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One effect of the new Obama administration's global charm is that America could be let out of the environmental doghouse. The Obama plan to restart the economy is stuffed full of green incentives, and the new president has earned global cheers for his promise to cut the gases that cause global warming. But hope and change are not easy to implement in Washington, and the first big disappointment is likely to come later this year when the world's governments gather in Copenhagen to replace the aging and ineffective Kyoto treaty.

On climate issues America is less a nation than 50 different states, moving wildly at different speeds.

Pundits have been talking down the Copenhagen summit on the theory that the current financial crisis makes 2009 a tough time for governments to focus on costly and distant global goals like protecting the planet. In reality, the greenish tinge on nearly every economic recovery plan, even China's, show that this crisis offers green opportunity. The real reason Copenhagen will be a disappointment is that the new Obama administration can't lead until it first learns what it can actually implement at home. And delivering greenery in the American political system is harder than it looks-even when the same left-leaning party controls both the White House and Congress.

On environmental issues, America is barely a nation. Under a single flag it uneasily accommodates a host of states pushing greenery at wildly different speeds. In the 1970s and 1980s, this multispeed environmentalism propelled America to a leadership position. The key was truly bipartisan legislation, which allowed Washington to craft a coherent national approach. In fact, most of the major U.S. environmental laws did not arise solely from the environmental left but were forged by centrist Republican administrations working closely with centrist and left-leaning Democrats. Republican President Nixon created America's pathbreaking clean air and water regulations; Republican George H.W. Bush updated the air rules to tackle acid rain and other pernicious long-distance pollutants. In his more moderate second term, Ronald Reagan was America's champion of the ozone layer and helped spearhead a treaty-probably the world's most effective international environmental agreement-that earned bipartisan support at home and also pushed reluctant Europeans to regulate the pollutants.

Ever since the middle 1990s-about the time that the U.S. government was shut down due to a partisan budget dispute-such broad coalitions supporting greenery have been rare. In the vacuum of any serious federal policy, for nearly a decade the greener coastal states devised their own rules to cut warming gases. The United States as a whole let its green leadership lapse. (At the same time, the project to create a single European economy has shifted authority in environmental matters from individual member states into the hands of central policymakers in Brussels, where a coterie of hyperrich and very green countries have set the agenda. Europe, long a laggard on environmental issues, is now the world leader.)

The normal multispeed script was playing out on global warming as the Obama administration took power. Industry, worried about the specter of a patchwork of regulations, has lobbied for a coherent national strategy. But the Obama administration's first major policy on global-warming policy went in precisely the opposite direction: he reversed the Bush administration's decision that blocked California from adopting its own strict rules on automobile efficiency.

Today's challenge, which won't be solved by Copenhagen, is for Obama to stitch these many state environmental efforts together. That's no easy task. Global-warming regulation will probably have a larger impact on the nation's economy than any other environmental program in history, and any plan will have to allow enough room for some states to move quickly while also satisfying industry's well-founded need for harmony. Obama's Democratic Party controls both the White House and Congress, but that does not guarantee success. It will be difficult to craft a national policy that earns broad and bipartisan support while also taking the big bite out of the emissions that the rest of the world is hoping Obama will promise to the Copenhagen treaty. The difficulties aren't just in dragging along wary conservative Republicans. In fact, the most important skepticism about an aggressive national strategy has been from a coalition of centrist Democrats who fear the impact on jobs and economic growth.

One key to success will be crafting a deal with China and other developing countries to show that they, too, are making an effort. But serious efforts on that front are still in their infancy.

The big challenge for Copenhagen will be to find a way to allow negotiations to stretch beyond the unrealistic 2009 deadline while still keeping momentum. America's slowness in getting serious about global warming should be welcome because it is a contrast to its rushed behavior in negotiating the Kyoto treaty. At Kyoto, Bill Clinton's administration promised deep cuts in emissions without any plan for selling them at home, which is why the Bush administration could so easily abandon the treaty. Repeating that mistake would be a lot worse than waiting a bit for America to craft real leadership. If that's why Copenhagen falls short of the mark, then that's good news-real greenery, rather than fakery.

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Policy Briefs
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Newsweek International Edition
Authors
David G. Victor
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Ambassador Eliasson sets out the current status of Europe-US relations and acknowledges the wide range of daunting problems the world must face today. He emphasizes the need for an enhancement of the transatlantic relationship, as well as the need for multilateral cooperation. Mr. Eliasson also reinforces the importance of a continued awarenesss of the economy, the environment, and ethics.

