Financing Terrorism: Murkowski Hearing on ISIS and Oil

Isis and oilA major objective in the fight against ISIS (or ISIL) is to curb its income from the sale of oil. This amounts to over $500 million per year. Senator Lisa Murkowski (R-AK), Chair of the Senate Energy and Natural Resources Committee, convened a hearing on Thursday, Dec. 10, to address the issue of terrorism and global oil sales.

The panel included Keith Crane, former Economic Policy Adviser to the Coalition Provisional Authority (Iraq); Peter E. Harrell, former Deputy Assistant Secretary, Department of State, Counter Threat Finance and Sanctions; Sara Vakhshouri, founder and President of SVB Energy International; and Jamie Webster, Senior Director of Energy Downstream Research, IHS.

The discussion emphasized a number of challenges the emerging coalition faces in undermining ISIS oil sales. Most of this trade occurs in territories occupied by ISIS that are cash-based economies. This allows the group to conduct transactions absent a paper or digital trail, thereby complicating intelligence efforts. As cash piles up and export beyond Iraq and Syria increases, however, ISIS may resort to more formal financial institutions.

A related challenge concerns the demand side. French, Russian, and American forces are targeting ISIS-operated oil facilities and transport vehicles, but the major purchasers of ISIS-supplied oil are small-time entrepreneurs (‘tea-pot’ refineries) within ISIS-controlled territories. Tracing the dispersal of the product through such local actors is highly problematic, and targeting these otherwise innocent buyers would be misguided and counterproductive.

Turning to America’s role in the effort to undermine ISIS oil sales, the panel unanimously supported two measures. One, the confirmation of Adam Szubin as Undersecretary for Terrorism and Financial Intelligence, Department of Treasury; and two, the lifting of the 40-yr old ban on crude exports. Senator Murkowski is a tireless advocate for ending the ban, among the benefits of which may be to undermine ISIS oil sales in the Middle East.

Income from oil sales is one among ISIS’s many funding mechanisms, which also include extortion, taxes, and sale of antiquities, but it may be the most important. The U.S., Russia, France, and Arab allies are rallying behind the effort to stop it.

CSIS Energy Panel: COP21 and Energy Markets

The energy panel at CSIS’s annual Global Security Forum focused overwhelmingly on supply-side trends. This included current Saudi and Iraqi production levels, the expectation of Iranian crude, American shale oil, and the pace of production cutbacks in a low price environment. EIA Administrator Adam Sieminski, Barcalys’s Michael Cohen, and others mostly agreed that prices will eventually return to pre-2008 levels based on classic supply/demand tendencies.

The only divergent voice came from Michelle Patron, Former Senior Director for Energy and Climate, National Security Council. Patron looks to the upcoming COP21 UN climate summit in Paris to suggest that demand for fossil fuels may lower notably should the summit achieve a consensus statement. The some 200 nations participating in the climate summit represent over 90% of the world’s carbon emissions, and one intention of the meeting is the tie respective energy plans together.

Demand for petroleum will lower should COP21 make progress on any of the following issues: vehicle efficiency standards, subsidy removal, aviation/marine fuel controls, carbon markets, and transportation alternatives (esp. electric vehicles).

COP21 will prove whether growing awareness of climate change can have a more notable impact on energy market outlooks than analysts have otherwise figured.

Eurogas President on the Energy Union, LNG, and Russian Gas

Eurogas is a consortium of 44 companies that promotes natural gas usage and represents the industry to regulatory bodies such as the European Commission (EC). Eurogas President Gertjan Lankhorst spoke at the Brookings Institution on energy security, addressing such issues as the EC’s Energy Union, Nord Stream II and other infrastructure, LNG, and the upcoming COP21 meeting in Paris.

Lankhorst supports all efforts that increase the diversification of supply to Europe and promote a freer market. This includes the Nord Stream expansion between Russia and Germany, considering that the gas might ultimately feed central and eastern European markets. Otherwise Lankhorst is a major backer of LNG terminals and reverse-flow capabilities, as such measures help mitigate dependence upon Russian gas.

