If George W. Bush's upcoming global summit on how to fix the world's broken financial system—an event proposed by several European presidents and prime ministers—is to be a serious effort, the leaders should begin laying the groundwork for establishing a global central bank.
The idea of such an institution would have been a political nonstarter before the current debacle. The crises of the last several decades—the Latin American debt meltdown in the early 1980s, the stock-market crash in 1987, the savings and loan collapse of the early 1990s, the Asian financial blowup of the late
1990s, the Internet-stock collapse earlier in this decade—did not involve the extent of global linkages among financial institutions or the mind-boggling consequences of complex securities that we are seeing today. In none of these previous blowups did the global credit system shut down, as it did in recent weeks; in none did governments in both the industrialized and developing world intervene so massively, coming close to nationalizing the entire global banking system.
And in none was it so clear that there is no effective governing authority at the center of global finance. There was a time when the U.S. Federal Reserve played this role, as the prime financial institution of the world's most powerful economy, overseeing the one global currency. But with the growth of capital markets, the rise of currencies like the euro and the emergence of powerful players such as China, the shift of wealth to Asia and the Persian Gulf and, of course, the deep-seated problems in the American economy itself, the Fed no longer has the capability to lead singlehandedly.
After World War II, the IMF was designed to be a central financial institution, too. But over the decades it has had less and less influence on the rich industrialized nations. Its credibility with Asia and Latin America has also waned. It is still involved in bailouts for countries such as Iceland and Pakistan, but its once central role in protecting global stability is clearly over. And most important, its political legitimacy is deeply flawed, because its management structure reflects the 1950s, with Belgium having more voting power than China.
In the future, a global central bank is needed to oversee the rudderless global financial system. There are a number of critical functions it could perform.
It could be the lead regulator of big global financial institutions, such as Citigroup or Deutsche Bank, whose activities spill across borders. It could monitor risks that are building in the global market and create an early-warning system that alerts banks and national regulators that trouble is coming, and pushes them to modify their policies.
It could act as a bankruptcy court when big global banks that operate in multiple countries need to be restructured. It could oversee not just the big commercial banks, such as Mitsubishi UFJ, but also the "alternative" financial system that has developed in recent years, consisting of hedge funds, private-equity groups and sovereign wealth funds—all of which are now substantially unregulated.
A new institution could have influence over key exchange rates, and might lead a new monetary conference to realign the dollar and the yuan, for example, for one of its first missions would be to deal with the great financial imbalances that hang like a sword over the world economy.
A global central bank would not eliminate the need for the Federal Reserve or other national central banks, which will still have frontline responsibility for sound regulatory policies and monetary stability in their respective countries. But it would have heavy influence over them when it comes to following policies that are compatible with global growth and financial stability. For example, it would work with key countries to better coordinate national stimulus programs when the world enters a recession, as is happening now, so that the cumulative impact of the various national efforts do not so dramatically overshoot that they plant the seeds for a crisis of global inflation. This is a big threat as government spending everywhere goes into overdrive.
The IMF could continue to exist, but its board would have to be restructured, its bailout role for smaller nations carefully defined, and its directions—including the severity of the conditions it imposes on borrowers—would have to come from the new central bank.
To give it legitimacy, a global central bank would have to be governed in light of political realities. That means that its board would include not only the top financial officials of the United States, the U.K., the euro zone and Japan, but also China, Saudi Arabia, Brazil, South Africa and perhaps a few others.
If a global central bank had existed before today's financial crisis, it could have sounded a shrill warning about irresponsible financial transactions much earlier; and if it had been set up with the enforcement teeth it deserves, it would have had the clout to demand, perhaps as early as 2005, that banks and other financial institutions start building reserves when times were booming, rather than allow them to maintain lower reserves precisely because profits were soaring. It would have seen that financial institutions were accumulating debt that was 30 times their capital and imposed—or caused national central banks to impose—more sober leverage ratios.
A global central bank worth its salt would have reined in not just commercial banks but also loosely-regulated investment banks, because all such institutions would have been obligated to adhere to the global banks' regulatory standards or else be blacklisted in global markets. It would have intervened to deal with Lehman Brothers and AIG, both with truly global reach, and thereby put the burden not just on American taxpayers but also taxpayers of other countries who used these institutions' services.
Had it existed, a global central bank would have acted without the air of panic that has been exhibited by national central banks and finance ministries in this meltdown. Ideally, it would have gathered its governing board well in advance of a financial blowup to execute a coordinated rescue and global-stimulus plan, part of what should be its ongoing role of preparing for crises.
It would be hard to overestimate the political pushback that any official proposal for a global central bank would draw from various constituencies, most especially within the United States. Among their many charges, critics will protest the establishment of "world government." But we have a World Trade Organization with legally binding powers over trade disputes. We have a World Health Organization for communicable disease with the ability to quarantine entire countries. And a World Court functions today that has considerable legal and moral clout.
No one should want too much globally centralized oversight. But the world's gathering misery shows that too little leadership from the center can be equally dangerous. The November summit itself won't solve anything, but if it gave instructions to finance ministers and central bankers to explore what a new central bank could do, with a deadline to come back with concrete ideas shortly after a new U.S. president is inaugurated, it will have made real progress on one of the great problems of our times.
Garten is the Juan Trippe Professor of international trade and finance at the Yale School of Management.
© 2008
Friday, October 31, 2008
It's time
Oct 30th 2008
From The Economist print edition
America should take a chance and make Barack Obama the next leader of the free world
IT IS impossible to forecast how important any presidency will be. Back in 2000 America stood tall as the undisputed superpower, at peace with a generally admiring world. The main argument was over what to do with the federal government’s huge budget surplus. Nobody foresaw the seismic events of the next eight years. When Americans go to the polls next week the mood will be very different. The United States is unhappy, divided and foundering both at home and abroad. Its self-belief and values are under attack.
For all the shortcomings of the campaign, both John McCain and Barack Obama offer hope of national redemption. Now America has to choose between them. The Economist does not have a vote, but if it did, it would cast it for Mr Obama. We do so wholeheartedly: the Democratic candidate has clearly shown that he offers the better chance of restoring America’s self-confidence. But we acknowledge it is a gamble. Given Mr Obama’s inexperience, the lack of clarity about some of his beliefs and the prospect of a stridently Democratic Congress, voting for him is a risk. Yet it is one America should take, given the steep road ahead.
Thinking about 2009 and 2017
The immediate focus, which has dominated the campaign, looks daunting enough: repairing America’s economy and its international reputation. The financial crisis is far from finished. The United States is at the start of a painful recession. Some form of further fiscal stimulus is needed (see article), though estimates of the budget deficit next year already spiral above $1 trillion. Some 50m Americans have negligible health-care cover. Abroad, even though troops are dying in two countries, the cack-handed way in which George Bush has prosecuted his war on terror has left America less feared by its enemies and less admired by its friends than it once was.
Yet there are also longer-term challenges, worth stressing if only because they have been so ignored on the campaign. Jump forward to 2017, when the next president will hope to relinquish office. A combination of demography and the rising costs of America’s huge entitlement programmes—Social Security, Medicare and Medicaid—will be starting to bankrupt the country (see article). Abroad a greater task is already evident: welding the new emerging powers to the West. That is not just a matter of handling the rise of India and China, drawing them into global efforts, such as curbs on climate change; it means reselling economic and political freedom to a world that too quickly associates American capitalism with Lehman Brothers and American justice with Guantánamo Bay. This will take patience, fortitude, salesmanship and strategy.
At the beginning of this election year, there were strong arguments against putting another Republican in the White House. A spell in opposition seemed apt punishment for the incompetence, cronyism and extremism of the Bush presidency. Conservative America also needs to recover its vim. Somehow Ronald Reagan’s party of western individualism and limited government has ended up not just increasing the size of the state but turning it into a tool of southern-fried moralism.
The selection of Mr McCain as the Republicans’ candidate was a powerful reason to reconsider. Mr McCain has his faults: he is an instinctive politician, quick to judge and with a sharp temper. And his age has long been a concern (how many global companies in distress would bring in a new 72-year-old boss?). Yet he has bravely taken unpopular positions—for free trade, immigration reform, the surge in Iraq, tackling climate change and campaign-finance reform. A western Republican in the Reagan mould, he has a long record of working with both Democrats and America’s allies.
If only the real John McCain had been running
That, however, was Senator McCain; the Candidate McCain of the past six months has too often seemed the victim of political sorcery, his good features magically inverted, his bad ones exaggerated. The fiscal conservative who once tackled Mr Bush over his unaffordable tax cuts now proposes not just to keep the cuts, but to deepen them. The man who denounced the religious right as “agents of intolerance” now embraces theocratic culture warriors. The campaigner against ethanol subsidies (who had a better record on global warming than most Democrats) came out in favour of a petrol-tax holiday. It has not all disappeared: his support for free trade has never wavered. Yet rather than heading towards the centre after he won the nomination, Mr McCain moved to the right.
Meanwhile his temperament, always perhaps his weak spot, has been found wanting. Sometimes the seat-of-the-pants method still works: his gut reaction over Georgia—to warn Russia off immediately—was the right one. Yet on the great issue of the campaign, the financial crisis, he has seemed all at sea, emitting panic and indecision. Mr McCain has never been particularly interested in economics, but, unlike Mr Obama, he has made little effort to catch up or to bring in good advisers (Doug Holtz-Eakin being the impressive exception).
The choice of Sarah Palin epitomised the sloppiness. It is not just that she is an unconvincing stand-in, nor even that she seems to have been chosen partly for her views on divisive social issues, notably abortion. Mr McCain made his most important appointment having met her just twice.
Ironically, given that he first won over so many independents by speaking his mind, the case for Mr McCain comes down to a piece of artifice: vote for him on the assumption that he does not believe a word of what he has been saying. Once he reaches the White House, runs this argument, he will put Mrs Palin back in her box, throw away his unrealistic tax plan and begin negotiations with the Democratic Congress. That is plausible; but it is a long way from the convincing case that Mr McCain could have made. Had he become president in 2000 instead of Mr Bush, the world might have had fewer problems. But this time it is beset by problems, and Mr McCain has not proved that he knows how to deal with them.
Is Mr Obama any better? Most of the hoopla about him has been about what he is, rather than what he would do. His identity is not as irrelevant as it sounds. Merely by becoming president, he would dispel many of the myths built up about America: it would be far harder for the spreaders of hate in the Islamic world to denounce the Great Satan if it were led by a black man whose middle name is Hussein; and far harder for autocrats around the world to claim that American democracy is a sham. America’s allies would rally to him: the global electoral college on our website shows a landslide in his favour. At home he would salve, if not close, the ugly racial wound left by America’s history and lessen the tendency of American blacks to blame all their problems on racism.
So Mr Obama’s star quality will be useful to him as president. But that alone is not enough to earn him the job. Charisma will not fix Medicare nor deal with Iran. Can he govern well? Two doubts present themselves: his lack of executive experience; and the suspicion that he is too far to the left.
There is no getting around the fact that Mr Obama’s résumé is thin for the world’s biggest job. But the exceptionally assured way in which he has run his campaign is a considerable comfort. It is not just that he has more than held his own against Mr McCain in the debates. A man who started with no money and few supporters has out-thought, out-organised and out-fought the two mightiest machines in American politics—the Clintons and the conservative right.
Political fire, far from rattling Mr Obama, seems to bring out the best in him: the furore about his (admittedly ghastly) preacher prompted one of the most thoughtful speeches of the campaign. On the financial crisis his performance has been as assured as Mr McCain’s has been febrile. He seems a quick learner and has built up an impressive team of advisers, drawing in seasoned hands like Paul Volcker, Robert Rubin and Larry Summers. Of course, Mr Obama will make mistakes; but this is a man who listens, learns and manages well.
It is hard too nowadays to depict him as soft when it comes to dealing with America’s enemies. Part of Mr Obama’s original appeal to the Democratic left was his keenness to get American troops out of Iraq; but since the primaries he has moved to the centre, pragmatically saying the troops will leave only when the conditions are right. His determination to focus American power on Afghanistan, Pakistan and proliferation was prescient. He is keener to talk to Iran than Mr McCain is— but that makes sense, providing certain conditions are met.
Our main doubts about Mr Obama have to do with the damage a muddle-headed Democratic Congress might try to do to the economy. Despite the protectionist rhetoric that still sometimes seeps into his speeches, Mr Obama would not sponsor a China-bashing bill. But what happens if one appears out of Congress? Worryingly, he has a poor record of defying his party’s baronies, especially the unions. His advisers insist that Mr Obama is too clever to usher in a new age of over-regulation, that he will stop such nonsense getting out of Congress, that he is a political chameleon who would move to the centre in Washington. But the risk remains that on economic matters the centre that Mr Obama moves to would be that of his party, not that of the country as a whole.
He has earned it
So Mr Obama in that respect is a gamble. But the same goes for Mr McCain on at least as many counts, not least the possibility of President Palin. And this cannot be another election where the choice is based merely on fear. In terms of painting a brighter future for America and the world, Mr Obama has produced the more compelling and detailed portrait. He has campaigned with more style, intelligence and discipline than his opponent. Whether he can fulfil his immense potential remains to be seen. But Mr Obama deserves the presidency.
From The Economist print edition
America should take a chance and make Barack Obama the next leader of the free world
IT IS impossible to forecast how important any presidency will be. Back in 2000 America stood tall as the undisputed superpower, at peace with a generally admiring world. The main argument was over what to do with the federal government’s huge budget surplus. Nobody foresaw the seismic events of the next eight years. When Americans go to the polls next week the mood will be very different. The United States is unhappy, divided and foundering both at home and abroad. Its self-belief and values are under attack.
For all the shortcomings of the campaign, both John McCain and Barack Obama offer hope of national redemption. Now America has to choose between them. The Economist does not have a vote, but if it did, it would cast it for Mr Obama. We do so wholeheartedly: the Democratic candidate has clearly shown that he offers the better chance of restoring America’s self-confidence. But we acknowledge it is a gamble. Given Mr Obama’s inexperience, the lack of clarity about some of his beliefs and the prospect of a stridently Democratic Congress, voting for him is a risk. Yet it is one America should take, given the steep road ahead.
Thinking about 2009 and 2017
The immediate focus, which has dominated the campaign, looks daunting enough: repairing America’s economy and its international reputation. The financial crisis is far from finished. The United States is at the start of a painful recession. Some form of further fiscal stimulus is needed (see article), though estimates of the budget deficit next year already spiral above $1 trillion. Some 50m Americans have negligible health-care cover. Abroad, even though troops are dying in two countries, the cack-handed way in which George Bush has prosecuted his war on terror has left America less feared by its enemies and less admired by its friends than it once was.
Yet there are also longer-term challenges, worth stressing if only because they have been so ignored on the campaign. Jump forward to 2017, when the next president will hope to relinquish office. A combination of demography and the rising costs of America’s huge entitlement programmes—Social Security, Medicare and Medicaid—will be starting to bankrupt the country (see article). Abroad a greater task is already evident: welding the new emerging powers to the West. That is not just a matter of handling the rise of India and China, drawing them into global efforts, such as curbs on climate change; it means reselling economic and political freedom to a world that too quickly associates American capitalism with Lehman Brothers and American justice with Guantánamo Bay. This will take patience, fortitude, salesmanship and strategy.
At the beginning of this election year, there were strong arguments against putting another Republican in the White House. A spell in opposition seemed apt punishment for the incompetence, cronyism and extremism of the Bush presidency. Conservative America also needs to recover its vim. Somehow Ronald Reagan’s party of western individualism and limited government has ended up not just increasing the size of the state but turning it into a tool of southern-fried moralism.
The selection of Mr McCain as the Republicans’ candidate was a powerful reason to reconsider. Mr McCain has his faults: he is an instinctive politician, quick to judge and with a sharp temper. And his age has long been a concern (how many global companies in distress would bring in a new 72-year-old boss?). Yet he has bravely taken unpopular positions—for free trade, immigration reform, the surge in Iraq, tackling climate change and campaign-finance reform. A western Republican in the Reagan mould, he has a long record of working with both Democrats and America’s allies.
If only the real John McCain had been running
That, however, was Senator McCain; the Candidate McCain of the past six months has too often seemed the victim of political sorcery, his good features magically inverted, his bad ones exaggerated. The fiscal conservative who once tackled Mr Bush over his unaffordable tax cuts now proposes not just to keep the cuts, but to deepen them. The man who denounced the religious right as “agents of intolerance” now embraces theocratic culture warriors. The campaigner against ethanol subsidies (who had a better record on global warming than most Democrats) came out in favour of a petrol-tax holiday. It has not all disappeared: his support for free trade has never wavered. Yet rather than heading towards the centre after he won the nomination, Mr McCain moved to the right.