Synopsis

Although unsure whether there will in fact be a new transatlantic agenda, Ambassador Eliasson repeatedly highlights that it is crucial that it does happen if we are to challenge the ‘huge’ issues of today. Mr. Eliasson notes the current financial climate and its possible effects on the social and political spheres as worrying. He also expresses particular concern at what he calls ‘fortress building,’ which involves protectionism and intolerance. Mr. Eliasson goes on to explain that as it stands, current US-Europe relations are dominated by mutual interest on security and the economy. However, to Mr. Eliasson, this relationship is marred by several issues. Inside the EU, democracy is in a predicament with politicians being accountable nationally while the issues are international. Moreover, Mr. Eliasson feels that the nature of the US and Europe relationship is not representative of the responsibility it should carry by being the most prosperous regions of the world.

How is this transatlantic relationship to move forward? If we are to arrive at what Mr. Eliasson describes as ‘scenario 1,’ which involves long term thinking, regulation, an emphasis on ethics, and a realization of interdependence in an internationally cooperative system, then Mr. Eliasson argues this requires reform. Mr. Eliasson argues it is urgent not to separate politics and economics. In dealing with a financial crisis, we must employ a multilateral approach and learn lessons for the future, particularly not fearing international regulation in a globalized economy. Mr. Eliasson also explains we can avoid this protectionist ‘fortress building’ by embracing ‘multipolarity.’ Mr. Eliasson underscores the importance of tolerance and good governance as central to progress. In addition, Mr. Eliasson reinforces that the problems of today are on such a massive scale that they must be dealt with internationally, as well as regionally and in the private sector.

Dealing with such issues, which involve collective engagement in Afghanistan and a cooperative approach in Africa, is what Mr. Eliasson believes must be added as a ‘third pillar’ to the US and Europe’s relationship. Mr. Eliasson also stresses concrete action on poverty by the US and Europe as central to this effort. In particular, he places emphasis a program for education of women and the establishment of clean water access. Mr. Eliasson believes that such efforts, which would add a pivotal ethical dimension to the transatlantic agenda, would enhance the reputation of democracy across the globe through concrete action.

In engaging with the audience in a question-and-answer session, one of the most emphasized subjects was diplomatic standards for international relations. Mr. Eliasson strongly reinforced the notion that the transatlantic agenda should stand with clear ethical standards. Other issues addressed included Iran's nuclear capabilities, religion, and the role of Russia.

About the Speaker

Ambassador Jan Eliasson was until July 1, 2008 Special Envoy of the United Nations Secretary-General for Darfur. Previously, Jan Eliasson was President of the 60th session of the United Nations General Assembly 2005-2006. He was Sweden’s Ambassador to the United States, 2000-2005. Mr. Eliasson was Minister for Foreign Affairs of Sweden in 2006.

Mr. Eliasson served from 1994 to 2000 as State Secretary for Foreign Affairs, a key position in formulating and implementing Swedish foreign policy. Earlier, 1988-1992, he was Sweden’s Ambassador to the United Nations in New York. During this period, he also served as the Secretary-General’s Personal Representative for Iran/Iraq.

In 1992, Mr. Eliasson was appointed the first United Nations Under-Secretary-General for Humanitarian Affairs and was involved in operations in Somalia, Sudan, Mozambique and the Balkans. He also took initiatives on landmines, conflict prevention and humanitarian action.

1980-1986, Mr. Eliasson was part of the UN mediation missions in the war between Iran and Iraq, headed by former Prime Minister Olof Palme. In 1993-94 Mr. Eliasson served as mediator in the Nagorno Karabakh conflict for the Organization for Security and Co-operation in Europe (OSCE). He has been Visiting Professor at Uppsala University and Göteborg University in Sweden, lecturing on mediation, conflict resolution and UN reform.

During his diplomatic career, Mr. Eliasson has been posted to New York (twice) Paris, Bonn, Washington (twice) and Harare, where he opened the first Swedish Embassy in 1980. He served as Diplomatic Adviser to the Swedish Prime Minister 1982-1983, and as Director General for Political Affairs in the Swedish Ministry for Foreign Affairs 1983-1987.

Mr. Eliasson has authored and co-authored numerous articles and books and is a frequent lecturer on foreign policy and diplomacy. He is recipient of honorary doctorate degrees from i. a. American University, Washington, D.C., Uppsala University and Göteborg University, Sweden. He has been decorated by a number of Governments.