Interestingly, Lankhorst’s commitment to demand-side diversification runs counter to one proposal of the Energy Union: demand aggregation for Russian gas. He believes the effort to coordinate EU purchases from Gazprom is already failing, and regional market forces will prevail.

The speaker concedes that promoting natural gas in Europe is an uphill battle. The public has been saturated with negative images regarding shale gas in particular. Lankhorst believes that politicians merely echo these perceptions to win votes rather than uphold the facts, and he laments that Europe is not more like the United States when it comes to fracking. He is skeptical that responsible fracking pollutes drinking water or produces earthquakes, and confident that natural gas can help lower overall carbon emissions.

For a thorough grounding in the industry perspective on natural gas and European energy security, one can do no better than turn to the Eurogas chief executive and spokesperson.

Google Exec Talks Renewable Energy

The Atlantic Council recently invited Google’s Vice President for Energy, John Woolard, to discuss the company’s stake in renewable energy. Woolard began by outlining three avenues through which Google advances its renewable energy interests: as a purchaser of power, as an investor, and as an innovator. The discussion focused mainly on Google’s investments and developing technologies.

Google has invested upwards of $2 billlon in renewable projects around the globe. One gem in the portfolio is the Lake Turkana wind project in Kenya, expected to provide 15% of the country’s electricity. Woolard explained that Google is far more willing to engage in such high-risk investments in Sub-Sahara Africa than are many banks. He is optimistic that renewables will play a central role across the Continent, but also realistic: Woolard does not believe that African nations can forgo energy infrastructure and a network, as it has in cellular technology. Microgrids may be useful in certain instances, but ultimately they must interconnect to form a larger, resilient and smart network.

Google is also a major innovator. 10 percent of investments are earmarked for disruptive, high-risk innovations. The fabled Google X laboratory, better known for self-driving cars and Google Glass, also pursues cutting edge renewable energy technologies. This includes the Makani high altitude wind turbine system. Wind blows far steadier and stronger above 700 feet than it does on earth’s surface, and the Makani system works much like a kite designed to tap this potential.

A lower emissions future is impossible without the investment and innovation of the private sector. One hopes that the oil and gas industry will learn from Google’s example.

Nuclear Power in China: The Promise of SMRs

No nation stands at the intersection of energy and climate concerns more firmly than does China. Small modular nuclear reactors (SMRs) are one innovative solution to meeting China’s twin demands of securing abundant and affordable energy while fulfilling aggressive emissions targets. SMRs are factory-built, small-scale (less than 500 MWe) reactors that a producer can theoretically ship and install on site. An Atlantic Council panel of academic, industry, and government experts explored the feasibility of SMRs for China.

SMRs might play an important role in China’s lower-emissions future. If built to scale, they could drive the cost of nuclear power down until it competes favorably with coal, still the overwhelming choice in China. According to Joe Lassiter, Senior Fellow at Harvard Business School, this would be 5 cents per kilowatt-hour. SMRs are a cleaner means of offsetting troughs in solar and wind power generation—periods of low sunlight or little wind—than gas-powered plants; and, according to John Hopkins, Chairman and CEO of NuScale, they are safe. Unlike a more traditional large plant such as Fukushima, where a tsunami cut the electricity to critical cooling pumps causing a meltdown, Nuscale’s model is self-cooling. It does not rely on an electric-powered pump, additional water, or human intervention for cooling.

The only skeptical voice came from Václav Bartuška, Ambassador-at-Large for Energy Security, Czech Republic. He reminded the audience that the Communist Party of China places a premium on deadlines and results, and SMRs remain in an experimental phase of development. Shortcomings or missed deadlines can ruin careers in China, so any proposal ‘first-of-its-kind’ is a tough sell. Officials will need to see a finished product and reliable known costs before investing in SMRs.

One thing is certain: innovation, whether in the nuclear or renewables fields, is essential to reducing carbon emissions. It will be interesting to see if SMRs, better batteries, carbon capture/storage, or another emerging technology can move to scale and compete with existing coal operations in China and beyond.