Meanwhile his temperament, always perhaps his weak spot, has been found wanting. Sometimes the seat-of-the-pants method still works: his gut reaction over Georgia—to warn Russia off immediately—was the right one. Yet on the great issue of the campaign, the financial crisis, he has seemed all at sea, emitting panic and indecision. Mr McCain has never been particularly interested in economics, but, unlike Mr Obama, he has made little effort to catch up or to bring in good advisers (Doug Holtz-Eakin being the impressive exception).
The choice of Sarah Palin epitomised the sloppiness. It is not just that she is an unconvincing stand-in, nor even that she seems to have been chosen partly for her views on divisive social issues, notably abortion. Mr McCain made his most important appointment having met her just twice.
Ironically, given that he first won over so many independents by speaking his mind, the case for Mr McCain comes down to a piece of artifice: vote for him on the assumption that he does not believe a word of what he has been saying. Once he reaches the White House, runs this argument, he will put Mrs Palin back in her box, throw away his unrealistic tax plan and begin negotiations with the Democratic Congress. That is plausible; but it is a long way from the convincing case that Mr McCain could have made. Had he become president in 2000 instead of Mr Bush, the world might have had fewer problems. But this time it is beset by problems, and Mr McCain has not proved that he knows how to deal with them.
Is Mr Obama any better? Most of the hoopla about him has been about what he is, rather than what he would do. His identity is not as irrelevant as it sounds. Merely by becoming president, he would dispel many of the myths built up about America: it would be far harder for the spreaders of hate in the Islamic world to denounce the Great Satan if it were led by a black man whose middle name is Hussein; and far harder for autocrats around the world to claim that American democracy is a sham. America’s allies would rally to him: the global electoral college on our website shows a landslide in his favour. At home he would salve, if not close, the ugly racial wound left by America’s history and lessen the tendency of American blacks to blame all their problems on racism.
So Mr Obama’s star quality will be useful to him as president. But that alone is not enough to earn him the job. Charisma will not fix Medicare nor deal with Iran. Can he govern well? Two doubts present themselves: his lack of executive experience; and the suspicion that he is too far to the left.
There is no getting around the fact that Mr Obama’s résumé is thin for the world’s biggest job. But the exceptionally assured way in which he has run his campaign is a considerable comfort. It is not just that he has more than held his own against Mr McCain in the debates. A man who started with no money and few supporters has out-thought, out-organised and out-fought the two mightiest machines in American politics—the Clintons and the conservative right.
Political fire, far from rattling Mr Obama, seems to bring out the best in him: the furore about his (admittedly ghastly) preacher prompted one of the most thoughtful speeches of the campaign. On the financial crisis his performance has been as assured as Mr McCain’s has been febrile. He seems a quick learner and has built up an impressive team of advisers, drawing in seasoned hands like Paul Volcker, Robert Rubin and Larry Summers. Of course, Mr Obama will make mistakes; but this is a man who listens, learns and manages well.
It is hard too nowadays to depict him as soft when it comes to dealing with America’s enemies. Part of Mr Obama’s original appeal to the Democratic left was his keenness to get American troops out of Iraq; but since the primaries he has moved to the centre, pragmatically saying the troops will leave only when the conditions are right. His determination to focus American power on Afghanistan, Pakistan and proliferation was prescient. He is keener to talk to Iran than Mr McCain is— but that makes sense, providing certain conditions are met.
Our main doubts about Mr Obama have to do with the damage a muddle-headed Democratic Congress might try to do to the economy. Despite the protectionist rhetoric that still sometimes seeps into his speeches, Mr Obama would not sponsor a China-bashing bill. But what happens if one appears out of Congress? Worryingly, he has a poor record of defying his party’s baronies, especially the unions. His advisers insist that Mr Obama is too clever to usher in a new age of over-regulation, that he will stop such nonsense getting out of Congress, that he is a political chameleon who would move to the centre in Washington. But the risk remains that on economic matters the centre that Mr Obama moves to would be that of his party, not that of the country as a whole.
He has earned it
So Mr Obama in that respect is a gamble. But the same goes for Mr McCain on at least as many counts, not least the possibility of President Palin. And this cannot be another election where the choice is based merely on fear. In terms of painting a brighter future for America and the world, Mr Obama has produced the more compelling and detailed portrait. He has campaigned with more style, intelligence and discipline than his opponent. Whether he can fulfil his immense potential remains to be seen. But Mr Obama deserves the presidency.
Urgent need for IMF action
October 26, 2008
Paul Krugman frets that we are about to witness the mother of all currency crises in emerging markets, and I am afraid that he is right. As I wrote in my previous post, the financial crisis in the developing world has just started and there are indications that it will get a lot, a lot worse. What is different with this phase of the crisis is that it cannot be addressed by governments in the affected countries issuing their own fiscal guarantees and domestic currency. These countries need external lines of credit, and they need it fast before the scale of the problem becomes truly unmanageable.
The solution is clear. The IMF, possibly along with central banks of the G7, has to act as a global lender of last resort to emerging markets. These countries have to have ample access to liquidity in reserve currencies--quickly and with few strings attached--for them to be able to fend off what may otherwise become a historic rout of their currencies. And China should join in: it should make a portion of its near-$2 trillion of reserves available in support of this global enlargement of credit lines.
Emerging markets have every right to say that they are being swept under by a crisis that is not their own doing. But the real reason the rest of the world needs to move on this front is naked self-interest. Combine a deep recession in the advanced countries with an uncontrolled depreciation of emerging-market currencies, and the pressure to erect trade barriers in the U.S. and Europe will be impossible to withstand. A vicious cycle of unemployment and protectionism feeding on each other a la 1930s could transform the deep recession everyone is already expecting into a second great depression. It can get worse...
And with this bit of good news just in, Dominique Strauss-Kahn should have no distractions to prevent him from focusing on this most urgent task. There are some reports that the IMF is moving in this direction. I have a feeling that this will be the make-it-or-break-it week for emerging markets. I hope the IMF will make an announcement in time to make a difference.
Paul Krugman frets that we are about to witness the mother of all currency crises in emerging markets, and I am afraid that he is right. As I wrote in my previous post, the financial crisis in the developing world has just started and there are indications that it will get a lot, a lot worse. What is different with this phase of the crisis is that it cannot be addressed by governments in the affected countries issuing their own fiscal guarantees and domestic currency. These countries need external lines of credit, and they need it fast before the scale of the problem becomes truly unmanageable.
The solution is clear. The IMF, possibly along with central banks of the G7, has to act as a global lender of last resort to emerging markets. These countries have to have ample access to liquidity in reserve currencies--quickly and with few strings attached--for them to be able to fend off what may otherwise become a historic rout of their currencies. And China should join in: it should make a portion of its near-$2 trillion of reserves available in support of this global enlargement of credit lines.
Emerging markets have every right to say that they are being swept under by a crisis that is not their own doing. But the real reason the rest of the world needs to move on this front is naked self-interest. Combine a deep recession in the advanced countries with an uncontrolled depreciation of emerging-market currencies, and the pressure to erect trade barriers in the U.S. and Europe will be impossible to withstand. A vicious cycle of unemployment and protectionism feeding on each other a la 1930s could transform the deep recession everyone is already expecting into a second great depression. It can get worse...
And with this bit of good news just in, Dominique Strauss-Kahn should have no distractions to prevent him from focusing on this most urgent task. There are some reports that the IMF is moving in this direction. I have a feeling that this will be the make-it-or-break-it week for emerging markets. I hope the IMF will make an announcement in time to make a difference.
Roussopoulos resigns under fire
GEORGE GILSON
Theodoros Roussopoulos launches a fierce attack on Pasok leader George Papandreou on October 22 in parliament (L) before leaving the stage (R)
STATE Minister Theodoros Roussopoulos resigned on October 23, proving that the raging Vatopaidi land scandal has come within a hair's breadth of Prime Minister Costas Karamanlis himself.
In his letter of resignation, Roussopoulos said his decision was "guided by the interest of the great democratic party". He was recruited by Karamanlis as spokesman in 2000, when New Democracy was in the opposition, but many traditional conservatives treated him as a carpetbagger despite the authority and expansive powers with which the prime minister entrusted him.
Roussopoulos said that as a simple MP he could better defend himself against an "insidious and totally ungrounded attack".
In immediately accepting the resignation, Karamanlis' office issued a statement saying that Roussopoulos' decision "displays self-respect and political mores".
His deputy, Evangelos Antonaros, will replace Roussopoulos as government spokesman. Interior Minister Prokopis Pavlopoulos will take over the statewide ministry, with its domestic and international press and information operations.
Rightwing Laos party leader George Karatzaferis told parliament the day before that Roussopoulos had already given the prime minister an undated resignation letter on October 19.
The resignation came a day after a stormy, seven-hour parliamentary debate on holding a parliamentary inquiry on the Vatopaidi scandal, to which the government acquiesced after two prosecutors handling the case resigned, charging external interference. Parliament agreed by acclamation that the inquiry will begin on October 30 and will wrap up by December 15.
Karamanlis was conspicuously absent from the debate, the clearest indication that the prime minister had hung Roussopoulos out to dry. In calling for a preliminary criminal probe in parliament, Pasok charged that Roussopoulos coordinated the Vatopaidi land exchanges.
Roussopoulos lashed out at Pasok leader George Papandreou in a vitriolic ad hominem attack during the October 22 debate, charging him with "political cannibalism".
Roussopoulos painted Papandreou as the heir to a political legacy who slandered him and targeted him in an effort to strike at ruling New Democracy and Karamanlis. That led his critics, such as Karatzaferis, to claim that Roussopoulos' criticism of Papandreou applied equally to Karamanlis and that the state minister might bring the PM down in order to protect himself.
'Spiritual ties'
Roussopoulos claimed that he merely enjoyed a "spiritual" relationship with Vatopaidi Abbott Efraim and that there was no evidence of his involvement in the scandal. A witness in the judicial probe testified that he drove Efraim repeatedly to Roussopoulos' home and offices.
New Democracy MPs and ministers have long complained of Roussopoulos' alleged role in the Vatopaidi affair. Conservative publisher Dimitris Rizos said on national television on September 22 that several ministers had told him that Roussopoulos was the mastermind.
Parliament's October 22 decision means that the Vatopaidi scandal - in which prosecutors say the state lost well over 100 million euros in about 260 land exchanges with the monastery - will dominate public discourse until mid-December. Even then, it is likely that the political parties, as in a 2004 inquiry on arms procurements, will issue separate conflicting reports that will do little to shed light on the scandal.
Pasok's proposal for parliament to conduct a preliminary criminal probe of three ministers' responsibility in the Vatopaidi affair appeared destined to fail. Though all three other opposition parties signed on after initial reluctance, the proposal required 151 votes, meaning it could not pass without at least three votes from the governing majority.
ND abstains from vote
Karamanlis and his inner cabinet decided on October 23 that New Democracy's parliamentary group will not even attend the scheduled vote the next day. The move sparked a political firestorm. Pavlopoulos, in making the announcement, said the ruling party will reverse itself if evidence of ministerial crimes emerge in the parliamentary inquiry.
The preliminary criminal inquiry in parliament would have power to place on trial in a special court the three ministers accused by Pasok of illegally approving or engineering the land exchanges. They are former agriculture minister Evangelos Bassiakos, Deputy Foreign Minister Petros Doukas (accused of acts committed as deputy finance minister) and Roussopoulos.
The 2001 constitution (article 86) took away from prosecutors the right to conduct preliminary criminal probes of ministers, giving that authority to a "special parliamentary committee". Hence, if prosecutors find evidence "related to ministers" - even if their name merely arises - they must send the case directly to parliament. If indications of guilt are found by the parliamentary committee, the full parliament votes on whether or not to put the minister on trial.
Papandreou argued that the criminal inquiry was the only way to exorcise the prevalent view that politicians and the powerful always go unpunished in Greece. He had called on ruling party MPs to vote on principle, not on party lines.
The Communist Party (KKE) and leftwing Syriza both called for a postponement of the October 24 vote in order to study the case files and determine if the preliminary criminal probe is warranted. But they were expected to attend the vote.
Top prosecutor blasted
Opposition parties, led by Pasok, again charged that Supreme Court Prosecutor George Sanidas violated the constitution in transmitting the files of the judicial criminal probe to parliament on October 22. That was because Sanidas' accompanying letter offered the unsolicited opinion that no evidence of ministerial crimes had been found in the records.
Pasok called on Justice Minister Sotiris Hatzigakis to take disciplinary action against Sanidas. The latter agreed to give parliament the files after talks with Hatzigakis.
Sanidas' many opposition critics have depicted him as a government puppet, a view that gained ground when the two prosecutors handling the Vatopaidi case were blocked from sending the judicial probe records to parliament once they found that ministers were involved.
The two were also irked that Sanidas appointed a third prosecutor, Efstathia Spyropoulou, to supervise their work. When Spyropoulou also concluded that evidence of ministers' responsibility mandated that parliament get the case, Sanidas called her "inadequate".
As the judicial files transferred to parliament showed, the depositions contained five references to Roussopoulos, three to former agriculture minister Alexandros Kontos, three to Doukas, one each to Finance Minister George Alogoskoufis and his deputy Antonis Bezas, and one each to former Pasok ministers George Drys and Apostolos Fotiadis (the Pasok ministers are covered by a statute of limitations on ministerial responsibility).
ATHENS NEWS , 24/10/2008, page: A03
Article code: C13310A031
Theodoros Roussopoulos launches a fierce attack on Pasok leader George Papandreou on October 22 in parliament (L) before leaving the stage (R)
STATE Minister Theodoros Roussopoulos resigned on October 23, proving that the raging Vatopaidi land scandal has come within a hair's breadth of Prime Minister Costas Karamanlis himself.
In his letter of resignation, Roussopoulos said his decision was "guided by the interest of the great democratic party". He was recruited by Karamanlis as spokesman in 2000, when New Democracy was in the opposition, but many traditional conservatives treated him as a carpetbagger despite the authority and expansive powers with which the prime minister entrusted him.
Roussopoulos said that as a simple MP he could better defend himself against an "insidious and totally ungrounded attack".
In immediately accepting the resignation, Karamanlis' office issued a statement saying that Roussopoulos' decision "displays self-respect and political mores".
His deputy, Evangelos Antonaros, will replace Roussopoulos as government spokesman. Interior Minister Prokopis Pavlopoulos will take over the statewide ministry, with its domestic and international press and information operations.
Rightwing Laos party leader George Karatzaferis told parliament the day before that Roussopoulos had already given the prime minister an undated resignation letter on October 19.
The resignation came a day after a stormy, seven-hour parliamentary debate on holding a parliamentary inquiry on the Vatopaidi scandal, to which the government acquiesced after two prosecutors handling the case resigned, charging external interference. Parliament agreed by acclamation that the inquiry will begin on October 30 and will wrap up by December 15.
Karamanlis was conspicuously absent from the debate, the clearest indication that the prime minister had hung Roussopoulos out to dry. In calling for a preliminary criminal probe in parliament, Pasok charged that Roussopoulos coordinated the Vatopaidi land exchanges.
Roussopoulos lashed out at Pasok leader George Papandreou in a vitriolic ad hominem attack during the October 22 debate, charging him with "political cannibalism".
Roussopoulos painted Papandreou as the heir to a political legacy who slandered him and targeted him in an effort to strike at ruling New Democracy and Karamanlis. That led his critics, such as Karatzaferis, to claim that Roussopoulos' criticism of Papandreou applied equally to Karamanlis and that the state minister might bring the PM down in order to protect himself.
'Spiritual ties'
Roussopoulos claimed that he merely enjoyed a "spiritual" relationship with Vatopaidi Abbott Efraim and that there was no evidence of his involvement in the scandal. A witness in the judicial probe testified that he drove Efraim repeatedly to Roussopoulos' home and offices.
New Democracy MPs and ministers have long complained of Roussopoulos' alleged role in the Vatopaidi affair. Conservative publisher Dimitris Rizos said on national television on September 22 that several ministers had told him that Roussopoulos was the mastermind.
Parliament's October 22 decision means that the Vatopaidi scandal - in which prosecutors say the state lost well over 100 million euros in about 260 land exchanges with the monastery - will dominate public discourse until mid-December. Even then, it is likely that the political parties, as in a 2004 inquiry on arms procurements, will issue separate conflicting reports that will do little to shed light on the scandal.
Pasok's proposal for parliament to conduct a preliminary criminal probe of three ministers' responsibility in the Vatopaidi affair appeared destined to fail. Though all three other opposition parties signed on after initial reluctance, the proposal required 151 votes, meaning it could not pass without at least three votes from the governing majority.
ND abstains from vote
Karamanlis and his inner cabinet decided on October 23 that New Democracy's parliamentary group will not even attend the scheduled vote the next day. The move sparked a political firestorm. Pavlopoulos, in making the announcement, said the ruling party will reverse itself if evidence of ministerial crimes emerge in the parliamentary inquiry.
