January 09, 2010

Turbulence Rocks Islamic Republic


January 8, 2010

Fierce clashes between opposition protestors and Iranian security forces on the occasion of Ashura—the Shiite sacred day commemorating the seventh-century martyrdom of Imam Hussein, has accentuated the domestic political instability in the Islamic Republic. It appears that despite the absence of the right to protest, the dissidents chose the day of Ashura to take to the streets against the authorities. The challenge to the authorities of the 30-year old Islamic Republic has hardly ever been greater in the almost daily protests seen on the streets of Tehran now. In fact, the recent clashes were the most violent since the aftermath of the disputed presidential election in June 2009.

The December 27, 2009, clash left at least eight people dead including one nephew of the election runner-up and opposition leader, Mir-Hossein Mousavi, though, the exact number of deaths in the violence remains unclear. Hundreds of opposition figures have been arrested including the sister of Shirin Ebadi, who won the 2003 Nobel Peace Prize. Iranian security forces also limited the movements of the other prominent opposition leader Mahdi Karroubi by declining to guard him if he leaves his home.

Protesters were chanting, “This is the month of blood,” and calling for the downfall of Iran's Supreme Leader Ayatollah Ali Khamenei. However, tens of thousands of Iranians also protested on Enghelab Street to voice support for Khamenei, chanting “Death to opponents.” It is getting clear that the recent clashes would only help intensify hostility between the hardline government and the pro-reform movement that has shown resilience in the face of frequent crackdowns.

To make matter worse for the authorities, the traditional seventh-day of bereavement for Ayatollah Montazeri coincided with the Ashura ceremonies. Montazeri had passed away on December 20, 2009. In 1985 Iran’s Assembly of Experts had selected Montazeri to succeed Ayatollah Ruhollah Khomeini. However, in 1989 it was determined that he should no longer be Imam Khomeini’s successor due to his views on political events at that time. More recently he had called President Mahmoud Ahmadinejad’s re-election a fraud and stated that Iran’s leaders were in danger of losing their legitimacy. His views had received wide support from several opposition supporters.

The Iranian government blamed the US and other Western powers for triggering the recent clashes. President Mahmoud Ahmadinejad pointed out that the recent protests are also “a play ordered by Zionists and Americans” and condemned the US and Britain for allegedly supporting the opposition protesters. He also added that “the Iranian nation has witnessed this kind of play several times.” Britain, France, Germany and the US have strongly condemned Iran’s brutal reaction to the protests. On December 28 2009, President Barack Obama noted that “the courage and the conviction of the Iranian people” while condemning Iran’s government for attacking demonstrators with “the iron fist of brutality.” The recent harsh criticism of the US and Britain and counter condemnation by the Iranian leaders would further intensify tensions between Iran and the West. Recent tensions will also encourage the West to impose harsher economic sanctions against Iran over its nuclear program.

A triumvirate of the supreme leader, Ahmadinejad and the powerful Islamic Revolution Guards Corps (the protectors of the Islamic Revolution and only answerable to the Supreme Leader) is arrayed against a broad pro-reformist movement, helped by a small group of powerful clerics. Khamenei and Ahmadinejad have become more reliant on Iran’s military, and allegations that Iran is imitating the violent crackdown of the Shah’s regime will begin to stick. Despite the absence of a united opposition—the protestors have been subdued. Yet the authorities’ assessment that the clashes would completely peter has proven incorrect.

The domestic political instability has begun at a time when Iran is facing the prospect of further international isolation and tougher economic sanctions if it fails to clinch a deal with world powers on its nuclear enrichment programme. Due to the ongoing internal disturbance, Ahmadinejad could accept the deal, which may also surprise the opposition. However, it is not easy for him to make such a decision.

Although Iran’s regime is under no immediate danger of being toppled, it however faces a growing number of internal and external threats which will necessitate prudent redressing.

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The Future of Global Oil Supply:


Understanding the Building Blocks

by Peter Jackson, Senior Director, IHS Cambridge Energy Research Associates

Context: Predicting Supply in a Complex World

Fears about "running out" of oil are recurrent. At their strongest, they coincide with periods of high prices and tight supply-demand balance. The latest such period of "peak oil" concerns became very evident from 2004, when strong oil demand ran up against capacity constraints. In contrast, IHS CERA’s reference case for global liquid productive capacity shows growth through 2030 to around 115 million barrels per day (mbd) and finds no evidence of a peak in supply appearing before that time.

Hydrocarbon liquids—crude oil, condensate, extra heavy oil, and natural gas liquids—are a finite resource; but based on recent trends in exploration and appraisal activity, there should be more than an adequate inventory of physical resources available to increase supply to meet anticipated levels of demand in this time frame. Post-2030 supply may well struggle to meet demand, but an undulating plateau rather than a dramatic peak will likely unfold. Moreover, if the "peak demand" now evident in the OECD countries is a precursor of later developments in the emerging markets, world demand itself could eventually move on to a different course.

In the short term the industry is at another crossroads following the precipitous fall in demand in 2008–09 in response to the onset of the recession. The oil price has roughly halved from its peak of $147 per barrel in July 2008, OPEC has recently cut production, OPEC spare capacity has nearly tripled to 6.4 mbd, and the industry has slowed its pace of expansion. Early in 2009 IHS CERA estimated that as much as 7.5 mbd of new productive capacity could be at risk by 2014 if costs remained high and oil prices hovered just below the cost of the marginal barrel for two years. Since then the oil price has recovered strongly to around $70–$80 per barrel, and some confidence has returned. Even in these unpredictable times the industry has continued to invest and to build new productive capacity; indeed, Saudi Arabia recently brought onstream the giant Khurais field, which at plateau is expected to produce 1.2 mbd. With sustained investment, a healthy cushion of spare capacity, and slow to moderate post-recession economic growth, supply should not present major problems, at least in terms of availability, in the short term.

Of course looking further ahead, it is important to recognize that oil is a finite resource and that at some stage supply could fail to meet demand on a consistent basis. It is impossible to be precise about the timing of this event, but given the pace at which demand has increased in the past decade a pivot point may well be reached before the middle of this century. Much depends on key factors such as global economic growth, the capability of the upstream industry, costs, government policies on access and taxation, the evolution of renewable and alternative energy sources—particularly for transportation—and the effect of climate change issues on policies and regulations concerning the use of fossil fuels. However, there is time to prepare and to make rational decisions to avoid being forced into short-term approaches that may not resolve longer-term problems.

Many studies of future oil supply examine subsurface issues and focus in particular on the scale of the resource while giving limited consideration to technology, economics, and geopolitics. Though belowground factors are critical, it is aboveground factors that will dictate the ultimate shape of the supply curve.

This IHS CERA Report presents the main points in our current productive capacity outlook to 2030 and discusses the architecture of future conventional and unconventional oil supply. In order to provide a framework, the methodology and foundations of the outlook are reviewed and the results of supporting studies on decline rates and giant fields are included.

