P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come

ENERGY SECURITY P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come

ENERGY SECURITY AN INTERDISCIPLINARY APPROACH

Gawdat Bahgat National Defense University Washington, DC, USA

A John Wiley and Sons, Ltd., Publication P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come

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Library of Congress Cataloging-in-Publication Data

Bahgat, Gawdat. Energy security : an interdisciplinary approach / Gawdat Bahgat. p. cm. Includes bibliographical references and index. ISBN 978-0-470-68904-2 (hardback) 1. Energy policy. 2. Energy development. 3. Power resources. I. Bahgat, Gawdat. II. Title. HD9502.A2B335 2011 333.79Ðdc22 2010046393

A catalogue record for this book is available from the British Library.

Print ISBN: 9780470689042 ePDF ISBN: 9780470980187 oBook ISBN: 9780470980170 ePub ISBN: 9780470980163

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Contents

About the Author ix Preface xi Acknowledgements xiii List of abbreviations xv Glossary xix

1 Introduction 1 1.1 Energy Security 2 1.2 Diversification of Energy Mix 3 1.2.1 Oil 4 1.2.2 Natural Gas 5 1.2.3 Coal 7 1.2.4 Nuclear Power 8 1.2.5 Biofuels 10 1.2.6 Other Renewable Sources 11 1.2.7 Investment 13 1.2.8 Resource Nationalism 14 1.2.9 Geo-policy 14 1.3 Conclusion 16 References 17

2 21 2.1 Oil 22 2.2 Natural Gas 26 2.3 Coal 29 2.4 Nuclear Power 29 2.5 Ethanol 32 2.6 The Quest for an Energy Strategy 33 2.7 Conclusion: The Way Forward 36 References 37

3 European Union 41 3.1 The EU Energy Outlook 42 P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come

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3.1.1 Oil 42 3.1.2 Natural Gas 43 3.1.3 Coal 44 3.1.4 Nuclear Power 44 3.1.5 Renewable Sources 46 3.2 Russia 48 3.3 Central Asia/ Region 50 3.4 Mediterranean Sea 52 3.5 The Gulf Cooperation Council 53 3.6 Turkey 53 3.7 Conclusion: The Way Ahead 54 References 55

4 China 59 4.1 Regulatory Authority 60 4.2 Oil 62 4.2.1 Imports from the 63 4.2.2 Africa 66 4.2.3 Central Asia 68 4.2.4 Refining 70 4.2.5 Shipping 71 4.2.6 Strategic Petroleum Reserve (SPR) 71 4.3 Coal 72 4.4 Natural Gas 73 4.5 Nuclear Power 73 4.6 Renewable Energy 74 4.7 Overseas Exploration and Production 74 4.8 Conclusion 75 References 76

5 Persian Gulf 79 5.1 Socio-economic and Political Challenges 80 5.1.1 International Sanctions 82 5.1.2 Wars and Ethnic/Sectarian Strife 82 5.1.3 Terrorism 83 5.1.4 Closure of Straits of Hormuz 83 5.1.5 Domestic Instability 83 5.1.6 Underinvestment 84 5.2 Saudi Arabia 84 5.3 Iran 93 5.4 Iraq 101 5.5 Conclusion: The Way Forward 106 References 106

6 Africa 111 6.1 Algeria 113 P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come

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6.2 Libya 114 6.3 117 6.4 Sudan 119 6.5 Angola 120 6.6 Nigeria 121 6.7 United States and Africa 123 6.8 Europe and Africa 125 6.9 Conclusion: The Way Ahead 126 References 126

7 Caspian Sea 131 7.1 Hydrocarbon Resources Ð An Assessment 132 7.1.1 Azerbaijan 133 7.1.2 Kazakhstan 134 7.1.3 Turkmenistan 145 7.2 The Legal Status of the Caspian Sea 147 7.2.1 Azerbaijan 147 7.2.2 Kazakhstan 148 7.2.3 Russia 148 7.2.4 Turkmenistan 148 7.2.5 Iran 148 7.3 Geopolitical Rivalry and Pipeline Diplomacy 149 7.3.1 Iran 149 7.3.2 Russia 150 7.3.3 China 152 7.3.4 Europe and the United States 153 7.4 Conclusion: The Way Forward 154 References 155

8 Russia 157 8.1 Oil Sector 158 8.2 Natural Gas 160 8.3 The Energy Strategy-2030 161 8.3.1 Oil Sector 162 8.3.2 Gas Sector 162 8.4 The Arctic Hydrocarbons 162 8.5 RussiaÐEU Energy Partnership 164 8.6 Russia, the Middle East, and OPEC 168 8.7 Energy Sector Organization 170 8.8 Conclusion: The Way Forward 172 References 173

9 OPEC and Gas OPEC 175 9.1 OPEC: History and Evolution 176 9.2 OPEC: Objectives, Membership, and Organization 179 9.3 OPEC Summits 181 P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come