The preliminary criminal inquiry in parliament would have power to place on trial in a special court the three ministers accused by Pasok of illegally approving or engineering the land exchanges. They are former agriculture minister Evangelos Bassiakos, Deputy Foreign Minister Petros Doukas (accused of acts committed as deputy finance minister) and Roussopoulos.
The 2001 constitution (article 86) took away from prosecutors the right to conduct preliminary criminal probes of ministers, giving that authority to a "special parliamentary committee". Hence, if prosecutors find evidence "related to ministers" - even if their name merely arises - they must send the case directly to parliament. If indications of guilt are found by the parliamentary committee, the full parliament votes on whether or not to put the minister on trial.
Papandreou argued that the criminal inquiry was the only way to exorcise the prevalent view that politicians and the powerful always go unpunished in Greece. He had called on ruling party MPs to vote on principle, not on party lines.
The Communist Party (KKE) and leftwing Syriza both called for a postponement of the October 24 vote in order to study the case files and determine if the preliminary criminal probe is warranted. But they were expected to attend the vote.
Top prosecutor blasted
Opposition parties, led by Pasok, again charged that Supreme Court Prosecutor George Sanidas violated the constitution in transmitting the files of the judicial criminal probe to parliament on October 22. That was because Sanidas' accompanying letter offered the unsolicited opinion that no evidence of ministerial crimes had been found in the records.
Pasok called on Justice Minister Sotiris Hatzigakis to take disciplinary action against Sanidas. The latter agreed to give parliament the files after talks with Hatzigakis.
Sanidas' many opposition critics have depicted him as a government puppet, a view that gained ground when the two prosecutors handling the Vatopaidi case were blocked from sending the judicial probe records to parliament once they found that ministers were involved.
The two were also irked that Sanidas appointed a third prosecutor, Efstathia Spyropoulou, to supervise their work. When Spyropoulou also concluded that evidence of ministers' responsibility mandated that parliament get the case, Sanidas called her "inadequate".
As the judicial files transferred to parliament showed, the depositions contained five references to Roussopoulos, three to former agriculture minister Alexandros Kontos, three to Doukas, one each to Finance Minister George Alogoskoufis and his deputy Antonis Bezas, and one each to former Pasok ministers George Drys and Apostolos Fotiadis (the Pasok ministers are covered by a statute of limitations on ministerial responsibility).
ATHENS NEWS , 24/10/2008, page: A03
Article code: C13310A031
ECJ rules against Greece
DAMIAN MAC CON ULADH
Greek students protest in Athens against the legalisation of private liberal arts institutions earlier this month
THE EUROPEAN Commission expects Greece to bow to a European Court ruling and recognise diplomas issued by the country's private liberal arts institutions (KES) that are affiliated with universities and colleges in EU member states.
In an October 23 ruling, the European Court of Justice (ECJ) said Greece has failed to comply with a 1989 EU directive (89/48/EEC) concerning the recognition of higher education diplomas of at least three years' duration. The purpose of this directive is to make it easier for professionals in one EU member state to practise their profession in another.
The European Commission initiated the case against Greece for non-compliance with the directive in July 2005 after it received complaints from 37 individuals in 2001. These individuals claimed that, even though Greece had transposed the 1989 directive into Greek law in 2000, a Greek presidential decree continued to impede the recognition of their educational and professional qualifications.
In its application to the court, the commission highlighted six areas in which it argued Greece was contravening community law and directives. The court upheld five of the six complaints.
The commission's first complaint argued that Greece systematically refused to recognise diplomas obtained from private liberal arts institutions in Greece.
At present, more than a dozen European universities, mainly British, provide their programmes through KES institutions in Greece based on franchising agreements. About half a dozen other schools are affiliated with American universities. More than 25,000 Greeks have earned a degree from one of these institutions.
In its ruling, the ECJ said that the general framework for the recognition of higher education qualifications is clear: It rests on the mutual trust that European Union member states have in the diplomas they award. As such, the system neither requires nor permits one member state to validate the qualifications issued by a competent authority of another member state.
Each state must presume that the qualifications awarded to a person in one state to pursue a particular profession are sufficient to carry out the same profession in other member states.
Europe's highest court also ruled that the authorities in a country hosting franchise colleges, in this case Greece, may not examine the basis on which the diplomas have been awarded. This right and responsibility rests with the competent authorities in the member country where the institution awarding the diplomas is based.
As regards the first complaint, the court found that Greece has infringed EU rules on the recognition of diplomas by failing to recognise the diplomas awarded by the competent authorities of another member state.
The court also ruled on the issue of "compensatory measures", whereby host member states (meaning states in which franchise educational establishments are located) may require graduates to undergo an adaptation period or aptitude test before they can fully engage in their profession. While the directive allows for exceptions to that principle, the court found that the Greek approach involved a far greater "suppression of choice" permitted by the directive.
In its third ruling, the ECJ found that the operation of a Greek official body set up to verify professional qualifications (the Council Responsible for Recognising Professional Equivalence of Higher Education Qualifications, or SAEITTE) is contrary to the 1989 directive on the grounds that all diplomas issued by recognised third-level institutions in other EU countries are automatically valid. Furthermore, it also ruled that Greece may no longer discriminate against degrees awarded after three years of course work (Most university courses in Greece are of a four-year duration.)
In a further ruling, which will affect liberal arts college employees in Greece's massive public sector, the Luxembourg court declared that Greece must not prevent anyone whose qualifications were not recognised when they were recruited into the civil service from seeking the promotion or salary increases to which they would otherwise be entitled.
Ball back in Greece's court
The ruling now puts the ball back in Greece's court as regards the implantation of additional directives affecting third-level education.
Greece failed to meet an October 2007 deadline for the implementation of the European Union directive (2005/36/EC) that also requires the state to recognise the professional qualifications of graduates who earned their degree at a European university or one of Greece's dozens of KES institutes.
In December 2007, Education Minister Evrypidis Stylianidis informed parliament's standing education committee that Greece would not enforce the 2005 EU directive until the ECJ ruling on the 1989 directive had come through.
Now that it has finally been delivered, the ECJ ruling may also make the new law on regulating private liberal arts colleges redundant. The law, passed by parliament during the summer, created a strict licensing system for the KES sector.
The law also explicitly states that it is illegal for these colleges to refer to themselves as universities. They are also prohibited from granting diplomas to their students, who must make do with a certificate of study instead.
"The ECJ ruling seems to completely undermine the provisions of this law," said a spokesman of a major Athens educational institution, speaking on condition of anonymity.
The ruling may also have constitutional ramifications. The current wording of the constitution explicitly states that university education may only be "provided exclusively by institutions which are fully self-governed public law legal entities... under the supervision of the state".
Minister not surprised
Speaking to a reporter, Stylianidis said that he was "not surprised by the result as it was something that we had expected". His ministry will study the ruling, consult with interested parties and then proceed to enact a presidential decree, in the new year at the earliest, which would "harmonise the Greek system with the European one, while ensuring the quality of education".
He did maintain, however, that the court decision and harmonisation is a different issue from that of licensing KES institutions, which he said was based on a "law already passed, for which the relevant decrees have been issued and which is proceeding to schedule".
Talking to this newspaper, an ECJ spokesman said the commission will now monitor whether Greece makes the necessary changes to its national law.
"If the commission feels that Greece hasn't complied, then it can start a second infringement procedure, ultimately resulting in requesting the ECJ to impose fines on Greece for having not complied with today's court judgement, " the spokesman said.
"However," as the spokesman said, "this happens very, very rarely. We have over 100 such infringements cases every year and only one or two judgements end in a fine."
Greek students protest in Athens against the legalisation of private liberal arts institutions earlier this month
THE EUROPEAN Commission expects Greece to bow to a European Court ruling and recognise diplomas issued by the country's private liberal arts institutions (KES) that are affiliated with universities and colleges in EU member states.
In an October 23 ruling, the European Court of Justice (ECJ) said Greece has failed to comply with a 1989 EU directive (89/48/EEC) concerning the recognition of higher education diplomas of at least three years' duration. The purpose of this directive is to make it easier for professionals in one EU member state to practise their profession in another.
The European Commission initiated the case against Greece for non-compliance with the directive in July 2005 after it received complaints from 37 individuals in 2001. These individuals claimed that, even though Greece had transposed the 1989 directive into Greek law in 2000, a Greek presidential decree continued to impede the recognition of their educational and professional qualifications.
In its application to the court, the commission highlighted six areas in which it argued Greece was contravening community law and directives. The court upheld five of the six complaints.
The commission's first complaint argued that Greece systematically refused to recognise diplomas obtained from private liberal arts institutions in Greece.
At present, more than a dozen European universities, mainly British, provide their programmes through KES institutions in Greece based on franchising agreements. About half a dozen other schools are affiliated with American universities. More than 25,000 Greeks have earned a degree from one of these institutions.
In its ruling, the ECJ said that the general framework for the recognition of higher education qualifications is clear: It rests on the mutual trust that European Union member states have in the diplomas they award. As such, the system neither requires nor permits one member state to validate the qualifications issued by a competent authority of another member state.
Each state must presume that the qualifications awarded to a person in one state to pursue a particular profession are sufficient to carry out the same profession in other member states.
Europe's highest court also ruled that the authorities in a country hosting franchise colleges, in this case Greece, may not examine the basis on which the diplomas have been awarded. This right and responsibility rests with the competent authorities in the member country where the institution awarding the diplomas is based.
As regards the first complaint, the court found that Greece has infringed EU rules on the recognition of diplomas by failing to recognise the diplomas awarded by the competent authorities of another member state.
The court also ruled on the issue of "compensatory measures", whereby host member states (meaning states in which franchise educational establishments are located) may require graduates to undergo an adaptation period or aptitude test before they can fully engage in their profession. While the directive allows for exceptions to that principle, the court found that the Greek approach involved a far greater "suppression of choice" permitted by the directive.
In its third ruling, the ECJ found that the operation of a Greek official body set up to verify professional qualifications (the Council Responsible for Recognising Professional Equivalence of Higher Education Qualifications, or SAEITTE) is contrary to the 1989 directive on the grounds that all diplomas issued by recognised third-level institutions in other EU countries are automatically valid. Furthermore, it also ruled that Greece may no longer discriminate against degrees awarded after three years of course work (Most university courses in Greece are of a four-year duration.)
In a further ruling, which will affect liberal arts college employees in Greece's massive public sector, the Luxembourg court declared that Greece must not prevent anyone whose qualifications were not recognised when they were recruited into the civil service from seeking the promotion or salary increases to which they would otherwise be entitled.
Ball back in Greece's court
The ruling now puts the ball back in Greece's court as regards the implantation of additional directives affecting third-level education.
Greece failed to meet an October 2007 deadline for the implementation of the European Union directive (2005/36/EC) that also requires the state to recognise the professional qualifications of graduates who earned their degree at a European university or one of Greece's dozens of KES institutes.
In December 2007, Education Minister Evrypidis Stylianidis informed parliament's standing education committee that Greece would not enforce the 2005 EU directive until the ECJ ruling on the 1989 directive had come through.
Now that it has finally been delivered, the ECJ ruling may also make the new law on regulating private liberal arts colleges redundant. The law, passed by parliament during the summer, created a strict licensing system for the KES sector.
The law also explicitly states that it is illegal for these colleges to refer to themselves as universities. They are also prohibited from granting diplomas to their students, who must make do with a certificate of study instead.
"The ECJ ruling seems to completely undermine the provisions of this law," said a spokesman of a major Athens educational institution, speaking on condition of anonymity.
The ruling may also have constitutional ramifications. The current wording of the constitution explicitly states that university education may only be "provided exclusively by institutions which are fully self-governed public law legal entities... under the supervision of the state".
Minister not surprised
Speaking to a reporter, Stylianidis said that he was "not surprised by the result as it was something that we had expected". His ministry will study the ruling, consult with interested parties and then proceed to enact a presidential decree, in the new year at the earliest, which would "harmonise the Greek system with the European one, while ensuring the quality of education".
He did maintain, however, that the court decision and harmonisation is a different issue from that of licensing KES institutions, which he said was based on a "law already passed, for which the relevant decrees have been issued and which is proceeding to schedule".
Talking to this newspaper, an ECJ spokesman said the commission will now monitor whether Greece makes the necessary changes to its national law.
"If the commission feels that Greece hasn't complied, then it can start a second infringement procedure, ultimately resulting in requesting the ECJ to impose fines on Greece for having not complied with today's court judgement, " the spokesman said.
"However," as the spokesman said, "this happens very, very rarely. We have over 100 such infringements cases every year and only one or two judgements end in a fine."
Q&A: DR Congo conflict
A rebel general has called a ceasefire in the east of the Democratic Republic of Congo, stopping short of seizing Goma, one of the largest towns in the region.
Some 20,000 people have fled the advance of Gen Laurent Nkunda's troops. They join an estimated one million already displaced in the region, raising fears of another humanitarian disaster.
DR Congo, a vast nation in the heart of Africa, is striving to recover from a lengthy civil war in which an estimated three million people died, mostly through starvation and disease.
What is the conflict about?
For years fighting in DR Congo has been fuelled the country's vast mineral wealth.
DR Congo is about the size of western Europe, but with no road or rail links from one side of the country to the other. That makes it easy for all sides in a conflict to take advantage of any anarchy and plunder natural resources.
A five-year war - sometimes termed "Africa's world war" as it drew in Angola, Namibia, Zimbabwe, Uganda and Rwanda - ended in 2003 with the formation of a transitional government and the subsequent holding of elections.
But unrest has continued in the unruly east of the country and as a result some armed groups have refused to disarm or join the national army.
Gen Nkunda's forces started fighting again in August 2008, after a lull following a peace deal signed in January.
Why has the fighting broken out again?
It is not entirely clear.
But Gen Nkunda has always said he is fighting to protect his Tutsi community from attack by Rwandan Hutu rebels, some of whom are accused of taking part in the 1994 genocide.
The Congolese government has often promised to stop the Hutu forces from using its territory, but has not done so.
The latest deadline was apparently the end of August - just when the fighting blew up again.
After declaring his current ceasefire, Gen Nkunda told the Associated Press that he wanted to talk to the government about his objections to a $5bn (£3.1bn) deal that gives China access to the region's mineral resources - such as gold and coltan, which is used to make mobile phones.
Does Gen Nkunda have sponsors?
The Congolese government has accused Rwanda of backing Gen Nkunda, with troops and heavy artillery.
Rwanda denies the claims but it has twice invaded its much larger neighbour in recent years.
Rwanda's president is Paul Kagame - a former Tutsi rebel who ended the genocide, in which some 800,000 Tutsis and moderate Hutus were killed.
The Congolese army has been accused of working with the Hutu rebels both on the battlefield and in exploiting the region's mines.
So it is plausible that Rwanda could be using Gen Nkunda's forces to put pressure on DR Congo to finally live up to its promises to disarm the Hutu militias.
What is the UN doing?
That is the question many Congolese are asking.
The UN has 17,000 peacekeepers in DR Congo - its largest mission in the world.
Some Congolese accuse the UN of doing nothing - just being "tourists" - and have attacked their offices in Goma.
But the UN mission has sent helicopter gunships to help stop the rebel advance on Goma and has asked for extra forces to help stop the fighting.
What about the civilians?
Aid workers are extremely worried about tens of thousands of people in the area.
All sides are accused of carrying out horrific atrocities against civilians, in particular mass rape.
Many of those who have fled to Goma are sleeping in the open, relying on local people and aid agencies for food.
Many more are likely to be caught up in the fighting in the region's picturesque rolling hills.
The UN fears that some people are dying from malnutrition.
Some 20,000 people have fled the advance of Gen Laurent Nkunda's troops. They join an estimated one million already displaced in the region, raising fears of another humanitarian disaster.
DR Congo, a vast nation in the heart of Africa, is striving to recover from a lengthy civil war in which an estimated three million people died, mostly through starvation and disease.
What is the conflict about?
For years fighting in DR Congo has been fuelled the country's vast mineral wealth.
DR Congo is about the size of western Europe, but with no road or rail links from one side of the country to the other. That makes it easy for all sides in a conflict to take advantage of any anarchy and plunder natural resources.
A five-year war - sometimes termed "Africa's world war" as it drew in Angola, Namibia, Zimbabwe, Uganda and Rwanda - ended in 2003 with the formation of a transitional government and the subsequent holding of elections.
But unrest has continued in the unruly east of the country and as a result some armed groups have refused to disarm or join the national army.
Gen Nkunda's forces started fighting again in August 2008, after a lull following a peace deal signed in January.
Why has the fighting broken out again?
It is not entirely clear.