In so doing, this report addresses the debate over "peak oil." There is much emotion involved in that debate. In our view much would be gained by lowering the emotional level and instead shifting to a more objective dialogue, based on a comparative view of data, methodology, and analyses. Our hope is that this paper can contribute to such a discussion and exchange. Our further hope is that out of such a dialogue will come a deeper understanding of the world’s oil supply in the decades ahead—a question crucial to the world’s overall future.

There are many areas of overlap between IHS CERA’s view of future oil supply and other outlooks. Oil is a finite resource, and at some stage supply will begin to fall short of meeting demand on a consistent basis if there is no break in the connection between economic growth and oil demand. The basic differences in opinion appear to center on when this will happen and on what happens after the inflection point. The view that oil supply will plummet after the inflection point and oil will run out, like the gasoline in an automobile, is misleading for the layperson.

IHS CERA believes that this inflection point will herald the beginning of an undulating plateau of supply that will last for perhaps two decades before a long, slow decline sets in (see Figure 3). It represents a transition period when traditional market forces and government policy will be unable to adjust supply to meet growing demand and limits are reached. Of course the path of demand will exert a controlling influence on the future supply curve. Peak demand is an equally important concept that may well be viewed in hindsight, from the perspective of a half century from now, as the main driver of peak supply.

But one further important point: Though a peak of global oil production is not imminent, there are major hurdles aboveground to negotiate.

Methodology: Defining the Yardsticks

Let us begin with the methodology with which we approach these questions.

Productive capacity is defined as the maximum sustainable level at which liquids can be produced and delivered to market. Productive capacity estimates account for routine maintenance, but not for general operational inefficiency, temporary interruptions such as weather or labor strikes, nor for dramatic swings in political and economic factors. For example, a field may have a productive capacity of 140,000 barrels per day (bd) but in reality produce 130,000 bd on average over a year because of unforeseen maintenance issues, regulatory inspections, rig movements, and tie-ins.

At the core of IHS CERA’s methodology is recent production history, which is considered the most reliable data available on which to base a supply projection. We can measure the barrels arriving at the surface over time. Future production trends are extrapolated using a comprehensive framework of decline rates and knowledge of operational plans for individual projects and fields. Remaining reserve data are an important constraint on the future supply profiles but—given the uncertainties in reserves estimation—can be used only as a broad guideline of future supply.

Four key components of supply are included in the outlook (see Figure 1):

fields in production (FIP)

fields under development (FUD)

fields under appraisal (FUA)

yet-to-find (YTF) resources

IHS CERA has fully incorporated the data from the IHS International Field and Well Data database so that there are approximately 24,000 fields and discoveries underpinning the outlook. In addition, we have conducted detailed analysis of field production characteristics, especially decline rates, which have been incorporated at the field and project levels.

A detailed database of approximately 450 OPEC and non-OPEC FUD provides a clear insight into the immediate plans of the industry to execute new projects ranging individually up to 1.2 mbd at production plateau. YTF resources are estimated by extrapolating historical activity and success rate data and making assumptions about future levels of activity in key countries. We have recently compiled historical exploration data from the IHS International Field and Well Data database on well count, success rate, and discovery sizes for each country, which has improved the YTF analysis.

In this activity-based model we take account of project efficiency, costs, timing, hardware availability, and our detailed oil price outlook. We adopt a holistic portfolio perspective to evaluate global productive capacity. Although it is clear that some giant fields such as Mexico’s Canterell are now strongly in decline following a successful secondary production program, and many countries are past their "peak," the sum of the parts as we currently see them show that global productive capacity should be able to grow for at least the next two decades.

Why So Much Variation Among Published Outlooks?

The long and complex debate about the future of global oil supply is characterized by two overriding characteristics: the very large range of potential outcomes projected and sustained disagreement about "the answer."

Production volumes are closely related to reserves, rock physics, and investment. Publicly available data tend to be limited and of variable quality. A wide range of methodologies have been applied to the problem, from those encompassing systematic analysis and careful assumptions to less robust techniques such as Hubbert’s method, which can provide a good approximation in certain circumstances but fall down especially where government policy constrains production. Importantly, Hubbert’s approach, developed in the 1950s when technology was stagnating, also fails to account for fluctuations in demand, technology advances, and the discovery of new hydrocarbon plays. Additionally different studies are based on variable views on reserves/resources, field production performance, future exploration, technology, and commercial issues. Few have attempted to incorporate the impact of aboveground factors such as demand and geopolitics.

Some models are based on a very pessimistic view of the future, which is not borne out by scrutiny of recent trends in exploration and production. For example, frequent claims—that "half of global oil reserves have been produced," "global reserves are not being replaced on an annual basis," and "deepwater exploration is essentially exhausted"—are questionable. The recent discoveries of ten giant oil fields below a thick salt layer in the Santos Basin, Brazil, may have boosted global resources by at least 25 billion barrels. Further assertions that giant oil fields are past their prime simply are not borne out in a recent detailed study of 548 giant oil fields in the IHS CERA Private Report Giant Fields: Providing the Foundation for Oil Supply Now and in the Future? This study demonstrates these fields’ continuing strong contribution to global supply and that some 76 giant fields, representing 84 billion barrels, remain undeveloped. Fields in general and giant fields in particular still show considerable potential for reserves upgrades, as illustrated in many studies.

IHS CERA’s 2009 Supply Outlook: "Pausing for Breath"

In our most recent reference case outlook, global productive capacity is expected to average approximately 92 mbd in 2009 and to rise to 115 mbd by 2030. This is a lower rate of growth than we have projected in the past and reflects the reaction of the oil industry to recent changing market forces. This is just one version of many possible outcomes, and we use it in this report to illustrate the architecture of supply and the nature and scale of the problem. This reference case provides a view of the building blocks of future supply in terms of FIP, FUD, FUA, and YTF as well as "Others," the category of unconventional liquids that include extra heavy oil, biofuels, coal-to-liquids/gas-to-liquids, and natural gas liquids. With aggregate decline rates of around 4.5 percent per year, FIP provide a diminishing proportion of the total future capacity. But in terms of the conventional oil asset life cycle, exploration replenishes the appraisal project inventory, which feeds into sanctioned development projects and ultimately producing fields. Figure 1 is a snapshot of a very dynamic system.

This summary does not show evidence of a peak in oil productive capacity before 2030. However, it does emphasize the importance of future exploration and the role of unconventional liquids in generating growth in the future. IHS CERA believes that unconventional liquids already contribute around 14 percent of total global capacity, and we expect this share to grow to 23 percent by 2030. The contribution of exploration is emerging as one of the key uncertainties and is the subject of current IHS CERA research.

This model assumes that

The oil price stays above the cost of the marginal barrel for most of the period to 2030.

There are adequate existing and future resources to support these sustained volumes of higher capacity.

The industry can build the hardware and develop the technical capability to implement investment programs.

What Are the Challenges to Producing a Robust Outlook?

Predicting future productive capacity hinges on an in-depth understanding of a complex multicomponent system, which is driven by the interplay of both aboveground and belowground factors. It is not realistic to treat the global oil endowment as if it were simply in a tank being emptied. IHS CERA’s experience of evaluating productive capacity over two decades suggests that there are no unique answers, a point reinforced by the wide variety of published outlooks noted above.