A Tale of Three Pipelines: Nord Stream and the Primacy of Industry in Germany

The mutual dependency of Russia and Germany in the energy sector should be placed in broad historical context. Throughout the Cold War, Germany sought to insulate the energy trade from global politics, and its approach to Russian energy today draws heavily on precedent. The Friendship, Trans-Siberian, and Nord Stream pipelines all demonstrate Germany’s effort to forge energy relations with Russia beyond politics. In Germany, business and industry interests have long trumped politics.

Russia crude export 2012 by nationDuring the Berlin Crisis and Cuban Missile Crisis, when the U.S. sternly opposed cooperation with the Soviets, Konrad Adenauer helped finalize a new oil pipeline from the Urals-Volga region. The Druzbha (‘Friendship’) line ran 7,500 kilometers from newly opened fields to Eastern Europe and beyond, reaching West Germany in 1963. The project, which was highly advanced for its day, required 40-inch diameter steel pipes that Soviet industry could not yet produce. Only select Western companies, above all in Japan and Germany, had the capacity to produce these pipes, so an historic deal was reached: Soviet oil for pipes. The German company Mannesmann alone provided 179,500 tons of piping in 1960, as Soviet-German trade in general increased 110% between 1958 and 1960.[i] Total oil import increased from 260,000 million tons (mts) to 1,920,000 mts between 1958 and 1962.

American opposition to German policy was clear. Both the CIA and State Department issued statements condemning Europe’s turn to Soviet energy. The Druzhba pipeline could finance Soviet militarization and be used to supply potential ground troops in Eastern Europe. It ran against the doctrines of containment and deterrence which the Americans spearheaded. Representative Paul Kitchin (D-NC) tied the pipeline squarely to, “a world dominated by international communism.” Senator Kenneth Keating (R-NY) argued that Khrushchev wished to “drown [the US] in a sea of oil.” Keating cautioned against permitting Europe to depend so heavily on the East for vital defense and industry. Hubert Humphrey (D-Minn) claimed that Soviet oil was, “perhaps…more dangerous than the military offensive threats.” [ii] These opinions became the foundation for the Export Control Act of 1962 that extended prior trade embargoes against the Soviet Union. A National Security Council resolution on possible trade sanctions considered oil and wide-diameter pipe to have potential ‘military significance.’ And the Kennedy Administration encouraged NATO to call on members to reduce Soviet oil imports to 10% of their respective overall markets, and to end the pipe trade.

Adenauer had hoped to forge a bilateral relationship with the Soviets independent of broader Cold War tensions. German business had enormous influence in government, and the foreign trade committee of the Bundestag voted against implementing the American-backed embargoes. They became law only because Adenauer’s CDU party delayed voting and walked out of Parliament on the final day of the review period. Bilateral trade plummeted, the German steel industry suffered, and antipathy toward American policy grew.[iii] The foreign minister admitted to having set foreign policy objectives—demonstrating unity with the U.S.—above the more immediate economic interests of his nation.[iv] Germany would not make that mistake again, as Soviet energy became even more attractive in the 1970s.

Germany’s softer approach to the Soviet Union continued under Willy Brandt, when negotiations for a new gas pipeline from Western Siberia began. Once again, bilateral trade developed largely irrespective of American opposition, and Germany insulated the energy trade from Cold War tensions. Soviet oil and gas had been a welcome alternative to Middle Eastern sources throughout the 1970s, a period of détente between the Superpowers. But the Soviet invasion of Afghanistan in 1979, followed by Moscow’s crackdown on democratic opposition in Poland after 1981, marked a return of the Cold War and major American arms buildup. Still, Chancellor Helmut Schmidt arrived in Moscow in 1980 to pen the next big deal: the Trans-Siberian Gas Pipeline (Urengoy-Pomary-Uzhgorod, later, Yamal). West German banks were the largest financiers of the project, and German industry the major producer of pipes. Ruhrgas of Germany spearheaded a consortium of companies from the Netherlands, Belgium, Italy, Austria, and France. Upon completion in 1983, the pipeline extended some 5,000 kilometers from the Urengoy to Ukraine, through which it entered Europe. The final contracts called for 27bcm of Siberian gas per year, of which West Germany took 10.5bcm.[v] It doubled the entire gas export from the USSR to the West.[vi] As conditions around the Persian Gulf deteriorated after the Iranian Revolution, the Germans were committed to Soviet energy. One official defended the new gas deal plainly: “No one can tell me that the Straits of Hormuz is a safer energy channel than a gas pipeline from Russia.”[vii]

