Day: December 29, 2010
The end is nigh…
Not really, but 2010 is coming to a close. Never easy to look ahead a year, but let me give it a try. It’ll make for a nice mea culpa post a year from now. And if I cherry pick a bit maybe I’ll be able to claim clairvoyance!
- Iran: the biggest headache of the year to come. If its nuclear program is not slowed or stopped, things are going to get tense. Both Israel and the U.S. have preferred sanctions, covert action and diplomatic pressure to military action. If no agreement is reached on enrichment, that might change by the end of 2011. No Green Revolution, the clerics hang on, using the Revolutionary Guards to defend the revolution (duh).
- Pakistan: it isn’t getting better and it could well get worse. The security forces don’t like the way the civilians aren’t handling things, and the civilians are in perpetual crisis. Look for increased internal tension, but no Army takeover, and some success in American efforts to get more action against AQ and the Taliban inside Pakistan. Judging from a report in the New York Times, we may not always be pleased with the methods the Pakistanis use.
- North Korea: no migraine, but pesky nonetheless, and South Korea is a lot less quiescent than it used to be. Pretty good odds on some sort of military action during the year, but the South and the Americans will try to avoid the nightmare of a devastating artillery barrage against Seoul.
- Afghanistan: sure there will be military progress, enough to allow at least a minimal withdrawal from a handful of provinces by July. But it is hard to see how Karzai becomes much more legitimate or effective. There is a lot of heavy lifting to do before provincial government is improved, but by the end of the year we might see some serious progress in that direction, again in a handful of provinces.
- Iraq: no one expects much good of this government, which is large, unwieldy and fragmented. But just for this reason, I expect Maliki to get away with continuing to govern more or less on his own, relying on different parts of his awkward coalition on different issues. The big unknown: can Baghdad settle, or finesse, the disputes over territory with Erbil (Kurdistan)?
- Palestine/Israel (no meaning in the order–I try to alternate): Palestine gets more recognitions, Israel builds more settlements, the Americans offer a detailed settlement, both sides resist but agree to go to high level talks where the Americans try to impose. That fails and Israel continues in the direction of establishing a one-state solution with Arabs as second class citizens. My secular Zionist ancestors turn in their graves.
- Egypt: trouble. Succession plans founder as the legitimacy of the parliament is challenged in the streets and courts. Mubarak hangs on, but the uncertainties grow.
- Haiti: Not clear whether the presidential runoff will be held January 16, but things are going to improve, at least until next summer’s hurricanes. Just for that reason there will be more instability as Haitians begin to tussle over the improvements.
- Al Qaeda: the franchise model is working well, so no need to recentralize. They will keep on trying for a score in the U.S. and will likely succeed at some, I hope non-spectacular, level.
- Yemen/Somalia: Yemen is on the brink and will likely go over it, if not in 2011 soon thereafter. Somalia will start back from hell, with increasing stability in some regions and continuing conflict in others.
- Sudan: the independence referendum passes. Khartoum and Juba reach enough of an agreement on outstanding issues to allow implementation in July, but border problems (including Abyei) and South/South violence grow into a real threat. Darfur deteriorates as the rebels emulate the South and Khartoum takes its frustrations out on the poor souls.
- Lebanon: the Special Tribunal finally delivers its indictments. Everyone yawns and stretches, having agreed to ignore them.
- Syria: Damascus finally realizes that it is time to reach an agreement with Israel. The Israelis decide to go ahead with it, thus relieving pressure to stop settlements and deal seriously with the Palestinians.
- Ivory Coast: the French finally find the first class tickets for Gbagbo and his entourage, who go to some place that does not recognize the jurisdiction of the International Criminal Court (no, not the U.S.!).
- Zimbabwe: Mugabe is pressing for quick adoption of his new constitution and elections in 2011, catching the opposition off balance. If he succeeds, the place continues to go to hell in a handbasket. If he fails, it will still be some time before it heads in the other direction.
- Balkans: Bosnians still stuck on constitutional reform, but Kosovo gets a visa waiver from the EU despite ongoing investigations of organ trafficking.
If the year turns out this way, it won’t be disastrous, just a bumpy downhill slide. Hard to see it getting much better than that, but I could have made it much worse:
- Iran: weaponizes and deploys nukes.
- Pakistan: finally admits it can’t find two of its weapons, which have likely fallen into AQ hands.
- North Korea: goes bananas in response to some provocation, launches artillery barrage on Seoul.
- Afghanistan: spring Taliban offensive sweeps away Coalition-installed local institutions; Kandahar falls.
- Iraq: Kurds and Arabs fight, without a clear outcome.
- Israel/Palestine: Israel attacks Hizbollah in Lebanon, third intifada begins with Hamas suicide bombings inside Israel.
- Egypt: Muslim Brotherhood challenges Mubarak in the streets, prevents orderly succession process.
- Haiti: hurricanes, food riots, political strife, reconstruction blocked.
- Al Qaeda: big hit inside the U.S., thousands die.