But Gen Nkunda has always said he is fighting to protect his Tutsi community from attack by Rwandan Hutu rebels, some of whom are accused of taking part in the 1994 genocide.
The Congolese government has often promised to stop the Hutu forces from using its territory, but has not done so.
The latest deadline was apparently the end of August - just when the fighting blew up again.
After declaring his current ceasefire, Gen Nkunda told the Associated Press that he wanted to talk to the government about his objections to a $5bn (£3.1bn) deal that gives China access to the region's mineral resources - such as gold and coltan, which is used to make mobile phones.
Does Gen Nkunda have sponsors?
The Congolese government has accused Rwanda of backing Gen Nkunda, with troops and heavy artillery.
Rwanda denies the claims but it has twice invaded its much larger neighbour in recent years.
Rwanda's president is Paul Kagame - a former Tutsi rebel who ended the genocide, in which some 800,000 Tutsis and moderate Hutus were killed.
The Congolese army has been accused of working with the Hutu rebels both on the battlefield and in exploiting the region's mines.
So it is plausible that Rwanda could be using Gen Nkunda's forces to put pressure on DR Congo to finally live up to its promises to disarm the Hutu militias.
What is the UN doing?
That is the question many Congolese are asking.
The UN has 17,000 peacekeepers in DR Congo - its largest mission in the world.
Some Congolese accuse the UN of doing nothing - just being "tourists" - and have attacked their offices in Goma.
But the UN mission has sent helicopter gunships to help stop the rebel advance on Goma and has asked for extra forces to help stop the fighting.
What about the civilians?
Aid workers are extremely worried about tens of thousands of people in the area.
All sides are accused of carrying out horrific atrocities against civilians, in particular mass rape.
Many of those who have fled to Goma are sleeping in the open, relying on local people and aid agencies for food.
Many more are likely to be caught up in the fighting in the region's picturesque rolling hills.
The UN fears that some people are dying from malnutrition.
Saturday, October 25, 2008
On the Bosporus, a Scholar Tells of Sultans, Washerwomen and Snakes
By SABRINA TAVERNISE
Published: October 24, 2008
ISTANBUL — Murat Belge is one of Turkey’s most important intellectuals. He is also — when the mood strikes him — one of this city’s most erudite tour guides.
His interest is history, and his talks are bursting with 19th-century gossip. The paranoid sultan who lived directly on the sea to be able to control it. The maid who went into prostitution to support her mistress, whose Albanian husband had stolen the couple’s money. A Crusades-era tree that was cut down in 1934 for a gardening school.
History can be slippery in Turkey, which became a modern state in 1923, assembled from the ethnic patchwork of what remained of the Ottoman Empire. The official version is kept under lock and key, and writers can be punished for trying to open it.
Mr. Belge (pronounced BEL-geh), a prominent leftist who teaches comparative literature at Bilgi University in Istanbul, knows this well. He was imprisoned for two years during a military coup in the 1970s, and has been prosecuted (but not jailed) in recent years, on grounds including columns he wrote in support of a conference on Armenians in the early 20th century, the time of the genocide of the Armenian population in the Ottoman Empire.
But that does not seem to have dented his irreverence, which flowed as freely as the anise-flavored liqueur during lunch at a fish restaurant during a tour this summer.
“We have a very unhealthy relation with our history,” he said. “It’s basically a collection of lies.”
In Turkey’s painful birth, at the end of World War I, its founder, Mustafa Kemal Ataturk, disassembled the structure of the Ottoman state, which had been in place for 600 years. Instead of forging a national identity based on the Ottomans, he emphasized “Turkishness,” reaching back to the Hittites in 2600 B.C.
“To set up a state is easy, but to create a nation is extremely difficult,” Mr. Belge said. “We are still suffering the consequences.”
But confrontation is not his objective. On the contrary, his strong affection for this beautiful city — piled on top of itself throughout the centuries — and his loving attention to detail gives audiences a fresh look at their own environment.
The journey begins in Europe (part of the city is in Europe and part in Asia), not far from Dolmabahce, an Ottoman palace built in the 19th century when the empire was already in deep decline. The balconies, Mr. Belge said, were brought to Turkey by European designers.
“Tanzimat emerges from that peninsula,” Mr. Belge said, motioning to a green finger of land, where minarets of the 17th-century Blue Mosque spike the skyline.
Tanzimat, a 19th-century period of reform, was a brief stab at modernization when the Ottomans established a Parliament and, briefly, a Constitution, as well as giving more rights to ethnic and religious minorities.
It was a time of brisk international trade, with far more ships coming to port than in the early years of the Turkish republic, he said, adding, “Ottomans were much more globalized in that respect.”
The Ottomans wanted no competition to their power, so in contrast to European society, there was no class of landed gentry, Mr. Belge said. People could quickly gain wealth and status.
So it was for one illiterate military officer, who became chief commander of the army. He signed his name using the Arabic script numbers 7 and 8, and a few squiggles in between, because that was what writing looked like to him. His wife, a washerwoman, never became accustomed to her important new status, and embarrassed hosts by refusing to sit down in their presence, something that was unacceptable for servants at the time.
The wooden waterfront mansions, or yalis (pronounced YAW-luhs), are among Mr. Belge’s favorite features of the Bosporus. He lived in one for a summer in 1974 and has been trying ever since to unearth their stories.
This, in fact, is how he became interested in giving tours. As a professor and writer, he likes sharing what he knows, so he began to lead walking tours. By the 19th century, even tradesmen were living in the waterfront yalis. Mr. Belge pointed out one that is referred to as the “shoe-leather maker’s yali.”
The snake yali got its name when a sultan spoke admiringly about it to a servant. The man happened to know the owner, and fearful that the yali would be taken by the sultan, replied that it looked nice from the outside, but was infested with snakes.
Mr. Belge pointed to a court office that had burned. “In Turkey, there is a habit that justice buildings burn so that the archives disappear,” he said mischievously. Then he indicated an empty space where a yali had been destroyed by an out-of-control ferry. “Living on the Bosporus is good, but there are consequences,” he said.
Published: October 24, 2008
ISTANBUL — Murat Belge is one of Turkey’s most important intellectuals. He is also — when the mood strikes him — one of this city’s most erudite tour guides.
His interest is history, and his talks are bursting with 19th-century gossip. The paranoid sultan who lived directly on the sea to be able to control it. The maid who went into prostitution to support her mistress, whose Albanian husband had stolen the couple’s money. A Crusades-era tree that was cut down in 1934 for a gardening school.
History can be slippery in Turkey, which became a modern state in 1923, assembled from the ethnic patchwork of what remained of the Ottoman Empire. The official version is kept under lock and key, and writers can be punished for trying to open it.
Mr. Belge (pronounced BEL-geh), a prominent leftist who teaches comparative literature at Bilgi University in Istanbul, knows this well. He was imprisoned for two years during a military coup in the 1970s, and has been prosecuted (but not jailed) in recent years, on grounds including columns he wrote in support of a conference on Armenians in the early 20th century, the time of the genocide of the Armenian population in the Ottoman Empire.
But that does not seem to have dented his irreverence, which flowed as freely as the anise-flavored liqueur during lunch at a fish restaurant during a tour this summer.
“We have a very unhealthy relation with our history,” he said. “It’s basically a collection of lies.”
In Turkey’s painful birth, at the end of World War I, its founder, Mustafa Kemal Ataturk, disassembled the structure of the Ottoman state, which had been in place for 600 years. Instead of forging a national identity based on the Ottomans, he emphasized “Turkishness,” reaching back to the Hittites in 2600 B.C.
“To set up a state is easy, but to create a nation is extremely difficult,” Mr. Belge said. “We are still suffering the consequences.”
But confrontation is not his objective. On the contrary, his strong affection for this beautiful city — piled on top of itself throughout the centuries — and his loving attention to detail gives audiences a fresh look at their own environment.
The journey begins in Europe (part of the city is in Europe and part in Asia), not far from Dolmabahce, an Ottoman palace built in the 19th century when the empire was already in deep decline. The balconies, Mr. Belge said, were brought to Turkey by European designers.
“Tanzimat emerges from that peninsula,” Mr. Belge said, motioning to a green finger of land, where minarets of the 17th-century Blue Mosque spike the skyline.
Tanzimat, a 19th-century period of reform, was a brief stab at modernization when the Ottomans established a Parliament and, briefly, a Constitution, as well as giving more rights to ethnic and religious minorities.
It was a time of brisk international trade, with far more ships coming to port than in the early years of the Turkish republic, he said, adding, “Ottomans were much more globalized in that respect.”
The Ottomans wanted no competition to their power, so in contrast to European society, there was no class of landed gentry, Mr. Belge said. People could quickly gain wealth and status.
So it was for one illiterate military officer, who became chief commander of the army. He signed his name using the Arabic script numbers 7 and 8, and a few squiggles in between, because that was what writing looked like to him. His wife, a washerwoman, never became accustomed to her important new status, and embarrassed hosts by refusing to sit down in their presence, something that was unacceptable for servants at the time.
The wooden waterfront mansions, or yalis (pronounced YAW-luhs), are among Mr. Belge’s favorite features of the Bosporus. He lived in one for a summer in 1974 and has been trying ever since to unearth their stories.
This, in fact, is how he became interested in giving tours. As a professor and writer, he likes sharing what he knows, so he began to lead walking tours. By the 19th century, even tradesmen were living in the waterfront yalis. Mr. Belge pointed out one that is referred to as the “shoe-leather maker’s yali.”
The snake yali got its name when a sultan spoke admiringly about it to a servant. The man happened to know the owner, and fearful that the yali would be taken by the sultan, replied that it looked nice from the outside, but was infested with snakes.
Mr. Belge pointed to a court office that had burned. “In Turkey, there is a habit that justice buildings burn so that the archives disappear,” he said mischievously. Then he indicated an empty space where a yali had been destroyed by an out-of-control ferry. “Living on the Bosporus is good, but there are consequences,” he said.
Friday, October 10, 2008
The European Union’s week from hell
Oct 9th 2008 | BRUSSELS
From The Economist print edition
IT COULD have been funny if it were not so serious. The excuses came thick and fast all week, as European Union leaders, for all their customary talk of collective action, were forced by the world credit meltdown into a hotch-potch of individual national schemes to guarantee deposits and prop up banks (see article).
The most amusing excuse for Europe’s disarray came from François Fillon, the prime minister of France. He told the French parliament that it was “logical” for national governments to take the lead in saving their own banks. After all, a collapse might threaten at 2am, and no minister would want to “wake up” his 26 EU counterparts to debate a rescue with them. Mr Fillon had a point, sort of: national authorities know their own financial sector better than outsiders, and speed is indeed often of the essence. But he was also covering up a bigger reason for Europe’s slow start in this crisis. The meltdown—and the speed of reaction required—cruelly exposed the institutional and political limits of the European project.
France knows this better than most. It holds the rotating presidency of the EU, a job France’s president, Nicolas Sarkozy, used to advantage during the Russian invasion of Georgia. But an emergency financial summit France convened in Paris on October 4th between leaders of the four largest economies in the union—France, Germany, Britain and Italy—was a flop.
Even before the leaders gathered, Germany let it be known that it rejected a French suggestion of a joint European rescue fund, worth perhaps €300 billion ($420 billion). The details are hazy, because French officials later denied that the plan was theirs. Less than 24 hours after the Paris summit ended in a flurry of platitudes, Germany struck again, this time announcing a state-backed guarantee for personal savings deposits in German banks (a political pledge worth more than €1 trillion, the finance ministry estimates).
Ireland had been the first to break EU ranks, offering to guarantee deposits at Irish-owned banks, amid fears of bank collapses. By the time EU finance ministers met in Luxembourg on October 7th, half a dozen countries had promised new or beefed-up deposit guarantees. In a bid to impose a semblance of co-ordination on the chaos, the assembled ministers were invited to hike the EU-wide minimum level for deposit insurance, to €100,000. Some countries, mostly new members from the ex-communist block, said they could not afford such a move. In a fudge, the EU ministers agreed that at the very least they would guarantee deposits of up to €50,000. Ministers added a promise that Europe would shore up “systemically relevant” institutions (though what counts as too big, or too interconnected, to fail was left carefully unsaid).
One explanation for this nation-by-nation approach is institutional. The EU’s founding fathers thought monetary union would go hand in hand with economic union, and the convergence of fiscal and monetary policies. Many assumed that political union would follow before too long. But history took a different turn, and the EU has ended up a strange hybrid: its members have pooled big chunks of sovereignty, and 15 of them share a currency. But it is not a federal state. The European Central Bank controls monetary policy for the euro zone but banking supervision remains under national control.
However, the main explanation for the week’s disappointments had less to do with institutional architecture than with political will. Nothing in the EU’s architecture prevents national governments from pouring money into a central EU rescue fund, as briefly suggested by France (and more recently Italy), if that is what they want to do. The truth is that they don’t.
The Germans have been the most honest in saying why. “We as Germans do not want to pay into a big pot where we do not have control and do not know where German money might be used,” the finance minister, Peer Steinbrück, told German radio. Actually, German voters have a hunch where their taxpayers’ money would be used: in countries such as Britain (home to the City and profit-mad Anglo-Saxon capitalists) or Spain (scene of a housing bubble driven by cheap credit, of a sort to make thrifty German savers shudder).
The crisis is not over, however. It took American politicians a while to explain to voters on Main Street just how they would suffer if the high-fiving swells on Wall Street were allowed to go under. European politicians may yet find themselves in a similar bind: having to explain to the sturdy burghers of Hamburg why it is in their interests to bail out braying City boys in London, or Latvians who overused their credit cards. That’s quite a sell.
From The Economist print edition
IT COULD have been funny if it were not so serious. The excuses came thick and fast all week, as European Union leaders, for all their customary talk of collective action, were forced by the world credit meltdown into a hotch-potch of individual national schemes to guarantee deposits and prop up banks (see article).
The most amusing excuse for Europe’s disarray came from François Fillon, the prime minister of France. He told the French parliament that it was “logical” for national governments to take the lead in saving their own banks. After all, a collapse might threaten at 2am, and no minister would want to “wake up” his 26 EU counterparts to debate a rescue with them. Mr Fillon had a point, sort of: national authorities know their own financial sector better than outsiders, and speed is indeed often of the essence. But he was also covering up a bigger reason for Europe’s slow start in this crisis. The meltdown—and the speed of reaction required—cruelly exposed the institutional and political limits of the European project.
France knows this better than most. It holds the rotating presidency of the EU, a job France’s president, Nicolas Sarkozy, used to advantage during the Russian invasion of Georgia. But an emergency financial summit France convened in Paris on October 4th between leaders of the four largest economies in the union—France, Germany, Britain and Italy—was a flop.
Even before the leaders gathered, Germany let it be known that it rejected a French suggestion of a joint European rescue fund, worth perhaps €300 billion ($420 billion). The details are hazy, because French officials later denied that the plan was theirs. Less than 24 hours after the Paris summit ended in a flurry of platitudes, Germany struck again, this time announcing a state-backed guarantee for personal savings deposits in German banks (a political pledge worth more than €1 trillion, the finance ministry estimates).
Ireland had been the first to break EU ranks, offering to guarantee deposits at Irish-owned banks, amid fears of bank collapses. By the time EU finance ministers met in Luxembourg on October 7th, half a dozen countries had promised new or beefed-up deposit guarantees. In a bid to impose a semblance of co-ordination on the chaos, the assembled ministers were invited to hike the EU-wide minimum level for deposit insurance, to €100,000. Some countries, mostly new members from the ex-communist block, said they could not afford such a move. In a fudge, the EU ministers agreed that at the very least they would guarantee deposits of up to €50,000. Ministers added a promise that Europe would shore up “systemically relevant” institutions (though what counts as too big, or too interconnected, to fail was left carefully unsaid).
One explanation for this nation-by-nation approach is institutional. The EU’s founding fathers thought monetary union would go hand in hand with economic union, and the convergence of fiscal and monetary policies. Many assumed that political union would follow before too long. But history took a different turn, and the EU has ended up a strange hybrid: its members have pooled big chunks of sovereignty, and 15 of them share a currency. But it is not a federal state. The European Central Bank controls monetary policy for the euro zone but banking supervision remains under national control.
However, the main explanation for the week’s disappointments had less to do with institutional architecture than with political will. Nothing in the EU’s architecture prevents national governments from pouring money into a central EU rescue fund, as briefly suggested by France (and more recently Italy), if that is what they want to do. The truth is that they don’t.
The Germans have been the most honest in saying why. “We as Germans do not want to pay into a big pot where we do not have control and do not know where German money might be used,” the finance minister, Peer Steinbrück, told German radio. Actually, German voters have a hunch where their taxpayers’ money would be used: in countries such as Britain (home to the City and profit-mad Anglo-Saxon capitalists) or Spain (scene of a housing bubble driven by cheap credit, of a sort to make thrifty German savers shudder).