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9.4 OPEC: Long-Term Strategy 183 9.5 Gas OPEC 185 9.6 GECF and OPEC 185 9.7 Oil vs. Gas 186 9.7.1 Russia 189 9.7.2 Iran, Qatar, and Algeria 190 9.7.3 Consumers’ Reaction 191 9.8 Conclusion 192 References 193

10 International Energy Agency 195 10.1 The Founding of the IEA 195 10.2 The International Energy Program 198 10.3 Structure of the IEA 199 10.3.1 The Governing Board 199 10.3.2 Standing Groups 200 10.3.3 The Secretariat 202 10.3.4 Membership 203 10.4 Energy Security 205 10.4.1 Emergency Response Mechanisms 206 10.5 How Did the System Work? 209 10.5.1 The 1979Ð1981 Crisis 209 10.5.2 The 1990Ð1991 Crisis 210 10.6 Conclusion 211 References 212

11 Conclusion 213 11.1 Energy Security 213 11.2 The International Energy Forum (IEF) 215 11.3 Joint Oil Data Initiative 216 11.4 Conclusion: The Way Forward 217 References 218

Index 219 P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come

About the Author

Dr. Gawdat Bahgat is a professor at the Near East South Asia Center for Strategic Studies, National Defense University, in Washington, DC, United States of America. Dr. Bahgat has taught political science and international relations at several universities. His areas of exper- tise include energy security, counter-terrorism, proliferation of weapons of mass destruction, international political economy, the Middle East, the Caspian Sea and Central Asia, and US foreign policy. Dr. Bahgat is the author of seven books and about 200 scholarly articles. His work has been translated into several foreign languages. He has been invited to and presented papers at conferences in Australia, Europe, and the Middle East, and is a frequent contributor to several media outlets. He holds a PhD in political science from Florida State University, an MA in Middle Eastern Studies from American University in Cairo, and a BA in political science from . P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come

Preface

Energy is the lifeblood of civilization. Both as individuals and nation states we depend heavily on energy. In almost everything we do, we rely on one or several sources of energy. Many people and governments used to take the availability of energy sources for granted. Our deepening reliance on energy and the rise of a combination of geopolitical, geological, and environmental challenges have cast doubt on this assumption that energy will always be there. Little wonder that energy security has become a major concern to almost all countries in the world. In recent years policy-makers and scholars have examined different aspects of energy security. These include production, consumption, reserves, refining, shipping, and investment among others. Indeed, the last few decades have witnessed a proliferation of political and academic conferences, industry journals, and books on energy security. Each side has sought to promote its interests with little ground for neutrality and objectiveness. I have been working on energy for more than two decades. The policy of energy, at national and international levels, and the growing literature are immensely stimulating. For a long time, consumers and producers perceived their interests as mutually exclusive. Since the early 1990s, a consensus has emerged that there is common ground. Long-term stability of energy markets and prices is generally seen as more favorable than short-term gains by one side or the other. These shared interests are the main theme of the analysis in this volume. In all the following chapters I argue that interdependence is the underlying characteristic of today’s energy markets. This book reflects what I learned in my teaching, research, and consulting in more than 20 years. The first chapter introduces readers to some of the major themes and concepts used in this study. This is followed by a close examination of energy outlooks in the major producing and consuming regions. In the last part the analysis focuses on the two most important international energy organizations Ð the Organization of Petroleum Exporting Countries and the International Energy Agency. The concluding chapter summarizes the main findings and discusses the International Energy Forum as an embodiment of the emerging cooperation between producers and consumers. In this volume the concept of energy security is addressed from both consumers’ and producers’ perspectives. In my decades-long journey of learning, teaching, researching, and writing about energy I have accumulated a huge debt to many colleagues, friends, and students. In writing this book I had the privilege of working with the most professional editorial team at John Wiley & Sons, Ltd. In particular I would like to thank Clarissa Lim, Neville Hankins, and Shalini Sharma. Nicky Skinner gave me unlimited support at crucial stages while writing P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come

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the book and Simone Taylor’s encouragement inspired me to transform my abstract thoughts into a book proposal. Writing a book is a huge adventure, with so many ups and downs. Professional and personal support from family and close friends is crucial in this undertaking. I would like to thank Helen Hooker, Sandra Dickson, Beth Sims, Theresa McDevitt, Helen Wedlake, and Patrizia Bassani. Finally, I would like to thank my friends and colleagues at the Near East South Asia Center for Strategic Studies, the National Defense University. Despite all the assistance I have received in the course of writing this book, all errors of facts or judgment are mine alone. P1: OTE/OTE/SPH P2: OTE fm JWST043-Bahgat December 28, 2010 15:57 Printer Name: Yet to Come

Acknowledgements

To Sandra Dickson, Beth Sims, and Theresa McDevitt: thank you for your love and support all these years.