Russia pipelines to Europe The Reagan Administration launched a campaign to undermine the Trans-Siberian Pipeline, but the Germans were confident in their bilateral ties to the East. The American position was clear in a CIA assessment of 1981, which clarified the political leverage that increased European dependence afforded the Soviet Union. The Soviets would not threaten a complete cut-off of gas supply, the report conceded, but wield more subtle influence to discredit American policy in Europe. The Soviets would capitalize on Europe’s “lack of cohesion and strategic perspective” on energy issues.[viii] Secretary of State Alexander Haig proposed a plan to substitute American coal for Soviet gas, and promote additional liquefied natural gas (LNG) for Europe from North Africa. When European companies nevertheless signed contracts for Siberian gas, Reagan pushed for an embargo of critical compressor parts that the USSR needed for the pipeline. Offending companies were then blacklisted and banned from all U.S. exports. This hard line dovetailed with the estimation of CIA Director William Casey, Secretary of Defense Caspar Weinberger, the President, and other officials that Soviet dependence on Western technology was a strategic weakness the U.S. had to exploit.[ix]

The German Ministry of Economy, in consultation with Ruhrgas, studied the security risks of increasing dependency on Soviet gas and concluded that American concerns were overblown. The Soviet Union could not disrupt West German supply without simultaneously affecting a number of third parties and ruining its international reputation. Should gas from West Siberia be compromised rather because of technical difficulties, the West Germans could compensate this temporary loss with additional supplies from the Netherlands or higher domestic production. Otherwise, the Soviets had been reliable energy suppliers for decades now, and needed the hard currency, pipes, and equipment from the West for its own internal development. European companies continued shipping parts to the Soviet Union, and Reagan, confronting opposition both at home and abroad, canceled the embargo in November, 1982. West Germany and other European allies had agreed to keep overall gas dependence on the USSR below 25%.[x]

The trend toward favoring Russian energy and de-politicizing the trade, notwithstanding opposition from Western (and now East European) allies, continued after the collapse of the Soviet Union. German Russlandversteher (‘Russia apologists’) like Gerhard Schröder supported Russia’s economic revival and political centralization in the 1990s, even as democratization failed and the state promoted Gazprom and Rosneft above private companies like Yukos, which it forcefully disbanded in 2003.[xi] Schröder was one of the major advocates for the Nord Stream gas pipeline to connect West Siberia to Germany directly beneath the Baltic Sea. After ending his term as Chancellor, Schröder became board chairman of the Nord Stream consortium in 2005, in which Gazprom was the majority shareholder with 51% (German companies BASF/Wintershall and E.On each owned 15.5% shares; and the Netherland and France were minority holders). The former chairman was Dmitry Medvedev, who became President of Russia. Poland and the Baltic States complained that Nord Stream would bypass them entirely, and that Russia was exerting too much influence over Germany. Poland’s defense minister, Radoslaw Sikorski, famously likened Nord Stream to a new Molotov-Ribbentrop pact (1939) between the powers. Gazprom had also cut the flow of gas to Ukraine the prior winter amid ongoing disputes over control of pipelines and pricing, and Naftogaz of Ukraine had resorted to siphoning off an amount intended for Europe. The nation was the largest transit route to the Balkans, Central Europe, and Western Europe: 80% of Russian gas imports to the EU passed through Ukraine at the time of the disruption, 20% of its total natural gas supply. At one point, Gazprom CEO Alexei Miller even told the Europeans: “get over your fear of Russia, or run out of gas.”[xii]

