Global Energy Crisis: Some Reflections.

 

Global Energy Crisis: Some Reflections.

1.  The Russia-Ukraine conflict has now been going on for more than three years. Russia currently occupies approximately 20% of Ukrainian territory. The Russian occupation of Ukrainian territories, including Crimea, employed the unlawful use of force. Hence, it is not legal. The rest of Europe has not yet legitimised Russian occupation of Ukraine's territory. But if you ask whether Russia has won the war, the answer is no. Russia has not won the war, even though it is in illegal occupation of approximately 20% of Ukrainian territory. But Ukraine cannot be declared as the winner in the war. “In fact, both are losers!” Russia is losing anywhere between 500 million and 1 billion US dollars every day in conducting this war.

The Russia-Ukraine conflict is likely to continue for the foreseeable future. It will continue so long as Europe has the political will and economic power to provide Ukraine with the type of support that it has been receiving during the armed conflict. Even though Russia has not lost the war, it has still lost considerable human and economic resources in pursuit of an objective whose realisation is, at best, doubtful. Usa under Joe Biden promptly imposed sanctions on Russian gas & oil. Under Trump, the USA toned down a bit, But Sanctions against Russian energy continued.

2. The USA And Global energy trade- US- Iran war

On the other hand, we have the USA-Iran war. Originally, it was a conflict between Israel and Iran. Subsequently, the USA became involved, and it had substituted Israel as the active combatant.

Even though the Arab nations had earlier prohibited the US from using their territories for conducting military operations against Iran, the territories of Arab countries continue to be bombarded by Iranian forces because they have allowed America to maintain military bases in and around the Middle East. The US has undoubtedly been able to kill thousands of Iranians. Officially, the US has lost fewer than 100 defence personnel as fatalities in this armed conflict. The US has also suffered serious economic losses.

Today, the US is probably the only country that can claim to be both a big energy consumers and a net energy exporter. At the same time US foreign policy demands that, in order for the US to have a good market for its energy products, The USA has a vested interest in ensuring that some of the major producers of fossil fuels are continuously kept out of the global market, so that US energy can be sold in the global market will command a better price.

The US has established the institution of the petrodollar, under which countries purchasing oil from the Middle East have traditionally settled their trade transactions through US dollars. However, the institution of the petrodollar is beginning to weaken. China has started buying energy from Saudi Arabia using its own currency. For more than 10 years, Iran has also been conducting a significant portion of its trade in Chinese currency; Russia today has its own monetary mechanism for its trade in oil, though it was part of the petrodollar. The US has, at different periods of time, been successful in keeping Iraqi oil, Venezuelan oil, Russian oil and now Iranian oil out of the international market, thereby ensuring that US energy exports continue to remain lucrative in the international market. US has perfected the art of weaponising global oil trade by employing Petrodollars.

Now that Iran has taken the battle to other Middle Eastern countries such as Saudi Arabia, Qatar and the United Arab Emirates, the price of oil in the global market has increased significantly. Qatar had to suspend the production of CNG. India today buys CNG from the USA and oil from the USSR after the closure of harmony strait; the flow of Middle East oil; into the global market is minimal.

4. In today's economy, energy remains one of the most important input costs. The more money countries around the world have to spend on their energy requirements, the less money they will have to purchase products from other advanced countries, including the United States of America. Thus, an increase in global oil prices would inflict a double blow on the USA; not only will the US consuming public pay more for their oil, but also the demand from the rest of the world for expensive America products will decline. Notwithstanding the local cheap (unclean) energy, US-manufactured products are not always competitive in the global market. China has built its manufacturing economy in such a way that it has become one of the world's largest manufacturing nations. Both these nations continue to rely on coal energy, one of the villains of global warming. COVID-19 caused considerable disruption to China's ambition of becoming the primary manufacturing hub for the entire world. Now, many countries have decided to adopt the "China Plus One" policy. This will still mean that China remains one of the most important suppliers of manufactured products because not many countries around the world will not be able to match the economies of scale that China has achieved. In these circumstances, the situation in the Gulf becomes even more complicated because the United States has realised that China, which is currently the second-largest economy in the world, may, at some point, become the world's largest economic power, replacing the United States from the position it has enjoyed for almost a century. The US is currently pursuing all available means to postpone this future reality.

This is an important crossroads in global relations.

5. Changing Global Political Dynamics/ US as the global leader?

Many observers and analysts of international relations make their predictions based on certain established trends. All of them recognise that the world today is becoming increasingly multipolar.

The United States, the most dominant superpower, is undoubtedly a mature democratic government. The President of the United States In many ways, possesses enormous executive authority. In terms of foreign policy and its implementation. The President can take significant decisions independently. The institution of the US President is the most dominant actor in shaping global relations and world peace. Theoretically, the Senate and the House of Representatives have the power to control the behaviour of the President of the United States of America. However, in reality, Congress often finds it difficult to control the President. the US Constitution gives the President the power to veto legislation passed by Congress. Although overriding Presidential veto is theoretically possible under the Constitution, it is practically difficult because legislators and political parties often depend on the President and the political system for their continued influence and Partly existence. Since the President controls the party system, the legislations do not reverse presidential veto. Observers around the world make certain predictions based on the behaviour of political parties in the United States, depending on whether the government is controlled by the Democratic Party or the Republican Party. However, with Mr. Donald Trump becoming President of the United States, many of these expectations have become unpredictable.