The crisis is not over, however. It took American politicians a while to explain to voters on Main Street just how they would suffer if the high-fiving swells on Wall Street were allowed to go under. European politicians may yet find themselves in a similar bind: having to explain to the sturdy burghers of Hamburg why it is in their interests to bail out braying City boys in London, or Latvians who overused their credit cards. That’s quite a sell.
Tuesday, October 7, 2008
A Gift From the ’70s: Energy Lessons
By JOHN TIERNEY
Published: October 6, 2008
What do you think of the hard path versus the soft path to America's energy future? Join the discussion.
The soft path, as Amory Lovins defined it in the 1970s, is energy conservation and power from the sun, wind and plants — the technologies that Senator Barack Obama emphasizes in his plan to reduce greenhouse emissions. Senator John McCain is more enthusiastic about building nuclear power plants, the quintessential hard path.
As a rule, it’s not a good idea to revive anything from the 1970s. But this debate is the exception, and not just because the threat of global warming has raised the stakes. The old lessons are as good a guide as any to the future, as William Tucker argues in “Terrestrial Energy,” his history of the hard-soft debate.
The initial debate over nuclear power seemed to end not long after the partial meltdown in 1979 of the reactor at Three Mile Island. Utilities canceled orders and stopped building reactors, partly because of public fears, but perhaps mainly because of rising costs. Mr. Lovins and his allies liked to say that nuclear power, once promoted as “too cheap to meter,” had now become “too expensive to matter.”
The soft path seemed to be the way to go, particularly when some of Mr. Lovins’s predictions about energy conservation came true. As Americans cut back in response to higher prices and new incentives, the growth in electricity demand slowed. Some public officials, most enthusiastically in California, told utilities to stop building large power plants. Instead, they subsidized wind farms and solar power, which were supposed to be cheap and plentiful alternatives once the technologies matured.
Instead, they remained so costly and scarce that Californians’ electricity rates were among the highest in America. They endured rolling blackouts in 2000 while paying astronomical prices for power from nuclear and fossil-fuel plants in other states. The crisis was attributed to price controls and Enron’s market manipulation, but the underlying problem was a shortage of power that forced the state to start building old-fashioned fossil-fuel plants for itself.
Meanwhile, there was a surprise on the hard path, too. Once utilities stopped building reactors, the share of electricity from nuclear power was projected to decline steadily as the oldest reactors were retired. But then several new “merchant energy” companies began assembling fleets of reactors sold off by local utilities. The new owners standardized operations, retrained workers and brought in human-factor engineers to redesign the famously indecipherable control panels.
Under the old owners, the reactors were balky white elephants operating only 60 percent of the time. By improving maintenance and preventing mistakes, the new owners kept them running 90 percent of the time and won permission to upgrade their capacities. So even as the nuclear industry was shrinking in the last two decades as the oldest reactors shut down, the remaining ones were profitably generating an increasing share of the country’s electricity.
Today about 20 percent of electricity in America is generated by nuclear power, which is about 20 times the contribution from solar and wind power. Nuclear power also costs less, according to Gilbert Metcalf, an economist at Tufts University. After estimating the costs and factoring out the hefty tax breaks for different forms of low-carbon energy, he estimates that new nuclear plants could produce electricity more cheaply than windmills, solar power or “clean coal” plants.
The outlook could change, of course, if new nuclear plants turn out to be more expensive than expected, or if engineers make breakthroughs in other technologies. (To debate these possibilities, go to www.nytimes.com/tierneylab.) Given the uncertainties, Dr. Metcalf cautions, it would be risky to bet everything on nuclear power as the answer to global warming.
But it seems even riskier to bet on just the soft path, as so many greens are doing, either by flatly opposing nuclear power or by setting so many conditions that no plants could be built for decades, if ever. (Mr. Obama says nuclear power is necessary but should not be expanded until security and safety issues are addressed.)
“The nuclear debate is still stuck back in the 1980s,” says Mr. Tucker, the author of “Terrestrial Energy,” the new brand he’s trying to affix to nuclear power. If people started associating nuclear plants with natural radioactive processes in the Earth instead of atomic bombs, he says, they might be persuaded that it’s the most environmentally benign form of energy, particularly compared with wind farms that cover scenic ridges and the vast solar arrays proposed for “empty” land in deserts.
Mr. Tucker, a journalist who has been debunking environmental alarms for decades, says he has come around to Al Gore’s view on the danger of global warming, and he’d like environmentalists to rethink their views, too.
“Even when greens give grudging support to nuclear power,” he says, “they add the caveat, ‘But first we have to make sure the plants are absolutely safe’ — as if reactors haven’t been operating safely for 25 years. Nobody recognizes the complete overhaul that has occurred in the industry or how it’s now pumping out twice as much electricity from the same plants with a vastly improved safety record.”
By scaring people about the tiny levels of radiation emitted during the normal operation of a nuclear plant, Mr. Tucker says, greens have effectively encouraged the construction of coal plants that actually release more radiation because of the traces of uranium in coal dust. He argues that the risks of terrorist attacks and nuclear waste have been exaggerated, particularly by the environmentalists who objected when the Yucca Mountain nuclear-waste depository was being designed to guarantee a level of safety for only 10,000 years.
They successfully sued to enforce a safety standard extending one million years — which, in an ideal world, would be a very nice standard. But if you believe global warming is a planetary crisis that must be addressed immediately, should you really be obsessing about hypothetical dangers near one mountain in A.D. 1,000,000? If there’s already a proven technology that doesn’t spew carbon dioxide into the atmosphere, why fiddle while coal burns?
Published: October 6, 2008
What do you think of the hard path versus the soft path to America's energy future? Join the discussion.
The soft path, as Amory Lovins defined it in the 1970s, is energy conservation and power from the sun, wind and plants — the technologies that Senator Barack Obama emphasizes in his plan to reduce greenhouse emissions. Senator John McCain is more enthusiastic about building nuclear power plants, the quintessential hard path.
As a rule, it’s not a good idea to revive anything from the 1970s. But this debate is the exception, and not just because the threat of global warming has raised the stakes. The old lessons are as good a guide as any to the future, as William Tucker argues in “Terrestrial Energy,” his history of the hard-soft debate.
The initial debate over nuclear power seemed to end not long after the partial meltdown in 1979 of the reactor at Three Mile Island. Utilities canceled orders and stopped building reactors, partly because of public fears, but perhaps mainly because of rising costs. Mr. Lovins and his allies liked to say that nuclear power, once promoted as “too cheap to meter,” had now become “too expensive to matter.”
The soft path seemed to be the way to go, particularly when some of Mr. Lovins’s predictions about energy conservation came true. As Americans cut back in response to higher prices and new incentives, the growth in electricity demand slowed. Some public officials, most enthusiastically in California, told utilities to stop building large power plants. Instead, they subsidized wind farms and solar power, which were supposed to be cheap and plentiful alternatives once the technologies matured.
Instead, they remained so costly and scarce that Californians’ electricity rates were among the highest in America. They endured rolling blackouts in 2000 while paying astronomical prices for power from nuclear and fossil-fuel plants in other states. The crisis was attributed to price controls and Enron’s market manipulation, but the underlying problem was a shortage of power that forced the state to start building old-fashioned fossil-fuel plants for itself.
Meanwhile, there was a surprise on the hard path, too. Once utilities stopped building reactors, the share of electricity from nuclear power was projected to decline steadily as the oldest reactors were retired. But then several new “merchant energy” companies began assembling fleets of reactors sold off by local utilities. The new owners standardized operations, retrained workers and brought in human-factor engineers to redesign the famously indecipherable control panels.
Under the old owners, the reactors were balky white elephants operating only 60 percent of the time. By improving maintenance and preventing mistakes, the new owners kept them running 90 percent of the time and won permission to upgrade their capacities. So even as the nuclear industry was shrinking in the last two decades as the oldest reactors shut down, the remaining ones were profitably generating an increasing share of the country’s electricity.
Today about 20 percent of electricity in America is generated by nuclear power, which is about 20 times the contribution from solar and wind power. Nuclear power also costs less, according to Gilbert Metcalf, an economist at Tufts University. After estimating the costs and factoring out the hefty tax breaks for different forms of low-carbon energy, he estimates that new nuclear plants could produce electricity more cheaply than windmills, solar power or “clean coal” plants.
The outlook could change, of course, if new nuclear plants turn out to be more expensive than expected, or if engineers make breakthroughs in other technologies. (To debate these possibilities, go to www.nytimes.com/tierneylab.) Given the uncertainties, Dr. Metcalf cautions, it would be risky to bet everything on nuclear power as the answer to global warming.
But it seems even riskier to bet on just the soft path, as so many greens are doing, either by flatly opposing nuclear power or by setting so many conditions that no plants could be built for decades, if ever. (Mr. Obama says nuclear power is necessary but should not be expanded until security and safety issues are addressed.)
“The nuclear debate is still stuck back in the 1980s,” says Mr. Tucker, the author of “Terrestrial Energy,” the new brand he’s trying to affix to nuclear power. If people started associating nuclear plants with natural radioactive processes in the Earth instead of atomic bombs, he says, they might be persuaded that it’s the most environmentally benign form of energy, particularly compared with wind farms that cover scenic ridges and the vast solar arrays proposed for “empty” land in deserts.
Mr. Tucker, a journalist who has been debunking environmental alarms for decades, says he has come around to Al Gore’s view on the danger of global warming, and he’d like environmentalists to rethink their views, too.
“Even when greens give grudging support to nuclear power,” he says, “they add the caveat, ‘But first we have to make sure the plants are absolutely safe’ — as if reactors haven’t been operating safely for 25 years. Nobody recognizes the complete overhaul that has occurred in the industry or how it’s now pumping out twice as much electricity from the same plants with a vastly improved safety record.”
By scaring people about the tiny levels of radiation emitted during the normal operation of a nuclear plant, Mr. Tucker says, greens have effectively encouraged the construction of coal plants that actually release more radiation because of the traces of uranium in coal dust. He argues that the risks of terrorist attacks and nuclear waste have been exaggerated, particularly by the environmentalists who objected when the Yucca Mountain nuclear-waste depository was being designed to guarantee a level of safety for only 10,000 years.
They successfully sued to enforce a safety standard extending one million years — which, in an ideal world, would be a very nice standard. But if you believe global warming is a planetary crisis that must be addressed immediately, should you really be obsessing about hypothetical dangers near one mountain in A.D. 1,000,000? If there’s already a proven technology that doesn’t spew carbon dioxide into the atmosphere, why fiddle while coal burns?
Monday, October 6, 2008
Heading Both Ways
By Owen Matthews and Sami Kohen | NEWSWEEK
Published Sep 20, 2008
From the magazine issue dated Sep 29, 2008
When the USS Mount Whitney, flagship of the U.S. Sixth Fleet, steamed into the port of Poti with a cargo of humanitarian aid, Georgians lined the quayside to cheer. All around lay the wreckage of Russia's occupation—a Georgian Coast Guard cutter dynamited in the bay, the remains of barricades and checkpoints by the town's rail terminus. As Russian soldiers watched from forward positions near the shore, the Sixth Fleet's commander, Capt. Owen P. Honors, insisted the warship's visit was "not a show of force—it's a show of solidarity."
Many in Washington wanted it the other way around—only to find that a show of naval force to face down Russia was refused by the once loyal U.S. ally Turkey. Even before any formal requests were lodged, Ankara made it clear it wouldn't allow heavy U.S. warships through the Bosporus, citing a 1936 international treaty that limited the tonnage of warships allowed through. More, Turkish officials were quick to dial back on earlier support for Georgia's joining NATO. "Turkey has always supported an enlargement of NATO," says Foreign Minister Ali Babacan. But "taking a country with [separatist] problems into NATO would mean importing those problems into the alliance."
Increasingly, Ankara finds itself at the center of bewildering crosscurrents. It's a strategic ally of the United States and Israel—but it also tries to maintain friendly relations with Syria and Iran. It is a candidate for European Union membership—but has divisions with the Union over Northern Cyprus. Its borders with the Caucasus, and cultural ties with Turkic republics in Central Asia, make Turkey a key part of Europe's hopes for energy independence from Russia—but it is heavily dependent on Russian gas and trade. Small wonder Turkey is refusing to choose sides.
Turkey's new ambivalence is made in both Washington and Moscow. The U.S.-led Iraq invasion in 2003 and Washington's support for Iraq's Kurds stirred deep anti-American feelings in Turkey. Meantime, Moscow was working to bring Turkey into its own economic orbit. A recent poll shows that Turks are more sympathetic to Russia than to the United States (by 18 percent to 14) but favor, above all, an independent foreign policy. Yet Turkey grows more entangled with Moscow all the time. Russia has been Turkey's No. 1 trade partner since 2003, with trade expected to top $38 billion in 2008, up from $27 billion last year. Hundreds of Turkish firms, particularly building contractors, operate in Russia, and Russians are the most frequent visitors in Turkey, with more than 2 million each year. Russia also provides half of Turkey's coal and 65 percent of its gas through the world's longest undersea gas pipeline, Blue Stream. As a result, Turkey is highly reluctant to provoke Russia. At the outbreak of war with Georgia, Moscow subjected thousands of Turkish containers and trucks to rigorous customs checks and delayed about $3 billion worth of goods in red tape. "It was a clear, hard signal, and not a very friendly one," says the head of one Istanbul trading company.
But Turkey also has an alliance with Georgia that is crucial to Ankara's energy supplies, and Europe's. The Baku-Tbilisi-Ceyhan pipeline brings a million barrels of Caspian crude oil from Azerbaijan via Georgia to the Turkish Mediterranean oil terminal of Ceyhan, and a parallel gas pipe to Erzurum provides much of eastern Turkey's energy needs. An Austrian consortium has been planning to extend that gas pipeline as far as Vienna, in order to break Russia's stranglehold on the Continent's energy supplies—a project dubbed Nabucco. And Turkey has provided training and NATO-standard equipment for Georgia's Army; it is also engaged with Georgia on ambitious regional projects such as the Baku-Tbilisi-Kars railway, due to connect Europe with Central Asia by 2011.
With such ties at stake, Turkey can't walk away from Georgia, and it insists it remains a Western ally—even if it's one that has to bow to Russia in times of conflict. "Our policy has not changed," insists one senior Turkish official who spoke on condition of anonymity. "But we do not want a new cold war," and the way to avoid one is "dialogue and cooperation." Yet the Georgian war has exposed just how far the Iraq War and Russian economic might have split Turkey away from its old allegiances—and set it tacking on its own zigzag course.
© 2008
Published Sep 20, 2008
From the magazine issue dated Sep 29, 2008
When the USS Mount Whitney, flagship of the U.S. Sixth Fleet, steamed into the port of Poti with a cargo of humanitarian aid, Georgians lined the quayside to cheer. All around lay the wreckage of Russia's occupation—a Georgian Coast Guard cutter dynamited in the bay, the remains of barricades and checkpoints by the town's rail terminus. As Russian soldiers watched from forward positions near the shore, the Sixth Fleet's commander, Capt. Owen P. Honors, insisted the warship's visit was "not a show of force—it's a show of solidarity."
Many in Washington wanted it the other way around—only to find that a show of naval force to face down Russia was refused by the once loyal U.S. ally Turkey. Even before any formal requests were lodged, Ankara made it clear it wouldn't allow heavy U.S. warships through the Bosporus, citing a 1936 international treaty that limited the tonnage of warships allowed through. More, Turkish officials were quick to dial back on earlier support for Georgia's joining NATO. "Turkey has always supported an enlargement of NATO," says Foreign Minister Ali Babacan. But "taking a country with [separatist] problems into NATO would mean importing those problems into the alliance."
Increasingly, Ankara finds itself at the center of bewildering crosscurrents. It's a strategic ally of the United States and Israel—but it also tries to maintain friendly relations with Syria and Iran. It is a candidate for European Union membership—but has divisions with the Union over Northern Cyprus. Its borders with the Caucasus, and cultural ties with Turkic republics in Central Asia, make Turkey a key part of Europe's hopes for energy independence from Russia—but it is heavily dependent on Russian gas and trade. Small wonder Turkey is refusing to choose sides.
Turkey's new ambivalence is made in both Washington and Moscow. The U.S.-led Iraq invasion in 2003 and Washington's support for Iraq's Kurds stirred deep anti-American feelings in Turkey. Meantime, Moscow was working to bring Turkey into its own economic orbit. A recent poll shows that Turks are more sympathetic to Russia than to the United States (by 18 percent to 14) but favor, above all, an independent foreign policy. Yet Turkey grows more entangled with Moscow all the time. Russia has been Turkey's No. 1 trade partner since 2003, with trade expected to top $38 billion in 2008, up from $27 billion last year. Hundreds of Turkish firms, particularly building contractors, operate in Russia, and Russians are the most frequent visitors in Turkey, with more than 2 million each year. Russia also provides half of Turkey's coal and 65 percent of its gas through the world's longest undersea gas pipeline, Blue Stream. As a result, Turkey is highly reluctant to provoke Russia. At the outbreak of war with Georgia, Moscow subjected thousands of Turkish containers and trucks to rigorous customs checks and delayed about $3 billion worth of goods in red tape. "It was a clear, hard signal, and not a very friendly one," says the head of one Istanbul trading company.