With opposition mounting from Poland, and in the wake of the cut-off to Ukraine, the Greens pressured Parliament over Nord Stream in July, 2006. It responded simply that nations like Poland, worried about the project and German dependence on Russia, merely required more information. Whether these nations might receive gas through branches from Nord Stream was a business decision the German government could not influence. Otherwise, supplies to Germany would be secure since the contracting companies would help Russia open new fields in Western Siberia, and Russia was a reliable long-term partner in the energy sector.[xiii]

The debate over Nord Stream heated up when Gazprom stopped the flow of gas to Ukraine again in winter of 2009, after negotiations over transmission and pricing failed once again. The stand-off ended on January 20 after mediation by the EU, and although Germany was not as strongly affected as its East European neighbors were, the Bundestag revisited the issue of Nord Stream.[xiv]And once again, it refused to politicize the gas trade, tacitly supporting Russia’s actions. Parliament argued that the new 10-year contract between Naftogaz and Gazprom would secure Ukraine’s supply, and that Germany was energy secure in any case, given the Jamal pipeline through Belarus and Poland and supplies from Norway. The entire issue was a business matter, and Germany was moving to reduce reliance on fossil fuels long-term through the Energiewende in any case. Parliament conceded that Gazprom had compromised its reputation by halting the flow to Ukraine, but claimed it would repair that reputation and remain a reliable supplier to Germany. In the short-term, Germany was poised to increase dependence on natural gas, and Nord Stream promised more energy security. In other words, Parliament was suggesting that Nord Stream was a response to the instability and unreliability of transit nations Ukraine and Belarus.[xv]

The Greens asked the Bundestag again in 2010 about the risks of Nord Stream, both environmental and political, but Parliament continued to downplay the geopolitical and strategic dimension of the Euro-Russian energy trade. Germany had “traditionally” relied on Russia for natural gas, and Russia possessed the greatest gas reserves (conventional and unconventional) in the world. German contracts served to further open those valuable reserves, and Nord Stream would serve Germany for decades to come. Parliament did not even mention Ukraine, though the Greens had asked specifically about the most recent shut-off.[xvi] These statements dovetail with the conclusions of Röhrkasten and Westphal, who interviewed 25 energy experts in Germany in 2012. The authors found that the experts did not consider Nord Stream a geopolitical issue, and that gas transit through Ukraine had, “almost become a non-issue.”[xvii]

By contrast, American lawmakers considered Nord Stream and the entire energy business with Russia in geopolitical and strategic terms, a view more closely aligned with Eastern Europe than with Germany. Their views were already clear in a Senate Subcommittee hearing Senator Joe Biden oversaw in 2008. Former national security advisor, Zbigniew Brzezinski, urged Germany to open branches from Nord Stream to Poland and the Baltic states, but implied that the Russian state dominated decision-making, and that serving Eastern Europe with Nord Stream was not in Russia’s interest. Brzezinski considered the fact that Gerhard Schröder had become chairman of the board at Gazprom a “complication that cannot be…ignored,” and a “rather peculiar circumstance.” It was unlikely that Germany would oppose Russian plans for Nord Stream under such circumstances. Brzezinski added that Russia/Gazprom was splitting the EU by forging bilateral energy relationships: with Germany over Nord Stream, and with Italy over South Stream. Former correspondent for Radio Free Europe, Roman Kupchinsky, charged that Gazprom had close ties to organized crime in Eastern Europe, and that subsidiary Gazprom Germania funneled most of its revenue through shell companies abroad.[xviii] Elsewhere, Kupchinsky outlined the ties Gazprom executives had with the former East German secret police, the Stasi. Such powerful individuals “serve a vital purpose in creating an illusion that Gazprom is honorable and transparent, and that it is indispensable for European energy security.”[xix]

