ENERGY FORUM A QUARTERLY JOURNAL FOR DEBATING ENERGY ISSUES AND POLICIES CONTENTS Issue 75 November 2008 Middle East Political Stability Henry Siegman Lakhdar Brahimi In the Personal Commentary written for this issue by Andrew Gould Eric Rouleau the CEO of Schlumberger, the respective roles of services companies Walid Khadduri – page 3 and the international oil corporations are insightfully defined. Gould Whither OPEC? relates his analysis to Mark Moody-Stuart’s commentary published Robert Mabro in Forum 74 (August 2008) to which readers are referred for a fuller Bassam Fattouh – page 10 presentation of complementary views. He firmly believes that ‘the in- dustry can only satisfy society’s needs effectively when all the players Letters – page 16 clearly communicate their roles and relationships’. The contribution Personal Commentary of services companies is in technology and in the provision of first Andrew Gould – page 18 class skills that reflect the high quality of their staff. Trust between them and their customers is the most valuable asset; and this trust Asinus Muses – page 20 arises because competition is not involved in the relationship. The other articles in this issue are contributors all of whom have a long grouped under two themes. The first experience with, and often a direct which is covered by four contribu- involvement in, these matters. tions is the difficult subject of politi- I must add however that the stabil- cal stability in the Middle East. The ity issue involves other important importance of this topic for the oil elements from domestic political and gas industry is well recognised. conflicts, frustrations with the state At present a large share of world of economies and the lack of politi- production originates in this region; cal participation, resentment about and the huge reserves held by Mid- corruption, the impact of oil rev- dle East countries suggest that their enues on the distribution of income, role in supplying the world with oil to name but a few. Some of these and gas can only become more criti- may be addressed in future issues of cal in the long run. Forum. A host of factors are relevant to In a sharp analysis of the continual the stability problem. There are re- failure to solve the Arab–Israeli gional crises such as the Arab–Israeli problem, Henri Siegman points out conflict; international ones such that a country with the overwhelm- as the dispute over Iran’s nuclear ing advantages enjoyed by Israel ambitions; and internal instability rarely yields to the demands of a partly caused by foreign military very weak adversary. What is needed intervention in Iraq. These aspects is a powerful third party that can are addressed by distinguished restore the balance between Israel OXFORD ENERGY FORUM NOVEMBER 2008 and the Palestinians. The failure of many repeated Bassam Fattouh describes the relationship between attempts at ‘facilitation’ by the USA was not due OPEC and the world petroleum market result- to the lack of ideas but of a more critical lack of ing from the recent decision reducing production political will, in fact to cowardice. quotas as a dance in four stages or moves, some of which have already been made, and others are ex- The nuclear issue that has set the USA in associa- pected in the near future. He also points to cycles tion with other UN Security Council Members in the relationship with the market involving pas- plus Germany against Iran is analysed by Lakhdar sivity when prices are rising, except when political Brahimi, the veteran international mediator and pressure to intervene with production increases be- diplomat, and Eric Rouleau, the journalist and comes significant, and active responses when prices sometimes Ambassador who has followed the are too low or falling in a dangerous manner. Middle East for longer than five decades. Both Even then immediate success is a rare occurrence believe that the military option having been swept because of the initial scepticism of markets and the away by the problems in Iraq and Afghanistan long lags between the implementation of cuts and and the financial crisis is now leaving only the their impact at final destinations. ‘engagement’ policy as an option. Barack Obama’s election to the presidency (an event that occurred Forum is a debating journal. We welcome therefore after the articles were written) suggests that this letters to the Editor. We are publishing two letters option will indeed be pursued. This however here, and we encourage readers to write about the raises difficult questions about who will set the controversial issues addressed in this and other agenda of the negotiations, what the agenda will issues. consist of, and who will be involved other than the United States and Iran. My own question From time to time Asinus changes its identity and relates to the