He is the Chairman of the Anna Lindh Memorial Fund of Sweden and is Member of the Advisory Group to the International Committee of the Red Cross (ICRC), Geneva.

Born in Göteborg, Sweden, in 1940, Mr. Eliasson was an exchange student in the United States 1957-1958. He graduated from the Swedish Naval Academy in 1962 and earned a Master’s degree in Economics and Business Administration in 1965.

Oksenberg Conference Room

Jan Eliasson Former Special Envoy of the United Nations Secretary-General for Darfur; Former President of the United Nations General Assembly; Former Minister for Foreign Affairs for Sweden Speaker
Lectures

Department of East European Studies
Uppsala University
Gamla Torget 3, III
Box 514, 751 20 UPPSALA
Sweden

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Professor of East European Studies, Uppsala University
Visiting Scholar, Forum on Contemporary Europe (December 2008)
Hedlund_photo.JPG PhD

Stefan Hedlund is Professor of East European Studies at Uppsala University, Sweden. A long-standing specialist on Russia, and on the Former Soviet Union more broadly, his current research interest is aimed at economic theories of institutional change. He also has a devouring interest in Russian history, which he has sought to blend with more standard theories of economic change. He has been a frequent contributor to the media, and has published extensively on matters relating to Russian economic reform and to the attempted transition to democracy and market economy more generally. His scholarly publications include some 20 books and close to 200 journal and magazine articles. His most recent monographs are Russian Path Dependence (Routledge, 2005), and Russia since 1980: Wrestling with Westernization (Cambridge University Press, 2008), the latter co-authored with Steven Rosefielde.

 

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Alexander Montgomery, a visiting assistant professor in 2008-09, was a postdoctoral fellow at CISAC in 2005-2006 and is an assistant professor of political science at Reed College. He has published articles on dismantling proliferation networks and on the effects of social networks of international organizations on interstate conflict. His research interests include political organizations, social networks, weapons of mass disruption and destruction, social studies of technology, and interstate social relations. His current book project is on post-Cold War U.S. counterproliferation policy, evaluating the efficacy of policies towards North Korea, Iran, and proliferation networks.

He has been a joint International Security Program/Managing the Atom Project Research Fellow at the Belfer Center for Science and International Affairs in the Kennedy School of Government at Harvard University. He has also worked as a research associate in high energy physics on the BaBar experiment at Lawrence Berkeley National Laboratory and as a graduate research assistant at the Center for International Security Affairs at Los Alamos National Laboratory. He has a BA in physics from the University of Chicago, an MA in energy and resources from the University of California, Berkeley, and an MA in sociology and a PhD in political science from Stanford University.

Emilie Hafner-Burton is an Assistant Professor of Public Policy and Politics at Princeton University and an affiliate at CISAC, as well as a visiting fellow at Stanford Law School. Formerly she was a predoctoral fellow at CISAC and an associated fellow at the Center on Democracy, Development, and the Rule of Law. She was at Oxford University as a Postdoctoral Research Prize Fellow, Nuffield College, and Senior Associate, Global Economic Governance Programme. She writes and teaches on international organization, international political economy, the global governance of gender, social network analysis, design and selection of international regimes, international human rights law and policy, war and economic sanctions, non-proliferation policy, and quantitative and qualitative research design. Her dissertation, Globalizing Human Rights? How Preferential Trade Agreements Shape Government Repression, 1972-2000, won the American Political Science Association Helen Dwight Reid Award for Best Dissertation in International Relations, Law and Politics for 2004-2005, as well as the Best Dissertation in Human Rights Prize for 2003-2004. Her articles are published or forthcoming in International Organization, American Journal of Sociology, Journal of Conflict Resolution, Feminist Legal Studies, European Journal of International Relations, Journal of European Public Policy, and Journal of Peace Research. PhD. Wisconsin.

Walter W. Powell is Professor of Education and (by courtesy) Sociology, Organizational Behavior, Management Science and Engineering, and Communication at Stanford University. He is also an external faculty member at the Santa Fe Institute. He is co-director of the Stanford Center on Philanthropy and Civil Society. He joined the Stanford faculty in July 1999, after previously teaching at the University of Arizona, MIT, and Yale. He has been a fellow at the Center for Advanced Study in the Behavioral Sciences three times, and a visiting fellow at the Institute for Advanced Studies in Vienna twice. Powell has received honorary degrees from Uppsala University, the Helsinki School of Economics, and Copenhagen Business School, and is a foreign member of the Swedish Royal Academy of Sciences. He is a U.S. editor for Research Policy, and has been a member of the board of directors of the Social Science Research Council since 2000.