- Yemen/Somalia: both go south, with AQ establishing itself firmly on both sides of the Bab al Mandab.
- Sudan: post-referendum negotiations fail, fighting on North/South border, chaos in Southern Sudan.
- Lebanon: Hizbollah reacts with violence to the Special Tribunal indictments, taking over large parts of Lebanon. Hizbollah/Israel war wrecks havoc.
- Syria: succeeds in surreptitiously building nuclear facilities on commission from Iran, Israeli effort to destroy them fails.
- Ivory Coast: Gbagbo tries to hold on to office, imitating Mugabe’s successful effort. Ouattara plays ball and accepts the prime ministry, pressured by internationals who don’t want to do what is necessary to airlift Gbagbo out of there. A real opportunity to demonstrate the effectiveness of international solidarity is squandered.
- Zimbabwe: Mugabe succeeds, Tsvangirai is out, state in virtual collapse.
- Balkans: the EU unwisely begins implementing the acquis communitaire in Republika Srpska due to delays in formation of a national Bosnian government, investigations in Kosovo drag on and make progress towards the visa waiver and other EU goodies impossible.
There are of course other places where we might see bad things happen: Venezuela, Burma, Nigeria, Kyrgyzstan, Saudi Arabia, Russia–but I’ll leave the imagining to you.
Happy New Year!
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Capture the rent!
A former Shell exec has been making news with a prediction of $5/gallon gasoline in 2012. I don’t know if he is right about 2012, but I am sure he is right about $5. This is inevitable, given the finite resource and (we hope) economic growth over the next few years (not to mention inflation).
The question is this: who will capture the “rent”? Rent is the excess return over the cost of production, distribution, refining and normal profit (which in some parts of the world is more like $5/barrel, at a time when oil is selling on the world market at over $90/barrel). As things stand today, most of the rent goes to non-U.S. oil producers abroad, where production costs are lower than in the now declining oil fields in the U.S.
At current prices, the U.S. is sending something more than $400 billion/year abroad to pay for oil imports, much of it ending up in the pockets of people we would not want to enrich if we thought about it: Iran and Russia foremost, Venezuela secondmost. Even if we don’t import oil directly from them, U.S. demand contributes to the market conditions that enable them to sell into the world market at $90/barrel a product that costs them far less. Money and oil are fungible: any significant decline in U.S. demand would affect the price worldwide and reduce the flow of rents to oil producers worldwide.
Enriching antagonists is not the only problem. Protecting the sea lanes through which oil is transported is costly. As things stand today, the costs are charged to the U.S. taxpayer in general, not to oil users. Colleagues estimate these costs are $10-20/barrel of U.S. consumption. I’d like to see those costs paid by those who use more of the oil, not by those of us who use less (I am writing in a 68 degree room, with two sweaters on).
The obvious way to do this is with an oil import fee. That, however, turns out to be neither wise nor possible. Not wise because it would protect U.S. producers and encourage domestic production. Wouldn’t it be smarter, the price being equal, to use someone else’s first? Not possible because the United States, in its wisdom, long ago “bound” the tariff on imported oil. This means we agreed not to increase the tariff, which is very low. If we impose an oil import fee, we would have to compensate others in the form of sharply reduced tariffs (and increased imports) for doing so. If we refused, the World Trade Organization’s rules would allow others to retaliate by raising their tariffs. Not a good way to go for a country in need of massively increasing its exports.
The better way is to charge fees on all oil use, or if you prefer for environmental reasons on all carbon use. This would “capture the rent” to pay for the associated security, environmental and other costs (including road infrastructure) associated with the use of oil.
One argument against comes from the left: poor people spend more of their incomes on oil and energy generally than rich people, so an oil or carbon tax is regressive. This can be fixed, in part, by using some of the income from the tax to provide benefits to people with lower incomes.
Another argument against comes from the right: we wouldn’t want to do anything to discourage exploration and production of oil. I don’t see why not: conserving a finite resource for future use sounds the right way to go to me. But in any event much of the money we send abroad to pay for oil is ending up not in oil exploration and production but rather in Dubai real estate and other worthy causes.
Why is this subject not discussed more often? Well, it is: Tom Friedman raises it regularly in the New York Times, but there is absolutely no resonance in the body politic. Gasoline taxes aren’t the third rail of American politics, they are the train. No one wants to get hit by it.
Barack Obama is too smart not to know all that I have written above, but to my knowledge he has not breathed a word about gasoline taxes since becoming President. I can only hope that in a second term he would break the spell and capture the rent, but I don’t know where he’ll find a Congress willing to go along. Maybe a lame duck in 2014?
If he needs inspiration, he might turn to Iran’s President Ahmedinejad, who despite strong opposition is cutting oil subsidies sharply and allowing domestic product prices to rise (by a factor of 4) while compensating with payments to lower-income Iranians. Of course he can do that because the increased prices put money directly into the Iranian government’s pocket, which is what oil taxes would do for the U.S. government. Is Ahmedinejad more courageous than Obama?
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