As part of our ongoing research program IHS CERA has concentrated on a number of factors that will strongly influence future supply:

Data. The IHS CERA reference case outlook is based largely on the IHS International Field and Well Data, and North American databases, which are arguably the most comprehensive available upstream data sets available. A reliable and comprehensive database is critical to any credible projection—but the complexity of the analysis requires making some significant assumptions. IHS CERA has critically tested many of these assumptions by studying some of the key questions relating to historical exploration trends, resource replacement, and oil field performance.
But even a perfect data set would generate a range of possible outcomes in modeling because of the complexity of the problem. The debate about future supply and data has tended to focus on subsurface technical data, especially reserves data. But there is a wide range of sources related to aboveground drivers that is also crucial in assessing country-specific economic data and projections—which drive supply—as well as rig count, yard space, and service sector capability.

Reserves. To date, the analytical core of this debate appears to have hinged on knowledge of field and global reserves. Oil and gas reserves are defined as the volumes that will be commercially recovered in the future. Hydrocarbons are trapped in reservoirs underground and cannot be physically audited or inspected, so estimates are based on the evaluation of data that provide indirect evidence of the scale of the reserve base. The Society of Petroleum Engineers (SPE) has produced a detailed set of six categories of reserves and contingent resources and three categories of undiscovered prospective resources. These reserves estimates entail large degrees of uncertainty, and a great deal of experience and judgment are required in performing the calculations.

Given the complexity of the calculations there are no unique answers at the individual field or global levels, and we still do not know exactly how much has been discovered or what remains to be found, despite any claims to the contrary. Current estimates can only be considered as orders of magnitude. The questionable use of resource estimates is well illustrated by Hubbert’s (1982) approach, which suggests that a peak of production occurs when half of the global inventory of supply has been produced. This seems plausible initially, given that some 1.1 trillion barrels of oil has been produced to date and there are apparently some 1.2 trillion barrels remaining to be produced. But that is appearances. What this approach does not make clear is that this analysis is based on "proven plus probable conventional reserves" alone, which amounts to 2.3 trillion barrels. It ignores all the remaining categories of conventional and unconventional reserves and resources (including possible, contingent, and prospective reserves), defined by the SPE, which could ultimately contribute at least as much again. IHS CERA estimates that global resources could be approximately 4.8 trillion barrels, including just over 1.1 trillion barrels of cumulative production to date.

It is clear that we are dealing with a finite resource, but more consistency in reserves reporting and further systematic studies are needed, such as the United States Geological Survey (2000) study of global YTF resources, to improve the quality of the numbers. Remaining reserves data are an important constraint on the future supply analysis—but given the uncertainties this can be used only as a broad guideline. Existing resource estimates have a habit of being increased as fields are upgraded and new plays are established.

Decline rates and field performance. At the core of IHS CERA’s productive capacity model is an extrapolation of historical production data into the future. We have completed a study of over 1,000 fields to understand the characteristics of field production through the buildup, plateau, and decline phases. Central to this analysis is an attempt to estimate typical decline rates for a range of field sizes and types in different geological and geographic environments. Information from relatively mature, data-rich areas such as the North Sea and Norway suggested that decline rates were well above an alarming 10 percent on an individual field basis, so it was important to complete this study to develop a more accurate and representative picture around the world.

In the discussion there often seems to be a confusion betweendepletion and decline. All oil fields start to deplete the day production begins, but not all fields have production in decline. Oil field production only starts to decline after the plateau period of production has ended. From our 1,000 field study database only 40 percent of production comes from fields in decline, suggesting, perhaps surprisingly, that a significant proportion of all production comes from fields building up or on plateau. This striking point often seems to be lost in the discussion. This study showed that the average decline rate for fields that were actually in the decline phase was 7.5 percent, but this number falls to 6.1 percent when the numbers are production weighted. The numbers were subsequently corroborated by the IEA (2008). Importantly, the global aggregate decline rate of all fields currently in production (which includes fields building up and on plateau) works out to be around 4.5 percent. It is anticipated that aggregate decline rates might increase slowly with time and also that ultimate recovery will continue to increase medium term.

Giant fields are still the cornerstone of global production. Some 548 giant oil fields contribute 61 percent of the total; and although production from the giants has risen, that proportion has remained steady in recent years. Recent IHS CERA research on giant oil fields shows that collectively the giant fields are not in decline and that some 60 percent of their recoverable oil remains to be produced. The number of giant field discoveries has declined in recent years, but their contribution seems unlikely to plummet in the near term.

Costs and capability. The IHS CERA Upstream Capital Costs Index (UCCI) is a combination of a set of indexes used to monitor the current state of the global upstream cost environment. Set at 100 in 2000, it more than doubled by the end of 2008 (230). This means that oil companies were essentially spending twice as much to undertake the same amount of work as in 2000. By the end of September 2009 the UCCI declined to 202, putting costs back to early 2007 levels; and although oil prices recently fell back to 2004 levels, cost reductions are projected to drop only gradually over the next six months. Some service sectors, such as the deepwater rig market, will sustain a high pricing structure because of the sustained demand; others, such as jackup rig markets, have softened and may continue to do so.

One critical factor for future oil output is people. Current upstream sector demographics are such that a large proportion of experienced professionals will retire in the next ten years. The industry has acknowledged this for a number of years and has taken steps to hire and train a new generation of experts, but this may be too little too late. In the current downturn the industry is again in danger of further erosion of its skills base. The service sector in particular is under pressure from operating companies to reduce costs, and this means rationalizations of staff, which will seriously restrict the capability of the service sector in the future.

Other aboveground factors. One key driver of the future supply outlook, rarely considered, is the ability of OPEC countries to control production. In most non-OPEC countries exploitation has progressed without much constraint. This means that for many non-OPEC countries, especially those with modest reserves, production has already peaked. While non-OPEC production capacity still has the potential to grow, it always produces at the limits of its productive capability with limited flexibility. On the other hand, with its vast resource base, much of it undeveloped, OPEC has controlled investment and production, depending on market conditions. Many OPEC countries have specific policies that control the pace of exploitation for future generations. Also many national oil companies have a different approach to oil field exploitation that focuses on optimizing long-term recovery. Extrapolating the impact of current OPEC investment and policy on future supply does not support a short- to medium-term shortage of oil.

Any outlook can present only one potential version of the future. IHS CERA uses a reference case production capacity outlook to generate three scenarios for future production—Asian Phoenix, Break Point, and Global Fissures—that enable an understanding of the range of possible drivers of future supply and describe three feasible outcomes. Recent oil price volatility has further reinforced the point that the future is highly uncertain and a range of outcomes should be considered.