A more recent Minority Staff Report for the Committee on Foreign Relations in support of a Southern Corridor for gas to Europe summarizes the American position well. The report cites numerous instances between 1998 and 2012 in which Russia wielded the energy weapon to win favorable contracts, acquire energy infrastructure, or influence political decision-making. This includes Lithuania and Latvia between 1998 and 2004, Moldova and Georgia in 2006, and Ukraine in 2006 and 2009. In 2008, Russia cut the gas supply to the Czech Republic after it agreed to host a U.S. defense radar in 2008; and in 2010, Russia offered Ukraine a $40 billion, ten-year discount on gas in exchange for a 32-year extension for the Black Sea Fleet in Crimea. The Americans were pushing for an alternative route from the Caspian Sea to Europe to undermine Russia’s tactics:

            Russian energy cutoffs in the cold of winter, energy contract coercion, and use of               the Nord Stream and South Stream pipelines to further isolate certain European                   markets have underscored the need for an alternative gas corridor to Europe.[xx]

The Southern Corridor is making progress today, but opposition to Russia’s energy tactics still falters at Germany’s doorstep, in part because its transition to renewables demands natural gas.

The U.S. and EU have levied sanctions against Russian energy in light of the ongoing crisis in Ukraine. But Russia and Germany have nevertheless agreed to expand the Nord Stream pipeline, effectively undermining the long-term impact that these sanctions will have. Economic development and the Energiewende trump politics in Germany today, much as business and industry prevailed during the Cold War.

[i] Bruce W. Jentleson, Pipeline Politics: The Complex Political Economy of East-West Energy Trade (Ithaca: Cornell University Press, 1986), pp.88-9.

[ii] Jentleson, Pipeline Politics, pp.98-100.

[iii] Jentleson, Pipeline Politics, p.116.

[iv] Claudia Wörmann, Osthandel als Problem der Atlantischen Allianz: Erfahrungen aus dem Erdgas-Röhren-Geschäft mit der UdSSR (Bonn, 1986), p.35.

[v] Per Högselius, Red Gas: Russia and the Origins of European Energy Dependence (New York: Palgrave MacMillan, 2013), pp.182, 186.

[vi] Jeronim Perović, “Russlands Aufstieg zur Energiegroßmacht: Geschichte einer gesamteuropäischen Verflechtung.” Osteuropa 63 (2013), p.27.

[vii] In Jentleson, Pipeline Politics, p.169.

[viii] Central Intelligence Agency, “USSR-Western Europe: Implications of the Siberia-to-Europe gas Pipeline” (Mar. 1981), released 1999.

[ix] David S. Painter, “Oil and the End of the Cold War,” unpublished manuscript (2008), p.8. With permission of author.

[x] Högselius, Red Gas, pp. 181-193.

[xi] Yukos head Mikhail Khodorkovsky, who had political aspirations at odds with Putin’s, was imprisoned on charges of tax evasion.

[xii] In Daniel Yergin, The Quest: Energy, Security, and the Remaking of the Modern World (New York: Penguin Press, 2011), p. 341.

[xiii] Deutscher Bundestag, Drucksache 16/1925 (22.06.2006). The Greens also asked about the environmental impact of the pipeline, and whether it could once day carry biogas rather than natural gas.

[xiv] Commission of the European Communities. “The January 2009 Gas Supply Disruption to the EU: An Assessment” (Brussels, 16.7.2009), p. 2, 11.

[xv] Deutscher Bundestag, Drucksache  16/11957 (13.02.2009). In Red Gas, Högselius also argues that Nord Stream was a response to instabilities in Ukraine and Belarus.

[xvi] Deutscher Bundestag, Drucksache 17/1375 (14.04.2010).

[xvii] Sybille Röhrkasten and Kirsten Westphal, “Energy security and the transatlantic dimension: a view from Germany,” Journal of Transatlantic Studies 10:4 (Dec. 2012), pg. 337.

[xviii] Senate Subcommittee on Foreign Relations. “Oil, Oligarchs, and Opportunity: Energy from Central Asia to Europe.” Hearing of June 12, 2008.