Reuben W. Hills Conference Room

Emilie Hafner-Burton Assistant Professor of Public Policy and Politics at Princeton University; CISAC Affiliate; Visiting Fellow, Stanford Law School Speaker
Alexander Montgomery Visiting Assistant Professor, CISAC; Assistant Professor of Political Science, Reed College Speaker
Walter W. Powell Professor of Education and (by courtesy) Professor of Sociology, Organizational Behavior, Management Science, and Communication, Stanford University Commentator
Seminars
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Peter Henry's research on emerging markets provides fundamental insights about the impact of economic reform on the lives of people in developing countries. It uses theory and data to grapple objectively with some of the most important and contentious economic questions of our time: Does debt relief help or hurt poor countries? Should emerging nations permit capital to flow freely in and out of their economies? Is it possible to reduce inflation without undermining economic growth? Peter's answers to these questions appear in the leading academic journals and have led him to testify before the U.S. Congress and various United Nations Ambassadors.

Peter is Konosuke Matsushita Professor of International Economics, the John and Cynthia Fry Gunn Faculty Scholar, and Associate Director of the Center for Global Business and the Economy at the Stanford University Graduate School of Business. He is also a Senior Fellow of the Stanford Institute for Economic Policy Research, a Research Associate at the National Bureau of Economic Research, a Nonresident Senior Fellow of the Brookings Institution, and a member of the Council on Foreign Relations. From 2000-2001 he was a National Fellow at the Hoover Institution. The National Science Foundation's Early CAREER Development Program supported his research and teaching from 2001-2006. In 2004 Peter participated in the Copenhagen Consensus, an international conference on how to make the most efficient use of the world's scarcest resources. The Economist magazine named the published proceedings of the conference one of the best business books of 2004.

Peter received his PhD in economics from the Massachusetts Institute of Technology in 1997. While in graduate school, he served as a consultant to the Governors of the Bank of Jamaica and the Eastern Caribbean Central Bank (ECCB). His research at the ECCB contributed to the intellectual foundation for establishing the first stock market in the Eastern Caribbean Currency Area.

Prior to attending MIT, Peter was a Rhodes Scholar at Oxford University where he received a BA in mathematics and a Full Blue in basketball. He also holds a BA in economics from The University of North Carolina at Chapel Hill where he was a Morehead Scholar, a National Merit Scholar, a member of Phi Beta Kappa, a Marshall Scholar-Elect, a reserve wide receiver on the varsity football team, and a finalist in the 1991 campus-wide slam-dunk competition.

Born in Jamaica, Peter became a U.S. citizen in 1986. His wife of 12 years, Lisa J. Nelson, received her BA and MD from Yale University. She is a child psychiatrist and was a Glaxo Welcome Fellow of the American Psychiatric Association from 1995 to 1997. They have four sons: Christian Blair, Langston Alexander, Hayden Montgomery, and Harrison Elbert.

Encina Ground Floor Conference Room

Encina Hall
616 Jane Stanford Way
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Peter Blair Henry is the Class of 1984 Senior Fellow at Stanford University’s Hoover Institution, Senior Fellow at Stanford’s Freeman Spogli Institute for International Studies (FSI), and Dean Emeritus of New York University’s Leonard N. Stern School of Business. The youngest person ever named to the Stern Deanship, Peter served as Dean from January 2010 through December 2017 and doubled the school’s average annual fundraising. Formerly the Konosuke Matsushita Professor of International Economics at Stanford University’s Graduate School of Business, from 2001–2006 Peter’s research was funded by an NSF CAREER Award, and he has authored numerous peer-reviewed articles in the flagship journals of economics and finance, as well as a book on global economic policy, Turnaround: Third World Lessons for First World Growth (Basic Books).

A Vice Chair of the Boards of the National Bureau of Economic Research and the Economic Club of New York, Peter also serves on the Boards of Citigroup and Nike. In 2015, he received the Foreign Policy Association Medal, the highest honor bestowed by the organization, and in 2016 he was honored as one of the Carnegie Foundation’s Great Immigrants.

