2 May 2012 | Vol. 3, № 16. From the Editor’s Desk Dear FDI supporters, Welcome to this week’s edition of the and the European Union’s High Strategic Weekly Analysis. This week, we Representative for Foreign Affairs and begin by examining the contentious issue Security Policy, Baroness Ashton. of accessing the energy resources of the Arctic region. Still on the subject of Next, we report on the Sanitation and energy, we also look at developments in Water for All Partnership and Australia’s decision to join the group. the eastern Mediterranean. We conclude this week’s edition with the Next, we head to South Asia. First, FDI Associate Lindsay Dorman investigates the findings of a new report from the dilemma confronting Russia as it International Land Coalition, investigating what has become known as the contributes to NATO efforts to stabilise Afghanistan, while facing a possible loss of “landgrab” phenomenon. influence in the Central Asian republics to I trust that you will enjoy this edition of the United States. FDI Associate N. Sathiya the Strategic Weekly Analysis. Moorthy provides an update on the latest situation in the Maldives and we then Major General John Hartley AO (Retd) analyse the implications of the capabilities Institute Director and CEO of India’s newest long-range missile. Future Directions International Looking at the Middle East, we consider the prospects for the upcoming “5+1” talks on 23 May. We then move to Burma, following the visits there by United Nations Secretary-General Ban Ki-Moon ***** Race for Arctic Energy Resources Ramps Up Background The eight members of the Arctic Council1 are in a race to assert their territorial claims in the region. As energy needs grow, ownership of the area’s vast petroleum resources is becoming increasingly contested. In 2007, Russia planted its flag on the Arctic seabed, sparking a series of conferences, culminating in the Ilulissat Declaration. Although aimed at easing territorial tensions, it may well come to be seen as the beginning of an international power struggle. In mid-April 2012, The United States Geological Society (USGS) released an updated estimate of the Arctic’s natural resources. Eleven per cent of the world’s undiscovered oil reserves lie within the Arctic Ocean and ten per cent of undiscovered gas reserves. Such substantial deposits of valued resources, and their disputed ownership, are likely to cause significant tensions between energy-hungry states. Comment The Arctic is globalising. Russia is rapidly opening up the Arctic to foreign investors, highlighted by last month’s billion dollar deals with Exxon Mobil and Eni of Italy. Royal Dutch Shell has also been given the go-ahead to drill off the coast of Alaska, beginning this northern summer. Britain’s Cairn Energy, currently drilling off Greenland and Norway, has in recent years continually moved north to boost its decreasing oil output. The Arctic Council has an increasingly difficult task in balancing the rights of the sovereign Arctic states and the interests of potential users. China, India, Japan and South Korea, all non-member states, are touted as possible major players in the booming Arctic reserves. The future of the Arctic involves co-operation, not conflict. The current scramble for the Arctic has not yet turned into a military affair, but Canada and Russia have been increasing their military capabilities in their respective arctic regions. The Arctic Council has an increasingly important role to play in mitigating the risk of suspicion and misunderstanding between states. So far, conflict over national boundaries, such as between Russia and Norway, have been settled without dispute. As energy needs increase, and current energy reserves dwindle, such disputes may be more likely to evolve into substantial security risks. Production from Arctic reserves is still decades away; the Russian joint venture exploration wells are not projected to reach production until 2020. Until then, huge financial outlays without return are to be expected. The long development phase of such projects dramatically increases the risk of failure. Although agreements, such as BP’s contract with Russian state-run energy giant Rosneft, can end badly, the biggest conflict may indeed be between oil and gas companies, with local peoples bearing the brunt of the fall out. Failures such as BP’s do little to promote peaceful co-operation in the area. The possible environmental impacts of such developments are an essential consideration, particularly in an area as pristine and ecologically important as the Arctic. Such concerns have long halted development in the United States and Canada. In contrast, there have been 1 Canada, Denmark, Finland, Iceland, Norway, Russia, Sweden, United States. Page 2 of 15 reports