The Big Picture

It would be easy to interpret the following market and oil price events from 2003 through 2008 in isolation to support the belief that a peak in global supply has passed or is imminent:

oil price spike to $147 per barrel in July 2008

tight supply-demand balance of around 2.5 mbd through mid-2008

considerable decline in global production to around 83 mbd

However, these events are linked to an array of political and economic factors, including a global boom, "the rise of the emerging markets," financial market impact, and constraints on "catching-up" in developing new capacity. They do not herald the onset of a peak and at the simplest level illustrate that the market continues to act as the shock absorber of major volatility. Supply continues to respond to prices (conditioned by expectations of future demand), and simultaneously demand responds to prices.

Improved data availability and transparency could help to produce more accurate outlooks for future capacity—but even this will not provide unique, reliable answers. Subsurface data on reserve levels and decline rates are only a part of the story. Some of the major aboveground factors that will continue to affect what actually happens to output are listed below. Both their importance and the range of possible outcomes inherent in them are evident:

future course of the global economy

government policies and decisionmaking in resource-holding countries

balance and impact of the complex web of geopolitics

future course of oil prices

course of government policies that focus on controlling demand

development of renewable energy sources and climate change issues

Many projections, including those based on the methodology of Hubbert, fail to account for the impact of economics, technology, or geopolitics,while others concentrate on conventional oil alone and fail to account for the growing proportion of unconventional oil being developed and produced. One is struck by the conviction, in each period, that technology has gone "about as far as it can go."

IHS CERA tackled this issue by developing a possible range of outcomes through plausible scenarios for the future of global energy. Even this comprehensive study—completed in 2006—does not present a unique base case projection, but rather develops the three scenarios noted above—Asian Phoenix, Global Fissures, and Break Point—extending to 2030. Indeed elements of these scenarios have played out during the past three years.

The Break Point scenario, developed in 2006, envisaged that oil prices would reach $150 per barrel. It demonstrated the importance of the feedback loops. In this scenario high prices and fear of shortage have a strong price response and policy response. The results include a shift by consumers and automakers, and programs to enhance energy efficiency and accelerate growth of alternative fuels, and oil loses its monopoly on transportation.

Global Fissures envisions a deep recession. A widespread political backlash against free trade and globalization, combined with global trade and political disputes, lowers economic growth and weakens energy prices. One of the triggers is a hard landing of the US economy, owing to the overhang of debt in housing and other sectors. Global Fissures reflects the current global climate most closely.

Looking ahead, we can see that the upstream industry faces many challenges. There is little doubt that the existing and possible future resource base can support growth in capacity through 2030. There is no shortage of new projects or exploration potential to replenish the hopper. Exploration and field upgrades have tended to replace global production in recent years. Exploration is not yet in terminal decline, and while recently some 12 billion barrels of oil has been discovered annually, the five-year moving average is actually growing (see Figure 2).

The longer-term problem lies not belowground, but in obtaining the investment and resources that the industry will need to grow supply significantly from current levels. Both OPEC and non-OPEC countries have a strong current inventory of some 450 projects under development. The recent fall in oil prices has precipitated a slowdown in the rate at which projects are being sanctioned and developed—but this temporary situation will ease when the global economy starts to recover. The projected medium-term slowdown in the rate of supply growth is a simple function of economics rather than evidence of an imminent peak.

Yet there are a number of trends that cause concern. Non-OPEC growth has been worryingly anemic for five years, driven largely by slowing growth of productive capacity in Russia. Non-OPEC may well struggle to regain the annual growth levels greatly exceeding 500,000 bd that were common before 2004. OPEC countries will be a key element of future growth, but prolonged periods of low oil prices (below $60 per barrel) and abundant spare capacity of around 6.5 mbd might well start to inhibit long-term supply growth. But just over the horizon a period of strong economic growth could quickly reverse this trend.

However, structural changes currently occurring in the service sector in response to falling costs will pose a threat to future supply expansion. After nearly a decade of strong growth in response to increasing demand, some service sector companies are downsizing and restructuring, and this will affect the ability of the service sector to help bring on new supply at an appropriate pace when demand starts to recover.

While the current economic situation has driven a reduction in exploration and production investment, it has also coincidentally provided a supply cushion that will take some time to work its way back into the system. Companies continue to build new productive capacity, albeit at a slower rate than one year ago. Collectively this will provide a short-term cushion until the global economy starts to pick up again from 2010 onward. One can well envisage a scenario half a decade or so from now in which a period of strong demand growth again leads to a period of tight supply and higher prices as investment and capacity growth fail to keep up.

But this should not be confused with the inflection point (see Figure 3). Ultimately there will be an inflection point when sustained growth of productive capacity will cease. As already noted, one fundamental difference is the view of when it occurs—is it imminent or two decades or more away? The other difference is on the question of what happens after the inflection point. The idea that oil supply will collapse after the inflection point and that oil will run out of the "tank in the ground" confuses the public. In our view this inflection point will inaugurate a new era—the beginning of an undulating plateau of supply. That, in turn, will last for another two decades or so, before a long, slow decline sets in. Would that be in 2050 or 2060 or even 2070? Whenever, it would take us into still a third era—the start of a transition period when traditional market forces and government policy will be unable to adjust supply to meet growing demand and the real limits are reached.

But much will happen before then that will affect demand—from changes in the automobile engine and the electric battery to changes in demographics and values. That is why the concept of "peak demand" is so important. Ironically, it may come be viewed in retrospect as the main driver of peak supply. In that case what happens aboveground will have set the tempo for what happens belowground.

South America's Power Puzzle

Tackling the Andean Security Dilemma

With transnational security threats, a political-ideological rift and opposed geopolitical projects and international alliances, the Andean states have a long way to go toward the establishment of functional regional security architecture. Ultimately, it is up to regional leaders to put the pieces of the South American puzzle in place.

By Markus Schultze-Kraft

As demonstrated by the recent stand-off between Venezuela and Colombia over the new defense cooperation agreement (DCA) between Bogotá and Washington, the Andean security dilemma is becoming more pronounced. The region urgently needs to find workable solutions to serious security problems that affect Bolivia, Colombia, Ecuador, Peru and Venezuela alike. Progress in this respect is becoming ever more elusive, however, as political polarization and deep antagonisms are tearing the Andes apart. Outside actors, in particular the United States, Brazil and the European Union, are either not doing their part to reduce the tensions or lack effective tools to do so. Hemispheric and regional organizations, such as the Organization of American States (OAS) and the recently founded Union of South American Nations (UNASUR), also are proving to be of limited help.

The costs of national security and neo-populist political stabilization
One decade ago, the five Andean nations were embroiled in nothing less than deep crisis. Colombia was gripped by increasingly intense internal armed conflict, pronounced state weakness and mushrooming drug trafficking. Bolivia, Ecuador and Peru faced serious political-institutional instability that led to the ouster of two presidents each in La Paz (2003 and 2005) and Quito (2000 and 2005). And Venezuela saw regime change and the dawn of the 'Bolivarian Revolution' heralding deep political polarization and a sharp deterioration of citizen security.

