversial oil industry bill is expected to eventually pass but the government may find it tough to later shift gears as international oil firms targeted under the legislation scale back their investments.

The Nigerian parliament is debating the Petroleum Industry Bill, an attempt at oil-sector reform in which Abuja can negotiate "downward" a foreign firm's share of profits and impose higher royalties and taxes, said Peter Pham, director of the Africa Project at the New York-based National Committee on American Foreign Policy and an associate professor at James Madison University in Harrisonburg, Virginia.

Despite potentially spending billions of dollars, a firm not seen as "fully exploiting" an oil block may risk having it turned over to a Nigerian upstart instead, Pham added.

While it is theoretically possible to alter the oil law in the future, "as a matter of practical politics" it will be tough, he argued. Even if the bill passes in the coming days, it will be at least 18 months before a new parliament revisits the law, "assuming it wants to," he noted.

By that time, international oil companies will have been "scared off," as blocks are revoked and given to Nigerians "loath" to surrender them, he said.

"In short, undoing damage would be difficult because there will be new entrenched interests with a stake in the new status quo."
Others are not so sure.

Backers of the hotly-debated bill will eventually see production and investment fall, perhaps by $3 billion annually, which might prompt them to "change the laws a bit and bring more people in," argued Sebastian Spio-Garbrah, a New York-based analyst covering Africa at the Eurasia Group, a research and consulting firm.

At the moment, the country is "just not in the mood for being reasonable" and wants to "own" the industry, which has been dominated by names like Chevron and Total, Spio-Garbrah told OilPrice.com. While local firms may lack the "technology of the Exxons," he noted, the "Pollyannish" government believes Nigerian firms can perhaps later hire oil-services companies to help out.

The country's oil industry needs to be deregulated because the Nigerian National Petroleum Corp. is "clearly inefficient," Pham said. But gaining political support for restructuring the state monopoly has meant adding other financial measures to the bill targeting international petroleum giants that will jeopardize future foreign investment, he cautioned.

The country was already hurting, as militant activity in the Niger Delta forced production off shore. The government instituted an amnesty program last year for fighters willing to change their ways that brought some normality to the region.

The elections in Iraq on March 7, 2010, are likely to serve as an important indicator of the prospects for a resolution of the long-running dispute over the administration of the ethnically mixed and resource-rich province of Kirkuk in the north of the country.

The Iraqi Kurds have repeatedly called for Kirkuk to be transferred to the control of the semi-autonomous Kurdistan Regional Government (KRG), which already administers three provinces in the predominantly Kurdish north of Iraq. The other ethnic groups in Iraq - including the Arab-dominated government in Baghdad - are equally insistent that Kirkuk should remain under central control and that any oil or gas revenues should be divided between the entire population of the country rather than all going to the KRG.

The failure to resolve the issue of the eventual status of Kirkuk threatens not only prospects for permanent political stability in Iraq but also hopes of extracting the province's huge reserves and building new oil and gas pipelines from Kirkuk to Turkey, and from there to energy-hungry Western markets.

"We are very interested in the oil and gas reserves in Kirkuk. Who wouldn't be?" said one executive from a leading European energy company. "We would like to invest in the region, perhaps even become involved in building one of the pipelines. But we can't do anything unless this issue is resolved. At the moment, the risk of political instability is just too great."

The Iraqi Kurds have long maintained that, historically, Kirkuk is a Kurdish province but that it was subjected to a process of Arabization under former Iraqi President Saddam Hussein, who deported a significant proportion of its indigenous Kurds and replaced them with ethnic Arabs. No one doubts that such a campaign was launched, although the scale of the deportations is hotly disputed.

Since the US-led invasion and occupation of Iraq in 2003, the KRG has assumed de facto control of education and security in Kirkuk. Other ethnic groups have accused the KRG of resettling hundreds of thousands of ethnic Kurds in the province, including not only those who were originally from Kirkuk but also a large number of Kurds from other areas. They claim that the KRG's ultimate aim is to change the demographic balance in the province in the run-up to a constitutionally required - but long overdue - referendum on the status of Kirkuk. They fear that, if a referendum results in a vote for union with the KRG, the Iraqi Kurds will attempt to use the revenue from the province's oil and gas reserves as the economic foundations for their long-held dream of an independent Kurdish state. It is a prospect which alarms not only the Iraqi government in Baghdad but also several of the country's neighbors. Syria, Iran and - particularly - Turkey all worry that the creation of an independent Kurdish state in northern Iraq will further fuel secessionist tendencies amongst their own already restive Kurdish minorities.

