I should first make it clear that I am not an energy specialist, or an economist. My interest is foreign policy and security. So when I look at the question of energy needs, it is with a security aspect. As your course has discussed, we face a number of security challenges in the years ahead some of which are from the global depletion of finite resources. It may be fresh water, fish, biodiversity or oil. We also face challenges from the effects of consuming some of these resources on a historically unprecedented scale. The major of these is global warming and the consequences that they may have on population movement and global inequality.
So when I look at the question of energy security, I see it as a very complex security issue. We need an increasing energy supply to sustain GDP growth rates to which we have become used. In the less developed parts of the world, they need an even faster growth of energy supply. Nearly all of those energy resources contribute to the carbon emissions that we now understand are leading to global warming. While some renewable forms of energy such as wind, tides and hydro-electric are low carbon emitters, they appear at current energy costs to be only able to provide a minority of energy needs. Nuclear which can provide significant power, carries other security concerns in terms of disposal of waste, and access to nuclear material for states that wish to proliferate, and perhaps to non-state actors for terrorism. We would need 7000 new nuclear power plants to provide around half the world's current energy needs. That leaves us with a dependency on hydrocarbons: oil, gas, and coal as the main sources.
Modern societies have over the past century become hooked on oil. It provides energy is a convenient transportable form at low cost. However the distribution of oil and gas fields is not even over the earth's surface. The Gulf contains over 65% of the world's proven conventional oil reserves. Saudi has 22%, Iran 11%, Iraq 10%, Kuwait 8%, UAE 8%. With half as much again still to be proven. They also have large gas fields, but Russia is currently the biggest producer of natural gas for energy use. Oil production everywhere apart from Saudi Arabia is currently operating at about maximum production capacity, and indeed some fields are now in decline. Oil producing regions are unstable. Africa, the Caspian Sea, and South America are not much better than the Gulf (sabotage in Nigeria, labor strikes in Venezuela, terrorist attacks in Saudi Arabia, corruption charges in Russia, civil unrest in Uzbekistan).This puts an extra degree of importance on Saudi Arabia as the one supplier which can fill the gap if something happens in other production countries.
So let me look turn now to western policy to the region, and then see what it means for our energy security in the years ahead.
Western policy in the Gulf is currently in a very bad way. It is difficult to know where to start. since the various conflicts and causes of instability are all interlinked. I could go through each of the countries in the region and list the current troubles and threats and outline gloomy scenarios for the future. But given the interlinked nature, let me start from the major recent cause of instability: the intervention in Iraq by the US and a few allies in 2003. This is claimed by some to have been a war about oil. I do not argue that oil was a primary cause, but it was certainly seen as a factor by some. The smuggling of oil, and the corruption in the oil for food programme of the Saddam sanction period enabled his regime to continue to arm. Oil profits were also seen as a way to fund the reconstruction of the country after the regime change.
Now three years on, the picture is very different. The country is ungovernable, and shows little prospect of achieving anything approaching the rule of law despite the large number of US and other forces there. Oil flows are no greater than they were in Saddam's time. Destruction and diversion from oilfields is rife. Oil is now a cause for division in the country. The oilfields in the South, give the Shia south a resource which they wish to control. The northern oilfields are not all in the Kurdish north, but they wish to adjust their boundaries to make sure they are. This would leave the centre of Iraq, including Baghdad as the centre of insurgency with no resources. Thus those who argue for partition will not only have a bloodletting as ethnic cleansing takes place, but there will also be cause for oil wars to follow between the regions.
Iraq's neighbour Iran has a very significant role to play. It is currently assumed to be giving some assistance to the Shias, although it is by no means clear how much. Most commentators believe that the only way to stability in Iraq is through co-operation with the neighbours, and that would definitely include Iran. We see this idea being trailed in the current Baker- Hamilton commission Iraq Study Group. Yet that brings us to wider security issues with Iraq over its nuclear enrichment programme. It claims to want to provide energy security for itself through a civil nuclear energy programme, but it is clear what it wants to keep open the option of producing a nuclear weapon capability. This alarms others in the region particularly Israel, but also Saudi Arabia. The US, and the EU, have been trying to dissuade Iran from this course by a combination of sticks and carrots. Yet at the same time they need help over Iraq. Meanwhile Israel has been making it clear that it would be prepared to take military action to prevent Iran getting the bomb. Israel is also feeling bruised by the problems it has had with Iranian backed Hesbollah from Lebanon. The effect of a military strike either by the US or Israel against Iran would be to destabilise the region.
That brings us to look at the next two key players in the future stability of the – first Saudi and then Israel.
If Iran and Iraq are at risk for stable oil supplies, then Saudi is needed as the provider. Yet the future stability of Saudi Arabia is by no means assured. The immense wealth that has flowed from the oil has not brought progressive development to the Kingdom. It has an internal terrorist problem which stems in part from inequalities, corruption and repression, but also from the same subset of Saudi religious zeal, Wahhabism, that created al-Qaeda. The majority of the perpetrators of 9/11 were Saudis. The ruling class are feeling insecure from the internal tensions, but also from external threats. The invasion of Kuwait by Iraq was a direct threat to Saudi. It would also likely react to an Iranian nuclear weapon programme by starting one of its own.
Saudi has not been good at investing its oil income to diversify the economy, unlike Qatar ad UAE. It has a problem of unemployment and underemployment, and a difficult to reform without succumbing to instability. It, as with much of the Gulf, is also suffering from population growth much larger than western nations, which worsens the unemployment and disaffection problem. Yet it will remain the world's main source of oil.
Although Israel is not an energy producer (there is some gas under the sea just off Gaza), it has an effect on stability across the region, and on the threat from radical Islam extremists. The actions against the Palestinians and recently against the Lebanon have added to the anger and support for Muslim extremist organisations. It is particularly difficult for the US to negotiate with Iran and Syria in the interests of wider stability in the region given its special relationship with Israel.
All of these problems, and in particular the chaos of Iraq have led to a growth in terrorist and insurgent capability. While this gives problems of a much wider nature that energy security, I shall just focus on the energy aspects. Oilfields, pipelines, terminals and distribution centres are all vulnerable and attractive targets. Another worry is the risk to oil tankers in the region. The straits of Hormuz are a particular risk pinch point, but the Suez canal is another. Gas pipelines are also at risk. Securing the energy infrastructure when there is so much vioence is difficult.
If this assessment of the near term has been gloomy for our energy supplies, the future does not look much better. Relative dependence on the Gulf is likely to increase, and we already seen competition for secure arrangements with the region from China and India. In a normal situation, one could expect market forces to regulate the market and price would stabilise in accordance with supply and demand. However, we are working in a time when the players are look for other benefits than price in terms of their external policies. We have seen Russia use its gas as a strategic instrument. This makes policy in the region very difficult for the west given the animosity which recent adventures have stirred up.
A logical energy policy would be to reduce dependence on oil and gas from this region. It would also have the benefit of reducing carbon emissions if achieved by greater efficiency or the use of renewable sources. The green agenda is also the best security policy agenda.
However this is a medium term aspiration. There are also foreign policy changes needed. Central to this is the settlement of the Israel-Palestine peace process. Iran needs to be re-engaged with the international community. Iraq needs to be stabilised, and the region needs to co-operate in its own future. None of this seems likely at the moment.