that, in Russia, the boundaries of national parks may be redrawn to accommodate development. An environmental disaster in the Arctic would have transnational effects and an effective response to an oil spill in such remote areas is unlikely. Estimates suggest that 84 per cent of the time it would be impossible to deploy an emergency response due to high winds, waves and darkness. Thick ice sheets in the Arctic will make a clean-up extremely difficult and little research has been done on this style of clean-up. The costs could dwarf that of the BP oil spill in the Gulf of Mexico, which has reached $40 billion so far. Before development proceeds, science needs to be able to assess the possible damage of such a spill and companies need to demonstrate that they have the funds and technical ability to handle such a disaster. Premature forays into the far north may have harmful effects on the environment, local peoples and nation states. As an inter-governmental forum, the Arctic Council should be encouraged and facilitated to provide opportunities for dialogue on regional issues. Development should only proceed in this sensitive area through a resilient, well-equipped, impartial authority. James Ball Research Assistant Northern Australia/Energy Security Research Programme ***** Energy Development and Security in the East Mediterranean Background Traditionally a transit route, recent energy developments in the eastern Mediterranean suggest the region will increasingly yield greater returns and further energy prospects. Offshore basins adjacent to Cyprus, Egypt, Turkey and Israel, have the potential to significantly alter regional dynamics. Political and security considerations, however, may prevent large-scale development. Most recently, in late-April, this was highlighted by increased tensions in northern Cyprus, between Cyprus and Turkey; a long dormant, although potentially volatile regional flashpoint. Elsewhere, tension between Israel and Lebanon, particularly due to unresolved territorial boundaries, provides additional cause for concern. Comment Over the last decade, exploration in the Mediterranean has provided a number of untapped oil and gas fields. While the reserves are unlikely to alter the global hydrocarbon mix, projections suggest the fields have the potential to transform the littoral states from energy importers to exporters. Realisation of this energy potential will bring not only economic benefits for the region, but will also strengthen the geopolitical position of its states, particularly Israel. Noble Energy, an American oil company, suggests that the Leviathan and Page 3 of 15 Tamar fields, in Israeli waters, may contain about 30 trillion cubic feet of gas. In today’s terms, this represents reserves worth in excess of $670 billion, or three times the United Kingdom’s remaining reserves. Similarly, in the wider Levant Basin, the US Geological Survey estimates there could be an estimated 122 trillion cubic feet of natural gas, and an additional 1.7 billion barrels of oil. Importantly, however, for the region’s hydrocarbon sector to remain viable, significant issues must be resolved, particularly border delineation, provision of critical infrastructure and regional security architecture. The confirmation of energy resources in the eastern Mediterranean, has accentuated ongoing maritime disputes in the region. The land border between Israel and Lebanon was demarcated by the UN in 2000, after the withdrawal of Israeli troops from southern Lebanon. Although not officially endorsed by the UN, Israel has extended this demarcation into the sea and has deployed a series of buoys in the Mediterranean. Beirut strongly rejects this extension. It has appealed to the UN to resolve the issue. Iran has also provided support to the Lebanese objections, with its usual rhetoric. Correspondingly, in the north-eastern Mediterranean, attempts by Cyprus to define its boundaries have been thwarted by Turkey, which, in April, took a unilateral decision to explore the territory it claims. Further concerns linger over potential claims by Egypt, particularly in relation to an already approved Israeli- Cypriot deal. The current military council have not made their foreign policy intentions clear, and in an effort to foster support for the flagging transition government, may tackle emotive issues, such as Israel. Developments in the energy sector are not without risk, which will make transporting hydrocarbons a capital intensive process. Long pipelines will be required to transport oil and gas to potential destinations in the European Union. Yet this raises significant dilemmas, particularly for Israel. Israel has no official diplomatic ties with Lebanon and its relations with Egypt have become tense; a development expected