He has carved out a very unique position for himself in 21st-century international relations. So far, people believed that only undeveloped, underdeveloped or politically less-evolved societies produced cruel and impulsive dictators. In many ways, the Trump has challenged this assumption. Nobody is able to predict him with certainty. Mr. Trump often makes decisions and subsequently changes them within a short time. Besides, Mr. Trump is more cruel to its own allies and goes out of the way to appease its adversaries such as North Korea and China. Mr. Donald Trump also craves for European recognition. He openly lobbied for the Nobel Peace Prize. Norway, which administers the Nobel Peace Prize process, chose not to grant him the prize. Instead, the prize was awarded to one of his protégés from Venezuela

7. Tariffs and the Return of Protectionism

Now we know that Mr. Trump employs tariffs as an important instrument of US global trade policy. In the past, the USA was one of the biggest champions against protectionism.

Traditionally, countries have used their sovereign power to decide whether foreign goods should enter their local markets. When they allow such goods to enter, they can determine the conditions under which foreign goods may be sold, impose qualitative, quantitative and phytosanitary restrictions to regulate the type and volume of products imported and sold into the local market. During the 20th century, the United States continuously opposed the concept of protectionism. USA under Mr Trump has become the biggest champion of local protectionism. The United States was an important global actor in the establishment and development of the GATT/ WTO. It also facilitated China's entry as a full member of the WTO, notwithstanding the fact that China was not originally a member of GATT. Under GATT, there is the principle of Most-Favoured-Nation treatment. The term "Most-Favoured-Nation" is somewhat misleading. It does not allow countries to bestow special economic privileges on one nation that other members of the global trading community are not entitled to receive. In reality, it provides equality of treatment in terms of exports and imports. Mr Donald Trump’s tariff policy has effectively killed MFN principle.

8. Global Warming and the Future of Energy

The USA is also a major consumer of coal-based energy, which is considered one of the most polluting forms of energy. CO₂ and NOx emissions from thermal power plants contribute significantly to global warming. Europe and the rest of the world have committed themselves to reducing and, eventually, eliminating CO₂ and NOx emissions. Many island countries, which contribute very little to global CO₂ and NOx emissions, are likely to become some of the most immediate victims of rising sea levels.

The USA, Russia and China may not be as concerned about global warming as other countries, particularly because the melting of Arctic ice could make the Arctic region increasingly navigable for a larger part of the year. It may also open up opportunities for greater access to resources and new maritime routes. The Trump administration has already withdrawn the USA from the Kyoto Protocol and the Paris Agreement. The closure of the Hormuz Strait and the sanctions imposed against Russia could further increase global reliance on thermal coal-based energy. Such a development would constitute one of the worst environmental disasters of the 21st century.

9. The Changing Global Energy Trade

The changing global energy landscape will have several important consequences.

a)   countries may gradually reduce their reliance on oil and increasingly depend on coal-based energy. Such a shift could further strengthen China's position in the global energy market.

b)  the importance of nuclear energy is likely to increase, notwithstanding its high cost, safety concerns and the risks associated with the diversion of fissile material for military purposes.

c)   the USA, China and Russia are likely to continue expanding their coal-based energy infrastructure, thereby increasing the risks associated with global warming.

d)  China has, to a considerable extent, insulated itself from the volatility of the global energy market by building substantial strategic reserves and increasing its dependence on energy supplies from Russia and Iran.

e)   India, on the other hand, has committed to spending more on the exploration of oil and gas resources in the Indian Ocean, particularly in the Bay of Bengal and the Andaman and Nicobar region. India should instead place greater emphasis on renewable and low-carbon energy resources, including biomass and solar energy. India's solar-energy sector has recently faced several challenges, and these need to be addressed urgently.

f)    as Mr. Fareed Zakaria has observed, India needs the United States more for achieving its developmental aspirations than the United States needs India for maintaining its position as an economic superpower. India's relationship with the Trump administration may therefore remain somewhat subdued. However, in the long run, it would be difficult for India to function without significant trade with Russia and Iran. This is unlikely to be the case for the United States. Therefore, India's conflict of interests with the United States is real and cannot simply be wished away.

g)   India now has, or is pursuing, free-trade arrangements with several major economies and regions, including Europe, the UK, Canada, Australia, New Zealand, Japan and African countries. India, like Canada, should realise that it would be economically and politically prudent to reduce excessive dependence on the United States. India should therefore diversify its external trade and reduce its dependence on the US market.

h)  the United Nations today appears weaker and more powerless than at any point in its history. The prospects of meaningful reforms to the structure of the United Nations appear remote. The Trump administration's use of tariffs and the United States' willingness to employ military force to settle economic and political disputes have further weakened confidence in the existing international order. In this context, the political voice of China assumes greater significance.

i)    India should do everything possible to strengthen multilateral institutions and groupings such as the WTO, the Paris Agreement and BRICS. The next twenty years will be crucial for India. If India can successfully navigate this period, it can strengthen its economic and strategic position and earn greater respect from the United States, while also expecting to be treated with the same degree of seriousness and consideration that the United States accords to China.