Colombia has since seen important internal security improvements, though the country remains far from resolving its protracted armed conflict. While Bolivia, Ecuador and Peru have achieved a degree of political stability, the government of Hugo Chávez in Venezuela has produced socioeconomic gains for parts of the poor majority of the population. But efforts have been undercut by government mismanagement of the country’s oil wealth as well as severe restrictions of Venezuelans’ fundamental liberties and rights and the installation of an increasingly autocratic political regime.

At the same time, there has been a progressive deterioration of relations between Colombia, on one hand, and its closest and most important neighbors, Ecuador and Venezuela, on the other. Initiatives of regional cooperation and integration, as under the today largely defunct Community of Andean Nations (CAN), have ceased to be a reality. Instead, the region has split into two politically and ideologically opposed camps that view each other with apprehension and profound distrust and pursue opposed geopolitical strategies.

Conservative restoration, 'orthodox' counter-drug and/or counter-insurgency policies and open-market economics, including free trade agreements with the US and the EU, have been at work in Colombia and Peru. The leftist and neo-populist governments of Venezuela, Bolivia and Ecuador, in turn, have been pursuing the establishment of an alternative regional bloc, the Bolivarian Alliance for the Americas (ALBA). In their quest to create state-centered 'participatory,' 'inclusive' and 'anti-neoliberal' political and economic regimes they have by and large chosen to distance themselves from Washington as well as from some liberal democracy principles.

The Colombian conundrum

Colombia’s armed conflict is at the heart of the current Andean security dilemma. Massive US military and counter-drug assistance through Plan Colombia and major Colombian military and other security efforts as well as the disarmament, demobilization and reintegration (DDR) of tens of thousands of irregular combatants have undoubtedly produced advances in the struggle against the Revolutionary Armed Forces of Colombia (FARC), National Liberation Army (ELN) and the paramilitaries. But new illegal armed groups (NIAGs) are springing up, some paramilitaries persist, the weakened guerrillas are adapting to the changing security environment and drug-trafficking continues.

Moreover, the military onslaught in Colombia, which has not been accompanied by a political strategy to end the conflict, has pushed the guerrillas and drug-traffickers across the country’s borders. In a setting characterized by deep mutual distrust and the breakdown of communication with his Ecuadorian and Venezuelan counterparts, Álvaro Uribe has taken the war to the insurgents beyond Colombia’s confines. In reaction to a Colombian raid on a clandestine FARC camp inside Ecuador on 1 March 2008, Rafael Correa severed diplomatic relations with Bogotá and Hugo Chávez threatened with armed reprisals should Colombia attempt a similar action in Venezuela.

The strategic alliance between Colombia and the US in the fight against drugs and the insurgents, as reflected in Plan Colombia and the recently signed new US-Colombian defense cooperation agreement (DCA), which allows for the continuation of broad security and counter-drug cooperation between the two countries for a decade or longer, is perceived as a threat in Caracas and Quito. In effect, Ecuadorian and Venezuelan national security concerns should not be overlooked or underestimated. However, both governments are also responsible for having maintained an ambivalent or even tolerant stance vis-à-vis the Colombian guerrillas. The FARC and ELN can operate with relative impunity in and from Venezuela and to a lesser degree Ecuador, where they and other Andean criminal outfits are engaging with local officials, members of the security forces and others in illegal transactions ranging from gun running, gasoline contraband to drug trafficking.

A regional response to regional problems

Colombia’s armed conflict, pervasive transnational organized crime and increasing levels of citizen insecurity, especially in Venezuela, require a regional response. The close alliance between Bogotá and Washington – which started under Presidents Bill Clinton and Andrés Pastrana in the late 1990s, was reinforced under Presidents George W Bush and Álvaro Uribe and continues today, albeit with less enthusiasm on the US side, under President Barack Obama – needs to be revised. Not only have the goals of counter-drug policy not been achieved, but the US’ mostly military and counterterrorism support under Plan Colombia has reinforced the Uribe administration’s policy of seeking the elusive military defeat of the insurgents and not dealing seriously with the elaboration of a political conflict resolution framework. Bogotá’s closeness to Washington has contributed to deepening the Andean rift – a process in which Caracas, Quito, La Paz and Lima have of course also played their role.

It is often held that the regional response to the current tensions between Colombia and Venezuela, sparked by the DCA, as well as previous potentially dangerous episodes of intra-Andean friction, has been ineffective. There is some truth to this argument but it needs to be qualified. After all the OAS and, in particular, the Río Group managed to quickly ease through diplomatic means the serious political-diplomatic crisis that was brought about by the March 2008 bombing of the FARC camp in Ecuador through diplomatic means. In spite of this 'success' in deescalating tensions, it must not be overlooked that during the following year and a half Quito and Bogotá engaged in constant mutual recriminations and had no diplomatic relations, which only now are being cautiously reestablished.

With regards to the confrontation between Venezuela and Colombia over the DCA, the recently founded Union of South American Nations (UNASUR) and its Defense Council as well as Brazilian President Lula da Silva, who offered to mediate in the crisis, ultimately failed to get Caracas and Bogotá to formally settle their differences. The Río Group remained silent, as did the OAS. However, it is no small feat that regional security issues, among them the DCA, were discussed amply in a string of meetings under the UNASUR umbrella (in Quito and Bariloche in August and in Quito in September and November). Some of these meetings were attended by the UNASUR presidents and defense ministers. It is further not an insignificant development that the fledgling South American Defense Council was charged with handling the DCA issue, and that the delegations who attended the November meeting in Quito by and large accepted the formal guarantees offered by Colombia and the US that the agreement would respect the national sovereignty of the other states in the region.

This notwithstanding, it is clear that the Andean region still has a very long way to go regarding the establishment of a functioning regional security architecture. The above-mentioned political-ideological rift that divides the region, deep mutual distrust, opposed geopolitical projects and international alliances, and not least the enormously challenging nature of the transnational security threats, such as Colombia’s armed conflict and drug-trafficking, all conspire against regional security improvements. In addition, Brazil’s role in moving the region’s security agenda forward is as yet not clearly defined, and UNASUR and its Defense Council are still fledgling entities in dire need of developing capacities to improve regional governance, including in the field of security.

South America and the Andes have to live up to these challenges because nobody else will and should do this job for the region, which inevitably would stand to continue witnessing instability and frequent security crises.

Dr Markus Schultze-Kraft is director of the International Crisis Group, Latin America and Caribbean program based in Bogotá, Columbia.

Venezuela’s Chavez Announces Currency Devaluation, Two-Tiered Exchange Rate

Published on January 9th 2010, by Kiraz Janicke - Venezuelanalysis.com

Venezuelan President Hugo Chavez during his address to the nation, Friday (YKVE Mundial)

Caracas, January 8, 2009 (venezuelanalysis.com) – Venezuelan President Hugo Chavez announced a devaluation of the official exchange rate of the bolivar currency and the creation of a second rate denominated the “oil bolivar” for non-essential imports, in a nationally televised address on Friday.

The bolivar would be devalued from 2.15 per dollar to 2.6 per dollar, Chavez said, while the “oil bolivar” will be pegged at 4.3 per dollar. The measure represents a 17 percent and 50 percent devaluation respectively.