But Turkey also has an alliance with Georgia that is crucial to Ankara's energy supplies, and Europe's. The Baku-Tbilisi-Ceyhan pipeline brings a million barrels of Caspian crude oil from Azerbaijan via Georgia to the Turkish Mediterranean oil terminal of Ceyhan, and a parallel gas pipe to Erzurum provides much of eastern Turkey's energy needs. An Austrian consortium has been planning to extend that gas pipeline as far as Vienna, in order to break Russia's stranglehold on the Continent's energy supplies—a project dubbed Nabucco. And Turkey has provided training and NATO-standard equipment for Georgia's Army; it is also engaged with Georgia on ambitious regional projects such as the Baku-Tbilisi-Kars railway, due to connect Europe with Central Asia by 2011.
With such ties at stake, Turkey can't walk away from Georgia, and it insists it remains a Western ally—even if it's one that has to bow to Russia in times of conflict. "Our policy has not changed," insists one senior Turkish official who spoke on condition of anonymity. "But we do not want a new cold war," and the way to avoid one is "dialogue and cooperation." Yet the Georgian war has exposed just how far the Iraq War and Russian economic might have split Turkey away from its old allegiances—and set it tacking on its own zigzag course.
© 2008
FT: Türkiye’de özelleştirme krize kurban gidecek
04/10/2008
Radikal
Türkiye’nin küresel krize karşı bağışık olmadığı bildirildi. Financial Times gazetesi, bayramın ardından yaşanan borsa düşüşleri ve liranın değer kaybına dikkat çekerek, “Türkiye, diğer yükselen piyasalar gibi küresel finansal kargaşaya karşı bağışık olmaktan uzak” yorumunu yaptı. Gazete, özelleştirme programının piyasalardaki olumsuz gelişmelere “kurban” gideceği gibi göründüğünü belirten gazete, bunun da cari açığı finansmanı açısından yaratacağı sorunlara dikkat çekti.
Ekonomi gazetesi Financial Times, Ankara kaynaklı Delphine Strauss imzalı haberinde bayramın ardından Cuma günü yeniden açılan İstanbul borsasının küresel finansal krizdeki son gelişmelerin karşısında yüzde 4.2 düştüğünü kaydetti. Gazete, bu düşüşün da, üç haftanın en büyük gerileme olduğuna ve bir haftalık kaybı yüzde 5.5’e çıkarttığına işaret etti.
Türk politikacılarının, yatırımcıların sinirlerini yatıştırmak amacıyla ülkenin bankacılık sisteminin artık krizlere daha dirençli olduğunu söylediklerini belirten gazete, Başbakan Recep Tayyip Erdoğan ve Merkez Bankası Başkanı Durmuş Yılmaz’ın açıklamalarına da dikkat çekti.
ÖZELLEŞTİRME PROGRAMI ETKİLENECEK
Ancak borsa düşüşlerinin yanı sıra tahvil faizlerinin yükseldiğine, Türk lirasının ise dolara karşı son beş ayın en düşük düzeyine indiğine işaret edildiği “Türkiye, diğer yükselen piyasalar gibi küresel finansal kargaşaya karşı bağışık olmaktan uzakö yorumunu yaptı. Gazete şunları yazdı:
“Özellikle hükümetin özelleştirme programını sürdürme planlarının, piyasalardaki pata durumuna kurban gideceği gibi görülüyor.
“Bu da, ülkenin şişmiş cari açığının finansmanı açısından daha çok baskı oluşturur.”
Financial Times, haberinde ayrıca Başbakan Erdoğan’ın, bu ortamın Halkbank’ın özelleştirmesi ve halka satılması için uygun olmadığı yolundaki değerlendirmesinin ardından Türk bankalarının değer kaybettiğini belirtti.
Halkbank hisselerinin değerinin de yüzde 6.1 düştüğüne işaret eden gazete, Erdoğan’ın, Ziraat Bankasının satılmasının düşünülmediğini söylediğine de dikkat çekti.
Haberde geçen ay önde gelen Türk bakanlarından birinin ise, Halkbank’ın özelleştirilmesinin piyasa koşullarının izin vermesi halinde gerçekleşeceğini söylediği anımsatıldı. (anka)
Radikal
Türkiye’nin küresel krize karşı bağışık olmadığı bildirildi. Financial Times gazetesi, bayramın ardından yaşanan borsa düşüşleri ve liranın değer kaybına dikkat çekerek, “Türkiye, diğer yükselen piyasalar gibi küresel finansal kargaşaya karşı bağışık olmaktan uzak” yorumunu yaptı. Gazete, özelleştirme programının piyasalardaki olumsuz gelişmelere “kurban” gideceği gibi göründüğünü belirten gazete, bunun da cari açığı finansmanı açısından yaratacağı sorunlara dikkat çekti.
Ekonomi gazetesi Financial Times, Ankara kaynaklı Delphine Strauss imzalı haberinde bayramın ardından Cuma günü yeniden açılan İstanbul borsasının küresel finansal krizdeki son gelişmelerin karşısında yüzde 4.2 düştüğünü kaydetti. Gazete, bu düşüşün da, üç haftanın en büyük gerileme olduğuna ve bir haftalık kaybı yüzde 5.5’e çıkarttığına işaret etti.
Türk politikacılarının, yatırımcıların sinirlerini yatıştırmak amacıyla ülkenin bankacılık sisteminin artık krizlere daha dirençli olduğunu söylediklerini belirten gazete, Başbakan Recep Tayyip Erdoğan ve Merkez Bankası Başkanı Durmuş Yılmaz’ın açıklamalarına da dikkat çekti.
ÖZELLEŞTİRME PROGRAMI ETKİLENECEK
Ancak borsa düşüşlerinin yanı sıra tahvil faizlerinin yükseldiğine, Türk lirasının ise dolara karşı son beş ayın en düşük düzeyine indiğine işaret edildiği “Türkiye, diğer yükselen piyasalar gibi küresel finansal kargaşaya karşı bağışık olmaktan uzakö yorumunu yaptı. Gazete şunları yazdı:
“Özellikle hükümetin özelleştirme programını sürdürme planlarının, piyasalardaki pata durumuna kurban gideceği gibi görülüyor.
“Bu da, ülkenin şişmiş cari açığının finansmanı açısından daha çok baskı oluşturur.”
Financial Times, haberinde ayrıca Başbakan Erdoğan’ın, bu ortamın Halkbank’ın özelleştirmesi ve halka satılması için uygun olmadığı yolundaki değerlendirmesinin ardından Türk bankalarının değer kaybettiğini belirtti.
Halkbank hisselerinin değerinin de yüzde 6.1 düştüğüne işaret eden gazete, Erdoğan’ın, Ziraat Bankasının satılmasının düşünülmediğini söylediğine de dikkat çekti.
Haberde geçen ay önde gelen Türk bakanlarından birinin ise, Halkbank’ın özelleştirilmesinin piyasa koşullarının izin vermesi halinde gerçekleşeceğini söylediği anımsatıldı. (anka)
Friday, October 3, 2008
Save the fat cats
By Nicholas D. Kristof Published: October 2, 2008
In the early 1990s, when I was a foreign correspondent looking for my next overseas posting with The New York Times, I sought Japan. At the time, Tokyo was an awe-inspiring economic titan, arguably the most important capital outside the United States.
Then Japanese politicians, acting with the same sublime ineptitude that America's House of Representatives displayed this week, ignored a growing banking crisis and dithered on a bailout. And so I watched from Tokyo as a mighty economy melted like an iceberg in the Caribbean.
Japan's failure to respond urgently and decisively to its banking mess caused the country to endure a "lost decade" of economic stagnation. If America wants to avoid Japan's decline, the House should approve a bailout, immediately.
Just as in the U.S. today, most Japanese did not initially appreciate how devastating a banking crisis could be to the real economy. Banks and real estate tycoons in Japan were corrupt, profligate and unsympathetic figures, and no one wanted to help them. On corporate expense accounts, they sipped coffee with gold leaf and patronized "no-panties shabu-shabu" restaurants, which had mirrored floors and miniskirted waitresses.
In short, the businessmen involved were jerks. And, whether in Japan or the U.S., it's challenging for politicians to frame a bailout with the slogan: Save the jerks!
Today in Opinion
There's no time to lose for Pakistan's new spy chiefAmerica, Russia and terrorists of the seasThe Justice Department gets serious
Japanese politicians didn't want to rescue such unpopular fat cats and didn't see any emergency. So Japan's economy slowly lost air, and the biggest losers were the small futon makers who couldn't get credit and the farmers on remote islands who lost ferry service when the government eventually had to cut back on spending.
For those of you accustomed to bull markets, who think we're sure to come out of this quickly, remember this: Japan's stock index is still less than one-third of its level of 19 years ago.
In 1993, after Japanese stocks had already tumbled for several years, an American friend told me that he was going to invest in Japanese stocks. "I don't know what they're going to do for the next couple of years," he said, "but we all know that over five years they'll recover and do better than American stocks." Since then, Japanese stocks have lost another 40 percent of their value.
The Federal Reserve chairman, Ben Bernanke, is an expert on Japan's Lost Decade, and the president of the New York Fed, Timothy Geithner, lived in Tokyo during that debacle, and their experience no doubt is one reason for the urgency of Washington's response. The lesson from Japan is pretty clear: Hold your nose and support a bailout, in particular to clean up banking assets.
All this said, critics of the bailout have reason to be furious. It is profoundly unfair that working-class American families lose their homes, their jobs, their savings, while it's plutocrats who caused the problem who get rescued.
If the congressional critics of the bailout want to do some lasting good, they should come back in January - after approving the bailout now - with a series of tough measures to improve governance and inject more fairness in the economy.
A starting point would be to remove tax subsidies on executive pay and allow courts to restructure mortgages as they do other kinds of debt. The Institute for Policy Studies in Washington estimates that U.S. taxpayers every year provide more than $20 billion in tax subsidies for executive pay.
Among the strongest critics of inflated executive pay have been Warren Buffett and the late management guru, Peter Drucker, who argued that CEO salaries should peak at no more than 20 or 25 times those of the average worker. (Last year, CEOs got an average of 344 times the wages of the typical worker.)
The truth is that with the complicity of boards of directors, CEOs hijack shareholder wealth in ways that are unconscionable. As The Wall Street Journal reported in June, if Eugene Isenberg, the 78-year-old CEO of Nabors Industries were to drop dead one of these days, his estate would be entitled to a "severance payment" of at least $263 million - more than the firm's first-quarter earnings.
With such greed oozing out of the corporate suite, and with financial companies enjoying the confidence of only 10 percent of Americans today (down from 36 percent in 2000), it's no wonder that voters are repulsed by the idea of helping banks. Wall Street urgently needs to undertake its own housecleaning, for the public revulsion toward it undermines its own long-term interests.
But, for now, the priority is to get credit flowing again in the arteries of commerce, even if that means saving the jerks. Otherwise, America risks becoming Japan.
In the early 1990s, when I was a foreign correspondent looking for my next overseas posting with The New York Times, I sought Japan. At the time, Tokyo was an awe-inspiring economic titan, arguably the most important capital outside the United States.
Then Japanese politicians, acting with the same sublime ineptitude that America's House of Representatives displayed this week, ignored a growing banking crisis and dithered on a bailout. And so I watched from Tokyo as a mighty economy melted like an iceberg in the Caribbean.
Japan's failure to respond urgently and decisively to its banking mess caused the country to endure a "lost decade" of economic stagnation. If America wants to avoid Japan's decline, the House should approve a bailout, immediately.
Just as in the U.S. today, most Japanese did not initially appreciate how devastating a banking crisis could be to the real economy. Banks and real estate tycoons in Japan were corrupt, profligate and unsympathetic figures, and no one wanted to help them. On corporate expense accounts, they sipped coffee with gold leaf and patronized "no-panties shabu-shabu" restaurants, which had mirrored floors and miniskirted waitresses.
In short, the businessmen involved were jerks. And, whether in Japan or the U.S., it's challenging for politicians to frame a bailout with the slogan: Save the jerks!
Today in Opinion
There's no time to lose for Pakistan's new spy chiefAmerica, Russia and terrorists of the seasThe Justice Department gets serious
Japanese politicians didn't want to rescue such unpopular fat cats and didn't see any emergency. So Japan's economy slowly lost air, and the biggest losers were the small futon makers who couldn't get credit and the farmers on remote islands who lost ferry service when the government eventually had to cut back on spending.
For those of you accustomed to bull markets, who think we're sure to come out of this quickly, remember this: Japan's stock index is still less than one-third of its level of 19 years ago.
In 1993, after Japanese stocks had already tumbled for several years, an American friend told me that he was going to invest in Japanese stocks. "I don't know what they're going to do for the next couple of years," he said, "but we all know that over five years they'll recover and do better than American stocks." Since then, Japanese stocks have lost another 40 percent of their value.
The Federal Reserve chairman, Ben Bernanke, is an expert on Japan's Lost Decade, and the president of the New York Fed, Timothy Geithner, lived in Tokyo during that debacle, and their experience no doubt is one reason for the urgency of Washington's response. The lesson from Japan is pretty clear: Hold your nose and support a bailout, in particular to clean up banking assets.
All this said, critics of the bailout have reason to be furious. It is profoundly unfair that working-class American families lose their homes, their jobs, their savings, while it's plutocrats who caused the problem who get rescued.
If the congressional critics of the bailout want to do some lasting good, they should come back in January - after approving the bailout now - with a series of tough measures to improve governance and inject more fairness in the economy.
A starting point would be to remove tax subsidies on executive pay and allow courts to restructure mortgages as they do other kinds of debt. The Institute for Policy Studies in Washington estimates that U.S. taxpayers every year provide more than $20 billion in tax subsidies for executive pay.
Among the strongest critics of inflated executive pay have been Warren Buffett and the late management guru, Peter Drucker, who argued that CEO salaries should peak at no more than 20 or 25 times those of the average worker. (Last year, CEOs got an average of 344 times the wages of the typical worker.)
The truth is that with the complicity of boards of directors, CEOs hijack shareholder wealth in ways that are unconscionable. As The Wall Street Journal reported in June, if Eugene Isenberg, the 78-year-old CEO of Nabors Industries were to drop dead one of these days, his estate would be entitled to a "severance payment" of at least $263 million - more than the firm's first-quarter earnings.
With such greed oozing out of the corporate suite, and with financial companies enjoying the confidence of only 10 percent of Americans today (down from 36 percent in 2000), it's no wonder that voters are repulsed by the idea of helping banks. Wall Street urgently needs to undertake its own housecleaning, for the public revulsion toward it undermines its own long-term interests.
But, for now, the priority is to get credit flowing again in the arteries of commerce, even if that means saving the jerks. Otherwise, America risks becoming Japan.
Energy Security and Foreign Policy
Benita Ferrero-Waldner
European Commissioner for External Relations and European Neighbourhood Policy
Foreign Policy Association, World Leadership Forum 2008
New York, 24 September 2008
I’d like to thank the Foreign Policy Association for the invitation to speak today. The European Commission knows and welcomes the contribution to debating international affairs which this organisation makes. In unstable times, this intellectual input is all the more valuable.
You have asked me to speak about the relationship between energy security and foreign policy. I’d like to do so, but putting energy into the broader context of security challenges for foreign policy today. With this summer’s events in Georgia, the subject matter couldn’t be more timely.
Ladies and Gentlemen,
You will remember the words of famous American philosopher Francis Fukuyama in the early 90s:
"What we may be witnessing is not just the end of the Cold War...but the end of history... That is... the universalization of Western liberal democracy as the final form of human government."
Well I would argue that the events of the last few weeks in the Caucasus – show that the “end of history” is not quite here yet, particularly in terms of the peaceful coexistence of neighboring states.
Some of you will also remember that later in the 1990s it became fashionable to talk about the “End of Foreign Policy”. According to the new theory, traditional divisions between Domestic and Foreign Policy were no longer valid as abroad, as a result of globalization, had become at home.
I would argue that that’s wrong too. If anything, the security threats which face us today mean that an understanding of the drivers and dynamics in the world and an ability to influence them are more relevant than ever.
It is nevertheless true that the scale and nature of some of these security threats have changed.