With financial support from the Hoover Institution and the Alfred P. Sloan Foundation, Peter leads the PhD Excellence Initiative, a predoctoral fellowship program in economics that identifies high-achieving students with the deepest commitment to economic research and prepares them for the rigors of pursuing a PhD in the field. For his leadership of the PhD Excellence Initiative, Peter received the 2022 Impactful Mentoring Award from the American Economic Association. Peter received his PhD in economics from MIT and Bachelor’s degrees from Oxford University, where he was a Rhodes Scholar, and the University of North Carolina at Chapel Hill, where he was a Morehead-Cain Scholar, a member of Phi Beta Kappa, a reserve wide receiver on the football team, and a finalist in the 1991 campus-wide slam dunk competition.

Born in Kingston, Jamaica, in 1969, Peter became a U.S. citizen in 1986. He lives in Stanford and Düsseldorf with his wife and four sons.

Class of 1984 Senior Fellow, Hoover Institution
Senior Fellow, Freeman Spogli Institute for International Studies
Dean Emeritus, New York University’s Leonard N. Stern School of Business
Date Label
Peter B. Henry Konosuke Matsushita Professor of International Economics, Gunn Faculty Scholar Speaker Stanford Graduate School of Business and CDDRL Faculty Member
Seminars
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Dr. Forsberg will present findings from studies in China and Vietnam and put those findings into a broader comparative perspective regarding the future role of the private sector in improving health service delivery and population health.

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Birger Carl Forsberg is a public health specialist and lecturer in International Health at the Karolinska Institute in Stockholm, Sweden from where he holds an MD and a PhD. He is also trained in economics and has health economics as one of his areas of work. Dr Forsberg has more than 20 years experience from international health from around 25 low- and middle-income countries as an adviser to bilateral donors and international organisations. Since 2002 he has been a consultant to the World Bank on public private sector collaboration in health. He is also coordinator since 2002 of a joint Harvard-Karolinska research programme called Private Sector Programme in Health (PSP). The programme has coordinated studies of the private health sector in five countries in Asia and Africa. In his talk Dr Forsberg will present findings from PSP studies in China and Vietnam and put those findings into a broader perspective on the future role of the private sector in health service delivery for increased access to health services and improved health.

Philippines Conference Room

Birger Carl Forsberg, MD Private Sector Program in Health Coordinator Speaker Karolinska Institutet, Sweden
Seminars
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Professor Hedlund explores a shift in focus in Europe away from the 'Brussels vs. Moscow' attitude by proposing strategic interaction in what he calls the 'corridor countries.' He discusses why there is a variety of outcomes in terms of economic success in these countries, in particular the strain of rapid deregulation in 1991 in the Soviet Union. Professor Hedlund also examines the challenges for these countries in Europe now.

Synopsis

In 'Creating a New Europe,' Professor Hedlund begins by discussing the choice the European Union had when they met in the Netherlands in 1991. He argues policymakers could have widened the concept of European integration through free trade and economic cooperation which would have led to unlimited expansion options towards the East. However, Prof. Hedlund argues they decided instead to deepen this notion of 'the United States of Europe' through a currency, flag, and constitution leading to an exclusionary approach. Now, in 2008, there is new opportunity with new members in the EU. Problems such as Russia's interaction with its neighbors which were formerly seen as external issues are now internal issues affecting Brussels. Rather than being 'grateful children' as Jacques Chirac infamously put it, these 'corridor states' are decentralising the game between Brussels and Moscow. Prof. Hedlund argues we must look for more substantial success in internal dynamics in these 'corridor states,' states which were formerly part of the U.S.S.R. and are now part of the EU or are hoping to be in the near future. To Prof. Hedlund, these states are in a good position to act as credible brokers for strategic interaction between the EU and Russia, as well as between each other, such as Lithuania's intervention during the Orange Revolution.

Prof. Hedlund explains how these ‘corridor countries’ were seen as homogenous in 1991 but now have a great diversity in economic outcomes. Much of this can be attributed to the over eager embracement of a market economy by Russia in 1991 and the hardship it caused. In addition, Prof. Hedlund identifies the corrupted markets which exploited the natural resources available following the collapse of the Soviet Union. Moreover, Prof. Hedlund cites that the ‘rent seeking’ attitude of the Russian government was not reciprocated in all former Soviet states. Some were arguably lured by the prospect of EU membership while others might have drawn in by the examples of the successful and democratic Western countries.