risk that Iran may read the US desire therefore its moods and style. A big thank you is to negotiate as a weakness and fail to make con- due to Robert (Bob) Sutcliffe who wrote the rubric cessions. What then? in a number of recent issues, and welcome to Paul Segal, an Asinus of a younger generation. Internal security in Iraq, a topic addressed by Wal- id Khadduri, is continually threatened by a long list of factors. The fundamental issue, however, is Contributors to this issue the failure to forge a social contract between the various population groups. Questions about the LAKHDAR BRAHIMI is a UN mediator and former future also arise – such as the role of the army, Foreign Minister of Algeria Iraq’s reaction to a worsening of the nuclear dis- pute over Iran and the regional policy of a future BASSAM FATTOUH is Reader in Finance at the Iraqi government. School of Oriental and African Studies and Senior Research Fellow at the OIES The second set of articles is about OPEC. This Organisation has come under fierce attack by lead- ANDREW GOU L D is Chairman and CEO of ers of OECD countries when oil prices rose during Schlumberger the first half of 2008. Some seem to have forgotten WA L ID KHADDURI is a consultant to the Middle that the reference prices of oil are determined in East Economic Survey the futures market, a financial institution, and not by OPEC. Robert Mabro shows that the ‘cartel’ RO B ERT MA B RO is Honorary President of label consistently and continually pinned on OIES OPEC is only applicable to certain short episodes. ERIC ROU L EAU is the former Middle East For a useful analysis of oil market’s behaviour it correspondent of Le Monde and French is important to understand correctly the role that ambassador to Tunisia OPEC plays in different times. The blanket use of the term cartel is an obstacle rather than a help to HENRY SIE G MAN is the director of the US/ understanding. Middle East Project in New York 2 OXFORD ENERGY FORUM NOVEMBER 2008 Middle East Political Stability Henry Siegman asks choices Palestinians have so often of that goal. That is something Israel made in pursuing their struggle for has refused to say to the Palestinians whether the next US statehood – from egregious failures and to the Syrians and that is why at institution-building, to murderous all previous negotiations have gotten President can rescue violence against innocent civilians, nowhere. a two-state solution to to the more recent fratricidal warfare between Fatah and Hamas for which the Israel–Palestine Fatah’s refusal to accept the demo- conflict cratic choice of the Palestinian people “The next occupant of the in the parliamentary elections of 2006 Oval Office will be the last deserves most of the blame. Rather, The next occupant of the Oval Office American president to be it is intended to say that the difficult will be the last American president to measures Palestinians must take to put able to save the two-state be able to save the two-state solution their house in order will remain be- to the Israel–Palestine conflict. If he solution to the Israel– yond their grasp unless they are given does not pursue and achieve this goal Palestine conflict” a credible and proximate commitment during the first year of his presidency, for a Palestinian state alongside of the two-state ‘horizon’ that President Israel that is ‘independent, viable George W. Bush pursued so ineffec- Of course, while in office, Olmert and sovereign’ as of right, not Israeli tively is likely to disappear for good. not only did nothing consistent with generosity. And because such a state But even a quick engagement by the this understanding, but until the very is indeed the right of the Palestinian new president will fare no better than last moment personally approved people, its acknowledgement must previous US peace initiatives – all of measures – such as authorising further precede, not follow, conditions that which have gotten nowhere – if he construction in the settlements and are set for its implementation. That and his advisors approach the task in East Jerusalem – that deepened such a clear commitment has not been believing that some more ‘peace the despair of Palestinians and made made to this day is far more revealing processing’ or ‘confidence-building a two-state solution an even more of Israeli intentions and US/European measures’ will achieve the goal that impossible dream. indifference than any number of eluded his predecessors. confidence-building measures that *** The Israel–Palestine conflict has defied have left entirely unchanged the US ‘facilitation’ over these many years Palestinians’ status as a people under The first and most decisive of the not because of procedural shortcom- the heel of a crushing and open-ended ignored fundamentals is the vast ings, nor because of a paucity of ideas.