First, the development deficit/demographic explosion. World population is set to increase from 6.5bn in 2005 to 7.7bn in 2020 and continue rising apace. 38% of this growth is projected to be in Africa in urban areas. In other words - those places least able to cope. Food insecurity is likely to be one result. Migration, civil unrest, ideological extremism, and conflict could be others.
Second, the environment/climate change. UN research predicts continuing rapid degradation of ecosystems. This will severely affect water, health, food and security across the world. If the rest of the world consumed in the way we do – and the indications are that emerging economies like China and India are beginning to - then we’d need more than two planet earths to cope. And that doesn’t take into account population growth. Climate Change, as my recent report to the European Council with the High Representative showed, is not only a “green issue”. It will act as a “threat multiplier” aggravating all these risks.
Third, terrorism/proliferation. For much of the last century our security concerns were about expansionist state power, threatening its own citizens or neighbouring countries. Today, some of the greatest threats are likely to emerge from countries where state power is not too strong but too weak. Too weak, in particular, to tackle the phenomenon of terrorism, an extremism looking for simple truths exacerbated by today’s technological advances where networks can be connected at the drop of a hat, with the click of a mouse.
Fourth, international institutions remaining fit for purpose. Through globalisation our neighbour’s backyard is now ours. Credible fora for the collective resolution of problems, on the basis of agreed standards, are therefore fundamental to managing today’s threats. If, given the shifting balance of power - by 2020, China will be the 2nd and India the 6th largest economies in the world - existing institutions are to remain able to do so, they must adapt. And Europe must help them do so. That means a reformed UN, G8, World Bank and IMF which better reflect the world of the 21st century. In my personal view, it means that the IMF should switch its focus from dealing with monetary issues to global financial market challenges. In my personal view, it means a permanent seat for the European Union at some stage on the Security Council. And it means a Security Council which accepts new majority voting fast-track procedures for dealing with extreme humanitarian disasters requiring urgent response. Finally, it means improving the UN’s peacekeeping capabilities to ensure that we have the necessary forces and equipment not only to talk our talk, but to walk it.
So today’s security challenges not just for foreign policy - but for our collective human security - are indeed severe.
Which brings me back to Energy Security, which is of course linked to all these threats.. My generation – in Europe at least - never had to bother much about turning out the lights, heating our homes or driving our cars. But our children’s will. Today Europe imports around 50% of the energy it consumes. By 2030 this could be around 64%. There is nothing wrong with importing energy per se, provided that we are talking about open, transparent and competitive global markets. However, in today’s world, we are often not. Increasing our energy imports therefore calls for a full assessment of risks.
For Europe, the particular concern relates to gas imports. As gas is mainly transported in long-distance pipelines, supplies are vulnerable to disruption.
In oil, we also see growing resource nationalism and interference by the State in producer countries. In addition, with the rapidly growing demand from countries such as China and India, we see that the national oil companies are failing to match demand with investment in production capacity.
It clearly will be important to ensure a diversified range of fuels – including renewables to enhance Europe’s energy security over the next decade.
All of this means that Energy Security will continue to top European Council agendas.
That energy should be at the heart of the European political agenda is of course not new. The creation of the Coal and Steel Community sowed the seeds of the Union as we know it today. You may remember the opening words of the 1950 Schuman:
“World peace cannot be safeguarded without the making of creative efforts proportionate to the dangers which threaten it...”
So is Europe taking initiatives that are proportionate to the dangers it faces on energy today? Let history be the judge.
I believe we are at a crucial moment in the development of a European Common Energy Policy. The Commission will shortly be presenting its Second Strategic Energy Review. It is clear that we need to ensure that our internal market is fully integrated. Without this, we won’t have the bargaining power we need. We have already done considerable work to put in place, a range of policies which include: linking up Member State energy infrastructure, increasing oil stocks, improving energy efficiency, promoting renewables – our ambitious target for both is 20% by 2020, a different fuel mix including biofuels, new technologies for vehicles, clean coal and so on....
As so often in the history of European construction, the progress we can make is first and foremost a matter of political will. It is of course for the Commission, but also for EU Member States, to demonstrate that. And as in many other areas there is a direct link between the level of ambition of the EU's internal agenda and our credibility and effectiveness externally.
So what of our External action? The events in the Caucasus have brought home that the so-called "frozen conflicts" can directly affect our energy security. No surprise then that the European Council enjoined the Commission to review all energy security initiatives, in particular on diversification of sources and supply routes.
At present energy features as a key element in all our agreements with third countries, suppliers, consumers and transit countries. We are working hard to enhance our bilateral energy relations with key partners in the Caspian Basin, Central Asia, the Mediterranean and the Middle East.
Strengthening our energy partnership with Central Asia – which has great potential in oil and gas - is a top political priority for us. I have just come from the EU/Central Asia security forum in Paris. We are redoubling our efforts to make a reality of the long-discussed "southern corridor”.
Over the past couple of years we have signed MOUs on energy with four key energy partners, namely Ukraine, Azerbaijan, Kazakhstan and Turkmenistan. We have concluded agreements too with Morocco and Jordan and MOUs are ready for signature with Egypt and Iraq.
Last but not least, you would expect a word on Russia. The European Union had identified a new energy partnership with Russia - built on the principles of transparency, reciprocity and a level playing field for all energy operators - as a key external priority. Negotiations on a new agreement are currently on hold pending Russian compliance with the terms of the peace brokered by the European Union in Georgia. Whatever the coming months bring in the Caucasus, we know that Russia will remain a very significant partner for us. But we know also that Russia needs us. Our markets take around two thirds of Russian gas exports, and the revenues from our custom are vital to Russia's economic growth. Managing this interdependence will be an important challenge.
In closing, I’d like to return to your original question about the relationship between energy security and foreign policy. Is there one? Yes. And it is fundamental for consumers, suppliers and transit countries alike.
On this, as on all other security challenges I have mentioned today, Europe needs to work hand in hand with the United States. I ask you to support us and work with us. And that means, in the field of energy, understanding our need to work pragmatically with our partners.
I thank you for your attention.
European Commissioner for External Relations and European Neighbourhood Policy
Foreign Policy Association, World Leadership Forum 2008
New York, 24 September 2008
I’d like to thank the Foreign Policy Association for the invitation to speak today. The European Commission knows and welcomes the contribution to debating international affairs which this organisation makes. In unstable times, this intellectual input is all the more valuable.
You have asked me to speak about the relationship between energy security and foreign policy. I’d like to do so, but putting energy into the broader context of security challenges for foreign policy today. With this summer’s events in Georgia, the subject matter couldn’t be more timely.
Ladies and Gentlemen,
You will remember the words of famous American philosopher Francis Fukuyama in the early 90s:
"What we may be witnessing is not just the end of the Cold War...but the end of history... That is... the universalization of Western liberal democracy as the final form of human government."
Well I would argue that the events of the last few weeks in the Caucasus – show that the “end of history” is not quite here yet, particularly in terms of the peaceful coexistence of neighboring states.
Some of you will also remember that later in the 1990s it became fashionable to talk about the “End of Foreign Policy”. According to the new theory, traditional divisions between Domestic and Foreign Policy were no longer valid as abroad, as a result of globalization, had become at home.
I would argue that that’s wrong too. If anything, the security threats which face us today mean that an understanding of the drivers and dynamics in the world and an ability to influence them are more relevant than ever.
It is nevertheless true that the scale and nature of some of these security threats have changed.
First, the development deficit/demographic explosion. World population is set to increase from 6.5bn in 2005 to 7.7bn in 2020 and continue rising apace. 38% of this growth is projected to be in Africa in urban areas. In other words - those places least able to cope. Food insecurity is likely to be one result. Migration, civil unrest, ideological extremism, and conflict could be others.
Second, the environment/climate change. UN research predicts continuing rapid degradation of ecosystems. This will severely affect water, health, food and security across the world. If the rest of the world consumed in the way we do – and the indications are that emerging economies like China and India are beginning to - then we’d need more than two planet earths to cope. And that doesn’t take into account population growth. Climate Change, as my recent report to the European Council with the High Representative showed, is not only a “green issue”. It will act as a “threat multiplier” aggravating all these risks.
Third, terrorism/proliferation. For much of the last century our security concerns were about expansionist state power, threatening its own citizens or neighbouring countries. Today, some of the greatest threats are likely to emerge from countries where state power is not too strong but too weak. Too weak, in particular, to tackle the phenomenon of terrorism, an extremism looking for simple truths exacerbated by today’s technological advances where networks can be connected at the drop of a hat, with the click of a mouse.
Fourth, international institutions remaining fit for purpose. Through globalisation our neighbour’s backyard is now ours. Credible fora for the collective resolution of problems, on the basis of agreed standards, are therefore fundamental to managing today’s threats. If, given the shifting balance of power - by 2020, China will be the 2nd and India the 6th largest economies in the world - existing institutions are to remain able to do so, they must adapt. And Europe must help them do so. That means a reformed UN, G8, World Bank and IMF which better reflect the world of the 21st century. In my personal view, it means that the IMF should switch its focus from dealing with monetary issues to global financial market challenges. In my personal view, it means a permanent seat for the European Union at some stage on the Security Council. And it means a Security Council which accepts new majority voting fast-track procedures for dealing with extreme humanitarian disasters requiring urgent response. Finally, it means improving the UN’s peacekeeping capabilities to ensure that we have the necessary forces and equipment not only to talk our talk, but to walk it.
So today’s security challenges not just for foreign policy - but for our collective human security - are indeed severe.
Which brings me back to Energy Security, which is of course linked to all these threats.. My generation – in Europe at least - never had to bother much about turning out the lights, heating our homes or driving our cars. But our children’s will. Today Europe imports around 50% of the energy it consumes. By 2030 this could be around 64%. There is nothing wrong with importing energy per se, provided that we are talking about open, transparent and competitive global markets. However, in today’s world, we are often not. Increasing our energy imports therefore calls for a full assessment of risks.
For Europe, the particular concern relates to gas imports. As gas is mainly transported in long-distance pipelines, supplies are vulnerable to disruption.
In oil, we also see growing resource nationalism and interference by the State in producer countries. In addition, with the rapidly growing demand from countries such as China and India, we see that the national oil companies are failing to match demand with investment in production capacity.
It clearly will be important to ensure a diversified range of fuels – including renewables to enhance Europe’s energy security over the next decade.
All of this means that Energy Security will continue to top European Council agendas.
That energy should be at the heart of the European political agenda is of course not new. The creation of the Coal and Steel Community sowed the seeds of the Union as we know it today. You may remember the opening words of the 1950 Schuman:
“World peace cannot be safeguarded without the making of creative efforts proportionate to the dangers which threaten it...”
So is Europe taking initiatives that are proportionate to the dangers it faces on energy today? Let history be the judge.
I believe we are at a crucial moment in the development of a European Common Energy Policy. The Commission will shortly be presenting its Second Strategic Energy Review. It is clear that we need to ensure that our internal market is fully integrated. Without this, we won’t have the bargaining power we need. We have already done considerable work to put in place, a range of policies which include: linking up Member State energy infrastructure, increasing oil stocks, improving energy efficiency, promoting renewables – our ambitious target for both is 20% by 2020, a different fuel mix including biofuels, new technologies for vehicles, clean coal and so on....
As so often in the history of European construction, the progress we can make is first and foremost a matter of political will. It is of course for the Commission, but also for EU Member States, to demonstrate that. And as in many other areas there is a direct link between the level of ambition of the EU's internal agenda and our credibility and effectiveness externally.
So what of our External action? The events in the Caucasus have brought home that the so-called "frozen conflicts" can directly affect our energy security. No surprise then that the European Council enjoined the Commission to review all energy security initiatives, in particular on diversification of sources and supply routes.
At present energy features as a key element in all our agreements with third countries, suppliers, consumers and transit countries. We are working hard to enhance our bilateral energy relations with key partners in the Caspian Basin, Central Asia, the Mediterranean and the Middle East.
Strengthening our energy partnership with Central Asia – which has great potential in oil and gas - is a top political priority for us. I have just come from the EU/Central Asia security forum in Paris. We are redoubling our efforts to make a reality of the long-discussed "southern corridor”.
Over the past couple of years we have signed MOUs on energy with four key energy partners, namely Ukraine, Azerbaijan, Kazakhstan and Turkmenistan. We have concluded agreements too with Morocco and Jordan and MOUs are ready for signature with Egypt and Iraq.
Last but not least, you would expect a word on Russia. The European Union had identified a new energy partnership with Russia - built on the principles of transparency, reciprocity and a level playing field for all energy operators - as a key external priority. Negotiations on a new agreement are currently on hold pending Russian compliance with the terms of the peace brokered by the European Union in Georgia. Whatever the coming months bring in the Caucasus, we know that Russia will remain a very significant partner for us. But we know also that Russia needs us. Our markets take around two thirds of Russian gas exports, and the revenues from our custom are vital to Russia's economic growth. Managing this interdependence will be an important challenge.
In closing, I’d like to return to your original question about the relationship between energy security and foreign policy. Is there one? Yes. And it is fundamental for consumers, suppliers and transit countries alike.
On this, as on all other security challenges I have mentioned today, Europe needs to work hand in hand with the United States. I ask you to support us and work with us. And that means, in the field of energy, understanding our need to work pragmatically with our partners.
I thank you for your attention.
Thursday, October 2, 2008
The power and the glory
From The Economist print edition
EVERYONE loves a booming market, and most booms happen on the back of technological change. The world’s venture capitalists, having fed on the computing boom of the 1980s, the internet boom of the 1990s and the biotech and nanotech boomlets of the early 2000s, are now looking around for the next one. They think they have found it: energy.
Many past booms have been energy-fed: coal-fired steam power, oil-fired internal-combustion engines, the rise of electricity, even the mass tourism of the jet era. But the past few decades have been quiet on that front. Coal has been cheap. Natural gas has been cheap. The 1970s aside, oil has been cheap. The one real novelty, nuclear power, went spectacularly off the rails. The pressure to innovate has been minimal.
In the space of a couple of years, all that has changed. Oil is no longer cheap; indeed, it has never been more expensive. Moreover, there is growing concern that the supply of oil may soon peak as consumption continues to grow, known supplies run out and new reserves become harder to find.
The idea of growing what you put in the tank of your car, rather than sucking it out of a hole in the ground, no longer looks like economic madness. Nor does the idea of throwing away the tank and plugging your car into an electric socket instead. Much of the world’s oil is in the hands of governments who have little sympathy with the rich West. When a former head of America’s Central Intelligence Agency allies himself with tree-hugging greens that his outfit would once have suspected of subversion, you know something is up. Yet that is one tack James Woolsey is trying in order to reduce his country’s dependence on imported oil.
The price of natural gas, too, has risen in sympathy with oil. That is putting up the cost of electricity. Wind- and solar-powered alternatives no longer look so costly by comparison. It is true that coal remains cheap, and is the favoured fuel for power stations in industrialising Asia. But the rich world sees things differently.
In theory, there is a long queue of coal-fired power stations waiting to be built in America. But few have been completed in the past 15 years and many in that queue have been put on hold or withdrawn, for two reasons. First, Americans have become intolerant of large, polluting industrial plants on their doorsteps. Second, American power companies are fearful that they will soon have to pay for one particular pollutant, carbon dioxide, as is starting to happen in other parts of the rich world. Having invested heavily in gas-fired stations, only to find themselves locked into an increasingly expensive fuel, they do not want to make another mistake.
That has opened up a capacity gap and an opportunity for wind and sunlight. The future price of these resources—zero—is known. That certainty has economic value as a hedge, even if the capital cost of wind and solar power stations is, at the moment, higher than that of coal-fired ones.
The reasons for the boom, then, are tangled, and the way they are perceived may change. Global warming, a long-range phenomenon, may not be uppermost in people’s minds during an economic downturn. High fuel prices may fall as new sources of supply are exploited to fill rising demand from Asia. Security of supply may improve if hostile governments are replaced by friendly ones and sources become more diversified. But none of the reasons is likely to go away entirely.
Global warming certainly will not. “Peak oil”, if oil means the traditional sort that comes cheaply out of holes in the ground, probably will arrive soon. There is oil aplenty of other sorts (tar sands, liquefied coal and so on), so the stuff is unlikely to run out for a long time yet. But it will get more expensive to produce, putting a floor on the price that is way above today’s. And political risk will always be there—particularly for oil, which is so often associated with bad government for the simple reason that its very presence causes bad government in states that do not have strong institutions to curb their politicians.
The market for energy is huge. At present, the world’s population consumes about 15 terawatts of power. (A terawatt is 1,000 gigawatts, and a gigawatt is the capacity of the largest sort of coal-fired power station.) That translates into a business worth $6 trillion a year—about a tenth of the world’s economic output—according to John Doerr, a venture capitalist who is heavily involved in the industry. And by 2050, power consumption is likely to have risen to 30 terawatts.