[xix] Roman Kupchinsky, “Gazprom’s Loyalists in Berlin and Brussels,” Eurasia Daily Monitor 6:100 (2009), accessed online.

[xx] Committee on Foreign Relations, “Energy and Security from the Caspian to Europe” (Dec. 12, 2012), pg. 2. President Putin declared South Stream defunct in December, 2014.

Iran Natural Gas After Sanctions: An Atlantic Council Panel

With the release of sanctions on Iran imminent, energy analysts have focused overwhelmingly on Iran’s potential oil exports. But the Islamic Republic possesses huge natural gas reserves, including at South Pars, the world’s largest field. While much of this wealth has remained undeveloped in recent decades, the Ministry of Petroleum is now poised to exploit it further. An expert panel at the Atlantic Council explored the economic and geopolitical implications of Iranian gas production and export in a post-sanIran_Gas_Fieldsctions environment.

One outstanding question is whether Europe can turn to Iranian gas as an alternative to Russian. The short answer is, not in the immediate future. According to Sarah Vakhshouri, President of SVB Energy International, the Islamic Republic is pursuing an ‘Economy of Resistance,’ in which boosting the domestic economy and diversifying the energy portfolio is vital. This suggests privileging value-added industries for natural gas at home, such as electricity production and petrochemicals, and increasing their exports rather than that of natural gas per se. As for gas, Iran is likely to increase existing trade with Iraq and Turkey—which could in turn move gas onward to Europe—and promote gas-powered electricity generation in the region. Brenda Shaffer, adjunct professor at Georgetown University, noted that Gulf nations rely heavily on oil for electricity and may wish to switch. Finally, by mounting a sustained political and legal opposition, Russia would complicate any Iranian plan to sell natural gas directly to Europe.

Spain has recently motioned to invest in LNG export from Iran. It may have to build the infrastructure itself, however, considering that Iran will concentrate on meeting domestic and regional demand first. Moreover, an increase in world gas supplies, whether from Iran or the United States, may put downward pressure on LNG demand.

Another issue concerned the Iranian Revolutionary Guard Corps (IRGC), members of which have substantial energy holdings, including in natural gas. Many such individuals were sanctioned due to ties with the nuclear program. Will they become more powerful when these sanctions are released? Or will foreign direct investment undermine the IRGC’s role? The panel could not definitively say.

The panel also did not address security concerns surrounding Iran’s natural gas trade. For example, might ISIL in Iraq target natural gas infrastructure from Iran? A gas agreement in 2013 between the nations was delayed for this very reason.

There has been overwhelming interest in Iranian oil in a post-sanctions environment, but comparatively little analysis of natural gas. This Atlantic Council panel helped balance the focus.

Does Development Trump Climate Change? BHP Billiton Exec on Commodities and Asia

The Chief Commercial Officer of BHP Billiton, Dean Dalla Valle, spoke at the Center for Strategic and International Studies on Wednesday, July 8. Major issues included demand in Asia for fossil fuels and iron, climate change, and renewable energy.

BHP Billiton is one of the world’s largest upstream producers of petroleum, gas, iron, copper, uranium, and other commodities. A full 60% of its customer base is in Asia, especially China and India, where Valle expects continued development. In coming decades, more farming, more automobiles, and growth of the middle class will require robust commodities imports. Fossil fuels will drive much of this growth, which inevitably means increasing carbon emissions. Valle was clear that BHP has “accepted the science of climate change,” including the company’s contribution to global emissions.

But development trumps climate change. For example, Valle claimed that denying electricity to the world’s new middle classes would be more dangerous than allowing short-term environmental damage. This is not to shirk responsibility for his company’s environmental impact, Valle would contend, as BHP does help advance the renewables industries. While the company does not invest in solar and wind power exactly, it provides the copper on which these industries depend.

Valle’s description of BHP as both cause and solution of climate change may leave many wondering if global industry cannot do more. But his remarks are a useful insight into how multinational energy companies approach the issue.

Climate Change, a New Battleground?