The Venezuelan government moved to regulate foreign currency exchange in 2003 after a two month long bosses lockout in the oil industry aimed at ousting the democratically elected Chavez from power caused an estimated $20 billion damage to the economy. The latest devaluation is the first since an 11 percent devaluation in March 2005.

The Central Bank of Venezuela (BCV) will also intervene directly into the unofficial dollar market where the bolivar is currently trading at approximately one-third the official rate in order to check capital flight, “This is a very firm resolution, the sectors that move in this economic ambit are well aware what I am referring to,” Chavez said.

The devaluation is aimed at revitalising the economy and strengthening national development after the country experienced a 2.9% contraction in 2009 due predominantly to lower oil prices resulting from the global economic crisis, he explained.

“This is to boost the productive economy, to reduce unnecessary imports and at the same time to stimulate exports,” he said, “We have to leave behind the oil rent model.”

The 2.6 rate will apply to imports from priority areas such as food, health, machinery and equipment, science and technology, books and education items as well as imports for the public sector, family remittances, Venezuelan exchange students, accredited consuls and embassies in Venezuelan territory, and pensions in some special cases.

The second rate will be applied to imports for the automotive, trade, telecommunications, chemicals, metallurgy, computing, and construction sectors as well as rubber and plastics, electrical appliances, textiles, electrical services, electronics, graphics, tobacco and alcoholic beverages, among others.

Economist Orlando Ochoa, from the Andrés Bello Catholic University told El Universal that in particular the state-owned oil company PDVSA and the basic industries grouped in the Venezuelan Corporation of Guayana (CVG) would benefit from the measure because “they are going to import the inputs they need to produce at 2.6, but they will receive 4.3 for their exports. This gives them a huge break.”

Venezuela—the largest oil producer in South America, whose income from oil accounts for approximately half the country’s GDP and ninety percent of exports—experiences an economic phenomenon known as “Dutch Disease” where high oil revenues act as a disincentive for domestic investment and production in other sectors making the country heavily reliant on imports.

The devaluation will boost the government’s spending power, as it will receive double the amount of bolivars per dollar from oil exports. However, it will also affect the general population by increasing the cost of imported goods in the country where inflation reached 25.1 percent in 2009.

In order to offset the impacts of inflation the government maintains price controls on a range basic food items including meat, bread, milk and coffee among other things, as well as a network of subsidised supermarkets, and free health and education services. However, a heavily subsidised petrol [gasoline] price of approximately five cents per litre is viewed as unsustainable by many analysts.

Further economic measures are expected in the coming days, it is possible that Chavez could announce further subsidies.

During his address to the nation the president argued that the economy should be at the service of humanity and therefore socialism.

“Economics is a social science in the service of human development (...) In capitalism the economy is in the service of bourgeois elites, which through their neo-liberal capitalist laws and constitutions, institutions, place it at the service of a minority and it becomes a source of exploitation of the majority.”

“Venezuela is an example of this: in the 20th century, despite the oil wealth, we ended the century with more than half of the population living in poverty and misery,” he recalled.

He compared this situation with the past 10 years, during which the Bolivarian Revolution has dramatically decreased unemployment and poverty, and free health and education programs have considerably improved the life of the country’s poor majority as noted by the United Nations Human Development Index.

“We'll do everything so that this global crisis does not affect Venezuela,” he said, recalling that in 2009, while the economies of northern Europe and the U.S. lost millions of jobs, in Venezuela the unemployment rate remained stable at around 7 percent.

Obama's Yemeni odyssey targets China

By M K Bhadrakumar


A year ago, Yemeni President Ali Abdallah Saleh made the startling revelation that his country's security forces apprehended a group of Islamists linked to the Israeli intelligence forces. "A terrorist cell was apprehended and will be referred to the courts for its links with the Israeli intelligence services," he promised.

Saleh added, "You will hear about the trial proceedings." Nothing was ever heard and the trail went cold. Welcome to the magical land of Yemen, where in the womb of time the Arabian Nights were played out.

Combine Yemen with the mystique of Islam, Osama bin Laden, al-Qaeda and the Israeli intelligence and you get a heady mix. The head of the US Central Command, General David Petraeus, dropped in at the capital, Sana'a, on Saturday and vowed to Saleh
carry out joint attacks against militants in the region.

Another Afghanistan?
Many accounts say that Obama, who is widely regarded as a gifted and intelligent politician, is blundering into a catastrophic mistake by starting another war that could turn out to be as bloody and chaotic and unwinnable as Iraq and Afghanistan. Yes, on the face of it, Obama does seem erratic. The parallels with Afghanistan are striking. There has been an attempt to destroy a US plane by a Nigerian student who says he received training in Yemen. And America wants to go to war.

Yemen, too, is a land of wonderfully beautiful rugged mountains that could be a guerilla paradise. Yemenis are a hospitable lot, like Afghan tribesmen, but as Irish journalist Patrick Cockurn recollects, while they are generous to passing strangers, they "deem the laws of hospitality to lapse when the stranger leaves their tribal territory, at which time he becomes 'a good back to shoot at'." Surely, there is romance in the air - almost like in the Hindu Kush. Fiercely nationalistic, almost every Yemeni has a gun. Yemen is also, like Afghanistan, a land of conflicting authorities, and with foreign intervention, a little civil war is waiting to flare up.

Is Obama so incredibly forgetful of his own December 1 speech outlining his Afghan strategy that he violated his own canons? Certainly not. Obama is a smart man. The intervention in Yemen will go down as one of the smartest moves that he ever made for perpetuating the US's global hegemony. It is America's answer to China's surge.

A cursory look at the map of region will show that Yemen is one of the most strategic lands adjoining waters of the Persian Gulf and the Arabian Peninsula. It flanks Saudi Arabia and Oman, which are vital American protectorates. In effect, Uncle Sam is "marking territory" - like a dog on a lamppost. Russia has been toying with the idea of reopening its Soviet-era base in Aden. Well, the US has pipped Moscow in the race.

The US has signaled that the odyssey doesn't end with Yemen. It is also moving into Somalia and Kenya. With that, the US establishes its military presence in an entire unbroken stretch of real estate all along the Indian Ocean's western rim. Chinese officials have of late spoken of their need to establish a naval base in the region. The US has now foreclosed China's options. The only country with a coastline that is available for China to set up a naval base in the region will be Iran. All other countries have a Western military presence.

The American intervention in Yemen is not going to be on the pattern of Iraq and Afghanistan. Obama will ensure he doesn't receive any body bags of American servicemen serving in Yemen. That is what the American public expects from him. He will only deploy drone aircraft and special forces and "focus on providing intelligence and training to help Yemen counter al-Qaeda militants", according to the US military. Obama's main core objective will be to establish an enduring military presence in Yemen. This serves many purposes.

A new great game begins
First, the US move has to be viewed against the historic backdrop of the Shi'ite awakening in the region. The Shi'ites (mostly of the Zaidi group) have been traditionally suppressed in Yemen. Shi'ite uprisings have been a recurring theme in Yemen's history. There has been a deliberate attempt to minimize the percentage of Shi'ites in Yemen, but they could be anywhere up to 45%.