With Yemen's oil revenues plunging, the government's push into the gas market seemed like an economic saving grace for a state wracked by poverty and terrorism, but analysts warn more thought should be given to carving out the country's post-petroleum era.

The infamous Christmas Day bomber's attempts to blow up a jet approaching Detroit - which Yemen-based al Qaeda in the Arabian Peninsula claimed responsibility for - has drawn unwanted attention to the country's vulnerability to terrorist movements.

Dwindling oil and water resources, high poverty and illiteracy, a ballooning population, rebel uprisings and separatist movements have made Yemen ripe for extremism.

Nestled in the southern tip of the Arabian Peninsula, Yemen is highly reliant on oil money, which accounts for 70 percent of the budget. But total reserves amount to about 2.8 billion to 3 billion barrels, which "really isn't much to write home about," S. Rob Sobhani, president and founder of Caspian Energy Consulting in Potomac, Maryland, told OilPrice.com.

In recent months, the government has tried to spark foreign interest: A delegation from Indonesia visited Sanaa, the Yemeni capital, in January to discuss investment in the oil and gas industry as well as the mining sector. And in February, France's Total signed a preliminary oil exploration deal for $32 million. The company was already leading a $4.5 billion liquefied natural gas plant that started production in October.

Major gas exports, however, are probably not "in the cards" for the Middle Eastern country, but some reserves may be moved within the region by pipeline to Oman and possibly to Saudi cities like Jeddah, Sobhani said. Yemen is strategically advantageous to all liquid natural gas markets, both in the Asia-Pacific basin and on either side of the Atlantic Ocean, he also wrote in the Christian Science Monitor in February.

Yemen needs "built-in consumers already lined up" to fuel the gas sector but where such interest will come from remains unclear, said Christopher Boucek, an associate in the Middle East program for the Washington-based Carnegie Endowment for International Peace. Boucek cited huge, "unfounded" fears in the United States that Yemeni natural gas tankers entering Boston's port, for example, constituted "some sort of a threat to national security."

Apart from drying-up oil reservoirs, the government is also contending with a legal process -- and "mechanics on the ground" for exploring, producing and extracting gas -- that are "not very well streamlined," Boucek noted, adding that Sanaa aims to fix these problems in a bid to court more foreign investors.

The artificially-engendered revival of the dispute, which began in February 2010 between Argentina and the United Kingdom over the sovereignty of the Falkland Islands in the South Atlantic, has been portrayed as a posturing by embattled Argentine Pres. Cristina Fernández de Kirchner, taking advantage of both the start of exploratory oil and gas drilling by British company Desire Petroleum in the Falklands waters, and the talks by Latin American and Caribbean leaders of the Rio Group in the Mexican resort of Playa del Carmen, beginning on February 22, 2010. But the crisis may well play into the political posturing of equally embattled United Kingdom Prime Minister Gordon Brown, who faces a general election by June 2010 at the latest.

Britain's presently governing Labour Party is as conscious -- almost superstitiously so -- of the fact that the 1982 Falklands War with Argentina revived the flagging fortunes of incumbent Conservative Prime Minister Margaret Thatcher, just as the US Democratic Party is fixated on the belief that Democratic Pres. Lyndon Johnson failed to win a second term in office because of being embroiled in the Vietnam War. As a result, the British Labour Party is unlikely to attempt to quell the dispute in the short term between the UK and Argentina, even though it plays strongly into the hands of Pres. Fernández de Kirchner.

The increasingly leftist bloc within Latin America, prompted and often financed by Venezuelan Pres. Hugo Chávez Frias, obliged Pres. Fernández on February 22, 2010, in Mexico by endorsing her attacks on the UK position and the assertion of Argentine sovereignty over the Falklands. It is clear, however, that Argentina's population and Armed Forces are in no position to resume any form of military conflict with the United Kingdom over the Falklands, even though British forces are themselves stretched by engagement in Afghanistan.