Scale is one of the important differences between the coming energy boom, if it materialises, and its recent predecessors—particularly those that relied on information technology, a market measured in mere hundreds of billions. Another difference is that new information technologies tend to be disruptive, forcing the replacement of existing equipment, whereas, say, building wind farms does not force the closure of coal-fired power stations.
For both of these reasons, any transition from an economy based on fossil fuels to one based on renewable, alternative, green energy—call it what you will—is likely to be slow, as similar changes have been in the past (see chart 1). On the other hand, the scale of the market provides opportunities for alternatives to prove themselves at the margin and then move into the mainstream, as is happening with wind power at the moment. And some energy technologies do have the potential to be disruptive. Plug-in cars, for example, could be fuelled with electricity at a price equivalent to 25 cents a litre of petrol. That could shake up the oil, carmaking and electricity industries all in one go.
The innovation lull of the past few decades also provides opportunities for technological leapfrogging. Indeed, it may be that the field of energy gives the not-quite-booms in biotechnology and nanotechnology the industrial applications they need to grow really big, and that the three aspiring booms will thus merge into one.
The possibility of thus recapturing the good times of their youth has brought many well-known members of the “technorati” out of their homes in places like Woodside, California. Energy has become supercool. Elon Musk, who co-founded PayPal, has developed a battery-powered sports car. Larry Page and Sergey Brin, the founders of Google, have started an outfit called Google.orgthat is searching for a way to make renewable energy truly cheaper than coal (or RE
This renewed interest in energy is bringing forth a raft of ideas, some bright, some batty, that is indeed reminiscent of the dotcom boom. As happened in that boom, most of these ideas will come to naught. But there could just be a PayPal or a Google or a Sun among them.
More traditional companies are also taking an interest. General Electric (GE), a large American engineering firm, already has a thriving wind-turbine business and is gearing up its solar-energy business. The energy researchers at its laboratories in Schenectady, New York, enjoy much of the intellectual freedom associated with start-up firms, combined with a secure supply of money.
Meanwhile, BP and Shell, two of the world’s biggest oil companies, are sponsoring both academic researchers and new, small firms with bright ideas, as is DuPont, one of the biggest chemical companies. Not everyone has joined in. Exxon Mobil, the world’s largest oil company not in government hands, is conspicuously absent. But in many boardrooms renewables are no longer seen as just a way of keeping environmentalists off companies’ backs.
Some people complain that many existing forms of renewable energy rely on subsidies or other forms of special treatment for their viability. On the surface, that is true. Look beneath, though, and the whole energy sector is riddled with subsidies, both explicit and hidden, and costs that are not properly accounted for. Drawing on the work of people like Boyden Gray, a former White House counsel, Mr Woolsey estimates that American oil companies receive preferential treatment from their government worth more than $250 billion a year. And the Intergovernmental Panel on Climate Change (IPCC), a United Nations-appointed group of scientific experts, reckons that fossil fuels should carry a tax of $20-50 for every tonne of carbon dioxide they generate in order to pay for the environmental effects of burning them (hence the fears of the power-generators).
So the subsidies and mandates offered to renewable sources of power such as wind turbines often just level the playing field. It is true that some subsidies amount to unwarranted market-rigging: examples include those handed by cloudy Germany to its solar-power industry and by America to its maize-based ethanol farmers when Brazilian sugar-based ethanol is far cheaper. Others, though, such as a requirement that a certain proportion of electricity be derived from non-fossil-fuel sources, make no attempt to pick particular technological winners. They merely act to stimulate innovation by guaranteeing a market to things that actually work.
If the world were rational, all of these measures would be swept away and replaced by a proper tax on carbon—as is starting to happen in Europe, where the price arrived at by the cap-and-trade system being introduced is close to the IPCC’s recommendation. If that occurred, wind-based electricity would already be competitive with fossil fuels and others would be coming close. Failing that, special treatment for alternatives is probably the least bad option—though such measures need to be crafted in ways that favour neither incumbents nor particular ways of doing things, and need to be withdrawn when they are no longer necessary.
The poor world turns greener too
That, at least, is the view from the rich world. But poorer, rapidly developing countries are also taking more of an interest in renewable energy sources, despite assertions to the contrary by some Western politicians and businessmen. It is true that China is building coal-fired power stations at a blazing rate. But it also has a large wind-generation capacity, which is expected to grow by two-thirds this year, and is the world’s second-largest manufacturer of solar panels—not to mention having the largest number of solar-heated rooftop hot-water systems in its buildings.
Brazil, meanwhile, has the world’s second-largest (just behind America) and most economically honest biofuel industry, which already provides 40% of the fuel consumed by its cars and should soon supply 15% of its electricity, too (through the burning of sugarcane waste). South Africa is leading the effort to develop a new class of safe and simple nuclear reactor—not renewable energy in the strict sense, but carbon-free and thus increasingly welcome. These countries, and others like them, are prepared to look beyond fossil fuels. They will get their energy where they can. So if renewables and other alternatives can compete on cost, the poor and the rich world alike will adopt them.
That, however, requires innovation. Such innovation is most likely to come out of the laboratories of rich countries. At a recent debate at Columbia University, which The Economist helped to organise, Mr Khosla defended the proposition, “The United States will solve the climate-change problem”. The Californian venture capitalist argued that if cheaper alternatives to fossil fuels are developed, simple economics will ensure their adoption throughout the world. He also insisted that the innovation which will create those alternatives will come almost entirely out of America.
As it happens, he lost. But that does not mean he is wrong. There are lots of terawatts to play for and lots of money to be made. And if the planet happens to be saved on the way, that is all to the good.
EVERYONE loves a booming market, and most booms happen on the back of technological change. The world’s venture capitalists, having fed on the computing boom of the 1980s, the internet boom of the 1990s and the biotech and nanotech boomlets of the early 2000s, are now looking around for the next one. They think they have found it: energy.
Many past booms have been energy-fed: coal-fired steam power, oil-fired internal-combustion engines, the rise of electricity, even the mass tourism of the jet era. But the past few decades have been quiet on that front. Coal has been cheap. Natural gas has been cheap. The 1970s aside, oil has been cheap. The one real novelty, nuclear power, went spectacularly off the rails. The pressure to innovate has been minimal.
In the space of a couple of years, all that has changed. Oil is no longer cheap; indeed, it has never been more expensive. Moreover, there is growing concern that the supply of oil may soon peak as consumption continues to grow, known supplies run out and new reserves become harder to find.
The idea of growing what you put in the tank of your car, rather than sucking it out of a hole in the ground, no longer looks like economic madness. Nor does the idea of throwing away the tank and plugging your car into an electric socket instead. Much of the world’s oil is in the hands of governments who have little sympathy with the rich West. When a former head of America’s Central Intelligence Agency allies himself with tree-hugging greens that his outfit would once have suspected of subversion, you know something is up. Yet that is one tack James Woolsey is trying in order to reduce his country’s dependence on imported oil.
The price of natural gas, too, has risen in sympathy with oil. That is putting up the cost of electricity. Wind- and solar-powered alternatives no longer look so costly by comparison. It is true that coal remains cheap, and is the favoured fuel for power stations in industrialising Asia. But the rich world sees things differently.
In theory, there is a long queue of coal-fired power stations waiting to be built in America. But few have been completed in the past 15 years and many in that queue have been put on hold or withdrawn, for two reasons. First, Americans have become intolerant of large, polluting industrial plants on their doorsteps. Second, American power companies are fearful that they will soon have to pay for one particular pollutant, carbon dioxide, as is starting to happen in other parts of the rich world. Having invested heavily in gas-fired stations, only to find themselves locked into an increasingly expensive fuel, they do not want to make another mistake.
That has opened up a capacity gap and an opportunity for wind and sunlight. The future price of these resources—zero—is known. That certainty has economic value as a hedge, even if the capital cost of wind and solar power stations is, at the moment, higher than that of coal-fired ones.
The reasons for the boom, then, are tangled, and the way they are perceived may change. Global warming, a long-range phenomenon, may not be uppermost in people’s minds during an economic downturn. High fuel prices may fall as new sources of supply are exploited to fill rising demand from Asia. Security of supply may improve if hostile governments are replaced by friendly ones and sources become more diversified. But none of the reasons is likely to go away entirely.
Global warming certainly will not. “Peak oil”, if oil means the traditional sort that comes cheaply out of holes in the ground, probably will arrive soon. There is oil aplenty of other sorts (tar sands, liquefied coal and so on), so the stuff is unlikely to run out for a long time yet. But it will get more expensive to produce, putting a floor on the price that is way above today’s. And political risk will always be there—particularly for oil, which is so often associated with bad government for the simple reason that its very presence causes bad government in states that do not have strong institutions to curb their politicians.
The market for energy is huge. At present, the world’s population consumes about 15 terawatts of power. (A terawatt is 1,000 gigawatts, and a gigawatt is the capacity of the largest sort of coal-fired power station.) That translates into a business worth $6 trillion a year—about a tenth of the world’s economic output—according to John Doerr, a venture capitalist who is heavily involved in the industry. And by 2050, power consumption is likely to have risen to 30 terawatts.
Scale is one of the important differences between the coming energy boom, if it materialises, and its recent predecessors—particularly those that relied on information technology, a market measured in mere hundreds of billions. Another difference is that new information technologies tend to be disruptive, forcing the replacement of existing equipment, whereas, say, building wind farms does not force the closure of coal-fired power stations.
For both of these reasons, any transition from an economy based on fossil fuels to one based on renewable, alternative, green energy—call it what you will—is likely to be slow, as similar changes have been in the past (see chart 1). On the other hand, the scale of the market provides opportunities for alternatives to prove themselves at the margin and then move into the mainstream, as is happening with wind power at the moment. And some energy technologies do have the potential to be disruptive. Plug-in cars, for example, could be fuelled with electricity at a price equivalent to 25 cents a litre of petrol. That could shake up the oil, carmaking and electricity industries all in one go.
The innovation lull of the past few decades also provides opportunities for technological leapfrogging. Indeed, it may be that the field of energy gives the not-quite-booms in biotechnology and nanotechnology the industrial applications they need to grow really big, and that the three aspiring booms will thus merge into one.
The possibility of thus recapturing the good times of their youth has brought many well-known members of the “technorati” out of their homes in places like Woodside, California. Energy has become supercool. Elon Musk, who co-founded PayPal, has developed a battery-powered sports car. Larry Page and Sergey Brin, the founders of Google, have started an outfit called Google.orgthat is searching for a way to make renewable energy truly cheaper than coal (or RE
This renewed interest in energy is bringing forth a raft of ideas, some bright, some batty, that is indeed reminiscent of the dotcom boom. As happened in that boom, most of these ideas will come to naught. But there could just be a PayPal or a Google or a Sun among them.
More traditional companies are also taking an interest. General Electric (GE), a large American engineering firm, already has a thriving wind-turbine business and is gearing up its solar-energy business. The energy researchers at its laboratories in Schenectady, New York, enjoy much of the intellectual freedom associated with start-up firms, combined with a secure supply of money.
Meanwhile, BP and Shell, two of the world’s biggest oil companies, are sponsoring both academic researchers and new, small firms with bright ideas, as is DuPont, one of the biggest chemical companies. Not everyone has joined in. Exxon Mobil, the world’s largest oil company not in government hands, is conspicuously absent. But in many boardrooms renewables are no longer seen as just a way of keeping environmentalists off companies’ backs.
Some people complain that many existing forms of renewable energy rely on subsidies or other forms of special treatment for their viability. On the surface, that is true. Look beneath, though, and the whole energy sector is riddled with subsidies, both explicit and hidden, and costs that are not properly accounted for. Drawing on the work of people like Boyden Gray, a former White House counsel, Mr Woolsey estimates that American oil companies receive preferential treatment from their government worth more than $250 billion a year. And the Intergovernmental Panel on Climate Change (IPCC), a United Nations-appointed group of scientific experts, reckons that fossil fuels should carry a tax of $20-50 for every tonne of carbon dioxide they generate in order to pay for the environmental effects of burning them (hence the fears of the power-generators).
So the subsidies and mandates offered to renewable sources of power such as wind turbines often just level the playing field. It is true that some subsidies amount to unwarranted market-rigging: examples include those handed by cloudy Germany to its solar-power industry and by America to its maize-based ethanol farmers when Brazilian sugar-based ethanol is far cheaper. Others, though, such as a requirement that a certain proportion of electricity be derived from non-fossil-fuel sources, make no attempt to pick particular technological winners. They merely act to stimulate innovation by guaranteeing a market to things that actually work.
If the world were rational, all of these measures would be swept away and replaced by a proper tax on carbon—as is starting to happen in Europe, where the price arrived at by the cap-and-trade system being introduced is close to the IPCC’s recommendation. If that occurred, wind-based electricity would already be competitive with fossil fuels and others would be coming close. Failing that, special treatment for alternatives is probably the least bad option—though such measures need to be crafted in ways that favour neither incumbents nor particular ways of doing things, and need to be withdrawn when they are no longer necessary.
The poor world turns greener too
That, at least, is the view from the rich world. But poorer, rapidly developing countries are also taking more of an interest in renewable energy sources, despite assertions to the contrary by some Western politicians and businessmen. It is true that China is building coal-fired power stations at a blazing rate. But it also has a large wind-generation capacity, which is expected to grow by two-thirds this year, and is the world’s second-largest manufacturer of solar panels—not to mention having the largest number of solar-heated rooftop hot-water systems in its buildings.
Brazil, meanwhile, has the world’s second-largest (just behind America) and most economically honest biofuel industry, which already provides 40% of the fuel consumed by its cars and should soon supply 15% of its electricity, too (through the burning of sugarcane waste). South Africa is leading the effort to develop a new class of safe and simple nuclear reactor—not renewable energy in the strict sense, but carbon-free and thus increasingly welcome. These countries, and others like them, are prepared to look beyond fossil fuels. They will get their energy where they can. So if renewables and other alternatives can compete on cost, the poor and the rich world alike will adopt them.
That, however, requires innovation. Such innovation is most likely to come out of the laboratories of rich countries. At a recent debate at Columbia University, which The Economist helped to organise, Mr Khosla defended the proposition, “The United States will solve the climate-change problem”. The Californian venture capitalist argued that if cheaper alternatives to fossil fuels are developed, simple economics will ensure their adoption throughout the world. He also insisted that the innovation which will create those alternatives will come almost entirely out of America.
As it happens, he lost. But that does not mean he is wrong. There are lots of terawatts to play for and lots of money to be made. And if the planet happens to be saved on the way, that is all to the good.
Wednesday, October 1, 2008
Friends and neighbours
Sep 25th 2008 | ANKARA AND YEREVAN
From The Economist print edition
KEMAL ATATURK , father of modern Turkey, rescued hundreds of Armenian women and children from mass slaughter by Ottoman forces during and after the first world war. This untold story, which is sure to surprise many of today’s Turks, is one of many collected by the Armenian genocide museum in Yerevan that “will soon be brought to light on our website,” promises Hayk Demoyan, its director.
His project is one more example of shifting relations between Turkey and Armenia. On September 6th President Abdullah Gul became the first Turkish leader to visit Armenia when he attended a football match. Mr Gul’s decision to accept an invitation from Armenia’s president, Serzh Sarkisian, has raised expectations that Turkey may establish diplomatic ties and open the border it closed during the 1990s fighting between Armenia and Azerbaijan over Nagorno-Karabakh. The two foreign ministers were planning to meet in New York this week. Armenia promises to recognise Turkey’s borders and to allow a commission of historians to investigate the fate of the Ottoman Armenians.Reconciliation between Turkey and Armenia could tilt the balance of power in the Caucasus. Russia is Armenia’s closest regional ally. It has two bases and around 2,000 troops there. The war in Georgia has forced Armenia to rethink its position. Some 70% of its supplies flow through Georgia, and these were disrupted by Russian bombing. Peace with Turkey would give Armenia a new outside link. Some think Russia would be happy too. “It would allow Russia to marginalise and lean harder on Georgia,” argues Alexander Iskandaryan, director of the Caucasus Media Institute.
Mending fences with Armenia would bolster Turkey’s regional clout. And it might also help to kill a resolution proposed by the American Congress to call the slaughter of the Armenians in 1915 genocide. That makes the Armenian diaspora, which is campaigning for genocide recognition, unhappy. Some speak of a “Turkish trap” aimed at rewriting history to absolve Turkey of wrongdoing. Indeed, hawks in Turkey are pressing Armenia to drop all talk of genocide.
Even more ambitiously, the hawks want better ties with Armenia to be tied anew to progress over Nagorno-Karabakh. But at least Mr Gul seems determined to press ahead. “If we allow the dynamics that were set in motion by the Yerevan match to slip away, we may have to wait another 15-20 years for a similar chance to arise,” he has said.
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