Global warming and climate change will change how US military trains and goes to warOn June 17th, in commemoration of Climate Diplomacy Day and the upcoming United Nations Conference on Climate Change (COP21) in Paris, the Atlantic Council held an event on climate change and national security. “Climate Security: The Next ‘Battle Ground?’” featured an all-star panel, including ambassadors and military experts.

The Ambassador of France to the United States, Gérard Araud, gave the opening remarks. He provided historical examples of how environmental issues became national security problems; for example, rising grain prices before the French Revolution, and the Hurricane Katrina disaster.

Two themes guided the subsequent discussion. One was the distinction between adaptation and mitigation. Daniel Chiu, former Deputy Assistant Secretary of Defense for Strategy and Force Development at DoD, expressed concern that militaries overemphasize adaptation to climate change rather than seek more proactive long-term solutions. Major General Munir Muniruzzaman (Ret.), whose native Bangladesh faces severe water management issues and possible coastline loss, was most emphatic about the need to reject stop-gap measures for a long-term crisis.

A second theme was the interplay between human and national security. Chairman of E3G and industry advisor, Tom Burke, provided the example of how drought in northern Africa causes mass migration to Europe, which in turn fuels radicalization and populist politics. The problem might manifest as social strife and even terrorism, but the solution cannot be military alone. A global effort against climate change must underpin the European response.

But militaries are sources of enormous innovation. Sharon Burke, former Assistant Secretary of Defense for Operational Energy Plans and Programs at DoD, reminded the audience that GPS and the Internet began as military programs before finding important civil application. She noted that solar-powered drones today will call for major improvements in storage technology. This may have profound implications beyond the military in helping reduce carbon emissions the world over.

Climate change is a threat to national security, but if the views expressed by the panel convince key policymakers and industry leaders, it need not become a new ‘battleground.’

Three Ambassadors on the Iran Nuclear Deal

Iran nuclearThe deadline for finalizing an agreement that Iran and world powers reached in Lausanne, Switzerland, over the status of Iran’s nuclear program is June 30. Unresolved issues include the pace of sanctions relief for Iran, and the intrusiveness of monitoring and verification mechanisms. Three Ambassadors to the United States—the French, German, and British—spoke on May 26th at the Atlantic Council in Washington DC on the prospects for realizing this deal and normalizing relations with Iran.

A few common themes emerged from the discussion. One concerns the disparity between official statements in Iran and the text of the framework agreement as it now stands. For example, the Supreme Leader has stated that Iran will not sign a deal that does not grant immediate sanctions relief, whereas the text suggests rather that relief depends on Iran meeting stipulations of the deal. In other words, sanctions will be lifted in tandem with verification. French Ambassador Araud and British Ambassador Westmacott in particular stressed the importance of distinguishing between politics and negotiations: what the parties present to their respective publics and constituencies may not reflect the content of the negotiations exactly, much of which remains confidential. Most notably, each side will present itself as a ‘winner’ to its domestic audience notwithstanding major concessions.

Another theme concerned the widespread tendency to link the nuclear issue to other geopolitical and regional concerns. These include Iran’s support for ISIL, intervention in Yemen, or human rights abuses. The speakers argued that the nuclear issue must be treated in isolation from geopolitics. Otherwise, debate over these issues may scupper the deal entirely.

A third problem is Russia. How committed to the nascent deal is Russia given its sale of S-300 missiles to Iran? Will such support encourage Iran to prolong or even pull out of negotiations, or was the sale a carrot for reaching the interim framework at Lausanne? The speakers did not agree entirely on this matter. Ambassador for Germany, Peter Wittig, called the sale “deplorable,” whereas the French Ambassador clarified that the missiles would not be delivered or operational for many months—well after a deal is reached—and should be considered a carrot.

Finally, the Ambassadors were unwilling or unable or to entertain the hypothetical scenario that the U.S. Congress rejects the June 30th deal. This would likely result in a veto by the President and heated debate in the United States. The British Ambassador admitted that his government was simply not yet prepared for this scenario.

Judging from the three Ambassadors’ comments, the Iran nuclear deal is very much a work in progress.