More importantly, in the northern part of the country, they constitute the majority. What bothers the US and moderate Sunni Arab states - and Israel - is that the Believing Youth Organization led by Hussein Badr al-Houthi, which is entrenched in northern Yemen, is modeled after Hezbollah in Lebanon in all respects - politically, economically, socially and culturally.

Yemenis are an intelligent people and are famous in the Arabian Peninsula for their democratic temperament. The Yemeni Shi'ite empowerment on a Hezbollah-model would have far-reaching regional implications. Next-door Oman, which is a key American base, is predominantly Shi'ite. Even more sensitive is the likelihood of the dangerous idea of Shi'ite empowerment spreading to Saudi Arabia's highly restive Shi'ite regions adjoining Yemen, which on top of it all, also happen to be the reservoir of the country's fabulous oil wealth.

Saudi Arabia is entering a highly sensitive phase of political transition as a new generation is set to take over the leadership in Riyadh, and the palace intrigues and fault lines within the royal family are likely to get exacerbated. To put it mildly, given the vast scale of institutionalized Shi'ite persecution in Saudi Arabia by the Wahhabi establishment, Shi'ite empowerment is a veritable minefield that Riyadh is petrified about at this juncture. Its threshold of patience is wearing thin, as the recent uncharacteristic resort to military power against the north Yemeni Shi'ite communities bordering Saudi Arabia testifies.

The US faces a classic dilemma. It is all right for Obama to highlight the need of reform in Muslim societies - as he did eloquently in his Cairo speech last June. But democratization in the Yemeni context - ironically, in the Arab context - would involve Shi'ite empowerment. After the searing experience in Iraq, Washington is literally perched like a cat on a hot tin roof. It would much rather be aligned with the repressive, autocratic government of Saleh than let the genie of reform out of the bottle in the oil rich-region in which it has profound interests.

Obama has an erudite mind and he is not unaware that what Yemen desperately needs is reform, but he simply doesn't want to think about it. The paradox he faces is that with all its imperfections, Iran happens to be the only "democratic" system operating in that entire region.

Iran's shadow over the Yemeni Shi'ite consciousness worries the US to no end. Simply put, in the ideological struggle going on in the region, Obama finds himself with the ultra-conservative and brutally autocratic oligarchies that constitute the ruling class in the region. Conceivably, he isn't finding it easy. If his own memoirs are to be believed, there could be times when the vague recollections of his childhood in Indonesia and his precious memories of his own mother, who from all accounts was a free-wheeling intellectual and humanist, must be stalking him in the White House corridors.

Israel moves in
But Obama is first and foremost a realist. Emotions and personal beliefs drain away and strategic considerations weigh uppermost when he works in the Oval Office. With the military presence in Yemen, the US has tightened the cordon around Iran. In the event of a military attack on Iran, Yemen could be put to use as a springboard by the Israelis. These are weighty considerations for Obama.

The fact is that no one is in control as a Yemeni authority. It is a cakewalk for the formidable Israeli intelligence to carve out a niche in Yemen - just as it did in northern Iraq under somewhat comparable circumstances.

Islamism doesn't deter Israel at all. Saleh couldn't have been far off the mark when he alleged last year that Israeli intelligence had been exposed as having kept links with Yemeni Islamists. The point is, Yemeni Islamists are a highly fragmented lot and no one is sure who owes what sort of allegiance to whom. Israeli intelligence operates marvelously in such twilight zones when the horizon is lacerated with the blood of the vanishing sun.

Israel will find a toehold in Yemen to be a god-sent gift insofar as it registers its presence in the Arabian Peninsula. This is a dream come true for Israel, whose effectiveness as a regional power has always been seriously handicapped by its lack of access to the Persian Gulf region. The overarching US military presence helps

Israel politically to consolidate its Yemeni chapter. Without doubt, Petraeus is moving on Yemen in tandem with Israel (and Britain). But the "pro-West" Arab states with their rentier mentality have no choice except to remain as mute spectators on the sidelines.

Some among them may actually acquiesce with the Israeli security presence in the region as a safer bet than the spread of the dangerous ideas of Shi'ite empowerment emanating out of Iran, Iraq and Hezbollah. Also, at some stage, Israeli intelligence will begin to infiltrate the extremist Sunni outfits in Yemen, which are commonly known as affiliates of al-Qaeda. That is, if it hasn't done that already. Any such link makes Israel an invaluable ally for the US in its fight against al-Qaeda. In sum, infinite possibilities exist in the paradigm that is taking shape in the Muslim world abutting into the strategic Persian Gulf.

It's all about China
Most important, however, for US global strategies will be the massive gain of control of the port of Aden in Yemen. Britain can vouchsafe that Aden is the gateway to Asia. Control of Aden and the Malacca Strait will put the US in an unassailable position in the "great game" of the Indian Ocean. The sea lanes of the Indian Ocean are literally the jugular veins of China's economy. By controlling them, Washington sends a strong message to Beijing that any notions by the latter that the US is a declining power in Asia would be nothing more than an extravagant indulgence in fantasy.

In the Indian Ocean region, China is increasingly coming under pressure. India is a natural ally of the US in the Indian Ocean region. Both disfavor any significant Chinese naval presence. India is mediating a rapprochement between Washington and Colombo that would help roll back Chinese influence in Sri Lanka. The US has taken a u-turn in its Myanmar policy and is engaging the regime there with the primary intent of eroding China's influence with the military rulers. The Chinese strategy aimed at strengthening influence in Sri Lanka and Myanmar so as to open a new transportation route towards the Middle East, the Persian Gulf and Africa, where it has begun contesting traditional Western economic dominance.

China is keen to whittle down its dependence on the Malacca Strait for its commerce with Europe and West Asia. The US, on the contrary, is determined that China remains vulnerable to the choke point between Indonesia and Malaysia.

An engrossing struggle is breaking out. The US is unhappy with China's efforts to reach the warm waters of the Persian Gulf through the Central Asian region and Pakistan. Slowly but steadily, Washington is tightening the noose around the neck of the Pakistani elites - civilian and military - and forcing them to make a strategic choice between the US and China. This will put those elites in an unenviable dilemma. Like their Indian counterparts, they are inherently "pro-Western" (even when they are "anti-American") and if the Chinese connection is important for Islamabad, that is primarily because it balances perceived Indian hegemony.

The existential questions with which the Pakistani elites are grappling are apparent. They are seeking answers from Obama. Can Obama maintain a balanced relationship vis-a-vis Pakistan and India? Or, will Obama lapse back to the George W Bush era strategy of building up India as the pre-eminent power in the Indian Ocean under whose shadow Pakistan will have to learn to live?

US-India-Israel axis
On the other hand, the Indian elites are in no compromising mood. Delhi was on a roll during the Bush days. Now, after the initial misgivings about Obama's political philosophy, Delhi is concluding that he is all but a clone of his illustrious predecessor as regards the broad contours of the US's global strategy - of which containment of China is a core template.