To Prof. Hedlund, the challenge now is to develop forward movement in the areas of the ‘corridor countries’ that have become stalled. In addition, some of the markets in those areas must be developed away from their, as he puts it, ‘3rd world’ manners of operating. Accountability is crucial to a functioning economy to Prof. Hedlund. Finally, these ‘corridor countries’ can help in democracy building.

In taking questions, Prof. Hedlund further reiterates his belief in the necessity of accountability. In addition, he touches on his sense that European education is waning, and that this is setting back innovation. Moreover, Prof. Hedlund addresses the merits of a variety of diplomatic approaches.

About the speaker

Stefan Hedlund is an Anna Lindh Research Fellow at the Stanford Forum on Contemporary Europe. He is professor of Soviet and East European Studies at Uppsala University, Sweden. Before 1991, his research was centered on the Soviet economic system. Since then, he has been focusing on Russia's adaptation to post-Soviet realities. This has included research on the multiple challenges of economic transition as well as the importance of Russia's historical legacy for the reforms. With a background in economics, he has a long-standing interest in problems related to the Soviet economic system, and the attempted transition that followed in the wake of the Soviet collapse. More recently, his research has revolved around neo-institutional theory, and problems of path dependence. Among sixteen authored and coauthored titles in English and Swedish, he is the author of Russian Path Dependence (2005), and the forthcoming co-edited volume Russia Since 1980: Wrestling with Westernization (Cambridge, 2009.) Professor Hedlund has received numerous awards including fellowships at the Davis Center for Russian Studies, Harvard University; the Slavic Research Center, Hokkaido University; and at the Kennan Institute, Washington DC.

Daniel and Nancy Okimoto Conference Room

Department of East European Studies
Uppsala University
Gamla Torget 3, III
Box 514, 751 20 UPPSALA
Sweden

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Professor of East European Studies, Uppsala University
Visiting Scholar, Forum on Contemporary Europe (December 2008)
Hedlund_photo.JPG PhD

Stefan Hedlund is Professor of East European Studies at Uppsala University, Sweden. A long-standing specialist on Russia, and on the Former Soviet Union more broadly, his current research interest is aimed at economic theories of institutional change. He also has a devouring interest in Russian history, which he has sought to blend with more standard theories of economic change. He has been a frequent contributor to the media, and has published extensively on matters relating to Russian economic reform and to the attempted transition to democracy and market economy more generally. His scholarly publications include some 20 books and close to 200 journal and magazine articles. His most recent monographs are Russian Path Dependence (Routledge, 2005), and Russia since 1980: Wrestling with Westernization (Cambridge University Press, 2008), the latter co-authored with Steven Rosefielde.

 

Stefan Hedlund Professor of Soviet and East European Studies Speaker Uppsala University, Sweden
Seminars
Authors
Mark C. Thurber
News Type
Commentary
Date
Paragraphs

As oil prices surge through $140/barrel at the time of writing, surely one can at least count on the invisible hand of the market to drive further exploration and production and ultimately bring more supplies on line, right? Or perhaps, more ominously, high oil prices presage a darker future of shortage and conflict as global oil fields pass their geological “peak”? In fact, both positions miss a crucial point about the dynamics of the world oil market — that it is increasingly animated by the counterintuitive behavior of the state-owned oil and gas giants that now control the vast majority of the world’s hydrocarbon resources.

“On average national oil companies (NOCs) extract resources at a far lower rate than international oil companies (IOCs), leaving about 700 billion barrels of oil effectively ‘dead’ to the world market.”So-called “national oil companies,” or NOCs, own about 80 percent of the world’s proven reserves of oil, a percentage that has been on the rise as the persistent high price environment encourages countries to assert even tighter control over the rent streams flowing from their resources. NOCs are curious and variegated beasts, and, contrary to the popular imagination, some are highly capable both technically and organizationally. Brazil’s Petrobras is an acknowledged world leader in deepwater drilling, while Norway’s StatoilHydro is highly regarded for its competence and transparent business practices. Saudi Arabia’s national champion, SaudiAramco, is secretive to the outside world but generally considered to be a well-run, technically capable organization. At the other end of the continuum, government infighting and micromanagement hobble Mexico’s Pemex and Kuwait’s KPC. Once-independent PDVSA in Venezuela has been remade by President Hugo Chávez into a government puppet that spends liberally on social programs but consistently undershoots its production targets. And indeed some national oil companies are hardly oil companies at all — Nigeria’s NNPC, for example, is mostly a rent-seeking bureaucracy.