The comfort level is palpably rising in Delhi with regard to the Obama presidency. Delhi takes the surge of the Israeli lobby in Washington as the litmus test for the Obama presidency. The surge suits Delhi, since the Jewish lobby was always a helpful ally in cultivating influence in the US Congress, media and the rabble-rousing think-tankers as well as successive administrations. And all this is happening at a time when the India-Israel security relationship is gaining greater momentum.

United States Defense Secretary Robert Gates is due to visit Delhi in the coming days. The Obama administration is reportedly adopting an increasingly accommodative attitude toward India's longstanding quest for "dual-use" technology from the US. If so, a massive avenue of military cooperation is about to open between the two countries, which will make India a serious challenger to China's growing military prowess. It is a win-win situation as the great Indian arms bazaar offers highly lucrative business for American companies.

Clearly, a cozy three-way US-Israel-India alliance provides the underpinning for all the maneuvering that is going on. It will have significance for the security of the Indian Ocean, the Persian Gulf and the Arabian Peninsula. Last year, India formalized a naval presence in Oman.

All-in-all, terrorism experts are counting the trees and missing the wood when they analyze the US foray into Yemen in the limited terms of hunting down al-Qaeda. The hard reality is that Obama, whose main plank used to be "change", has careened away and increasingly defaults to the global strategies of the Bush era. The freshness of the Obama magic is dissipating. Traces of the "revisionism" in his foreign policy orientation are beginning to surface. We can see them already with regard to Iran, Afghanistan, the Middle East and the Israel-Palestine problem, Central Asia and towards China and Russia.

Arguably, this sort of "return of the native" by Obama was inevitable. For one thing, he is but a creature of his circumstances. As someone put it brilliantly, Obama's presidency is like driving a train rather than a car: a train cannot be "steered", the driver can at best set its speed, but ultimately, it must run on its tracks.

Besides, history has no instances of a declining world power meekly accepting its destiny and walking into the sunset. The US cannot give up on its global dominance without putting up a real fight. And the reality of all such momentous struggles is that they cannot be fought piece-meal. You cannot fight China without occupying Yemen.

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.

Baloch Unity condemn kiling of Baloch in Karachi by MQM

We strongly condemns this heinous crime and cold blood murder of Baloch in Karachi and directly blame gangster of MQM for these killings we also blame Zardari’s PPP for sharing the blame since they are in collation against Baloch people, those who killed innocent Baloch will not find peace and mercy at hands of Baloch youth and those responsible cannot and will not be able to hide from Baloch revenge they must be dug out from their din and will have to answer the crimes they committed.

Baloch unity urges Baloch parties and organizations to hold demonstrations against this barbarism against peace loving Baloch and forge unity among their ranks in front of multiple threats faced by Baloch nation today.


8 Baloch killed in Karachi firing

The Baloch Hal

KARACHI: At least eight persons, a woman among them, were killed and more than twelve others injured in firing incident that took place between the workers of Peoples’ Aman Committee and Muttahida Qaumi Movement in Liyari and Garden areas of the city on Thursday, police said.

According to details, some persons on motorbike had killed a youth, Aamir believed to be worker of MQM in the morning, which closed business activities in Ramswami, Ranchor Line, Nabi Bukhsh, Garden, Dhobi Ghat and adjacent areas and after which firing started in various areas of Garden and Liyari.

As a result seven persons, including a woman community were killed and more than ten others injured. The deceased were identified as Fahim, 30, Shakir, 30, Younis, Mirza, Usman, Nadir, while the names of one person and the woman could not be ascertained and those injured included Dur Bibi, Arshad, Zubir, Basit, Wasim, Rafique, Aslam and three unknown women, which were shifted to civil hospital. Deceased were hailing from Baloch ethnic group.

Later, the workers of Peoples’ Aman Committee staged a sit-in in front of the Chief Minister house and chanted slogans against the MQM and warned to start million march in case, cases were not registered against MQM. They demanded registration of cases against Dr Farooq Sattar and incharges of Liyari and Gardens. The activists called off the sit-in after holding talks with provincial ministers Rafique Engineer and PPP Karachi division chief Najmi Alam. Huge contingent of police and rangers had been called to control the situation and huge traffic jam was seen on road, adjacent to the CM house but no arrest made till filing of this report.

Meanwhile, Central spokesman of Baloch Republican Party Sher Muhammad Bugti and Central Secretary General Baloch National Movement Khalil Baloch have strongly condemned the killing of innocent Baloch people and termed it state terrorism.


Number of organizational layers between Market Intelligence Manager and the CEO

SOURCE: Global Intelligence Alliance

Despite the recession, companies invest in keeping and developing their MI activities

Despite the tough times, companies are still investing in keeping their MI operations and
even developing them further. The survey data doesn’t suggest any significant changes to MI
headcount in the target organizations, and while MI budgets have been reduced, the shift has
not been as pronounced as one might have expected. MI professionals undoubtedly feel the
increased pressure caused by the growing workload and reduced budgets, but the situation can
also be viewed in a positive light; Many MI departments have never enjoyed as high levels of
attention from top management as during the current recession.

Almost all the surveyed companies expect the investment in MI to increase rather than decrease over the next 2 years

Now that companies are seeing how vital it is to respond to true business needs with accurate
Market Intelligence, there’s also underlying pressure to increase investment in the area, once
the economy starts to pick up again.

94% of companies sometimes make key decisions without the support of Market Intelligence

The survey results suggest that as many as 94% of the surveyed companies sometimes make
vital business decisions without the support of proper Market Intelligence, while 65% do so
even quite frequently.

Soft benefits of MI include improved quality of information and its dissemination, further efforts to be directed at improving time and cost savings

Respondents noted improved general awareness of the business environment (80%), improved
quality of the collected information (74%), more efficient internal dissemination of information
(61%) systematic gathering and analysis of information (58%), as well as improved identification
of both threats and opportunities (51%).

Organized MI increases self-confidence and accelerates decision-making

Of the respondents in companies without organized Market Intelligence, 48% said that the required information would only be available after a long delay or not at all, whereas of the companies withMI, 82% felt that the required information is available either immediately or in a short while.

There are typically 1-2 organizational layers between the head of MI and the CEO

Even in the largest companies valued at over 10 billion EUR, 61% have a maximum of two layers
between the CEO and MI. This suggests that in the surveyed companies, MI is considered a
relatively strategic activity.

Towards increasingly concrete MI: Linking market information with business processes

40-48% of the respondents consider that MI processes have sufficiently catered to the needs of
strategic planning, M&A and sales & marketing. One quarter of the respondents are not satisfied
with the level of integration of MI to any of the surveyed business processes, so there’s still
plenty of room for development.

Current MI efforts focus on the short run, but the long term should not be forgotten

Companies cannot make good tactical decisions without a vision of where the company wants
to be in the long term. Therefore, regardless of the current economic conditions, organizations
– and their Market Intelligence – should not lose sight of the long-term goals and the related
information needs.