What NOCs do share in common as distinct from the familiar international oil companies (IOCs) is being answerable to a host government, which inevitably brings with it some focus on objectives other than simple profit maximization. Typically, an NOC arises originally from the desire of resource-rich governments (“principals”) to gain more effective control over resource extractors (“agents”) by creating an oil champion owned by the state. Prior to NOC formation, governments are frequently (and often justifiably) wary of exploitation by the foreign oil operators providing hydrocarbon extraction services. Lacking a deep understanding of the costs of production, states are simply unable to be sure they are taxing their agents appropriately. In addition to enhancing control over the hydrocarbon sector and the revenue it brings, states may hope for other benefits from the NOC: cheap energy to fuel a growing economy, employment and development of local industry to support the hydrocarbon sector, or even foreign policy leverage derived from control of key resources.

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Unfortunately for the states, relationships with their NOCs are rarely straightforward, with implications for performance. Some national oil companies evolve into barely controllable “states within a state”— PDVSA pre-Chávez was an example of this — while others see their initiative smothered by excessive government intervention as in the case of Pemex and KPC. Fraught state-NOC interactions can take their toll on company effectiveness; in other cases, NOCs may simply appear less efficient than their IOC brethren because they are serving state purposes beyond simple monetization of hydrocarbon resources. Irrespective of cause, the result is that on average NOCs extract resources at a far lower rate than IOCs, leaving about 700 billion barrels of oil effectively “dead” to the world market. A far more immediate concern than whether oil fields are passing their geological “peak” is who is sitting on top of those fields!

A detailed study of NOC performance and strategy at the Program on Energy and Sustainable Development at FSI suggests a useful way of thinking about the effects of NOC resource domination on world oil and gas markets. Price versus quantity supply curves from classical economics assume that increased price will spur efforts to expand supply. Unfortunately, the counterintuitive reality for NOCs is that, when it comes to expanding supply in the current high-price environment, most either 1) can but don’t want to or 2) want to but can’t. The end result is what one could call a “backward-bending” supply curve — additional price increases do little or nothing to boost supply.

“The world has plentiful hydrocarbons in the ground, but that’s where many of them are going to stay due to the unique organizational and political dynamics of the NOCs.”In the “can but don’t want to” category are resourcerich governments that have decided they cannot assimilate any more money. Already, their investments are running into political resistance around the globe — witness Dubai’s failed attempt to purchase U.S. port management contracts, CNOOC’s failed bid for Unocal, or the increasing calls for curbs on the activities of sovereign wealth funds. Nations may decide they have enough cash and are better off leaving resources in the ground where they safely await monetization at a later date.

In the “want to but can’t” camp are countries and their NOCs that are simply unable to provide the stable political and regulatory climate to support additional build-out of expensive production and transport infrastructure. This situation is particularly common for natural gas, where long investor time horizons are needed to bankroll the multibilliondollar capital costs of pipelines or liquefied natural gas (LNG) terminals.

Meanwhile, international oil companies are left on the sidelines salivating helplessly over the vast reserves in NOC hands. Venezuela’s Orinoco region could yield hundreds of billions of barrels of heavy crude, but the government and a nowpliant PDVSA invite favored countries and their NOCs to explore rather than selecting the operators most capable of extracting the challenging but plentiful resource. Technical expertise and massive investment are required to fully develop vast Russian gas fields including Kovykta, Shtokman, and Yamal, but IOCs already burned by nationalizations and shifting rules in these and other Russian ventures are unlikely to be in a position to supply enough of either. In the face of dwindling resources they can tap, IOCs will need to diversify their business models, perhaps tackling technologically challenging options like oil sands or liquids from coal in conjunction with the carbon storage techniques that could make these palatable from a climate change perspective. Ironically, the only “easy” oil for IOCs has become oil that is geologically and technologically difficult.

While oil price is dependent on many factors (including global economic health) and is impossible to forecast with certainty, one can confidently predict continued tight supply of oil and gas, especially given global demand that will be propped up indefinitely by rising consumption in China and India. The world has plentiful hydrocarbons in the ground, but that’s where many of them are going to stay due to the unique organizational and political dynamics of the NOCs. Leverage over the market is weak; measures to reduce demand for oil and gas (though politically unpopular) or to spur development of alternative fuels and associated infrastructure (though slow to develop at scale) may be all that we have.

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