Peter L. Berger's Blog, page 513

As North Sea Oil Falls, Scotland Hardest Hit

Oil extracted in the North Sea is among the world’s most expensive to produce, due to strong UK labor unions and unfavorable natural conditions in the region. In today’s oil market, that’s a bad situation to be in, and the sector is imploding. The Sunday Times reports:

The combined market value of 112 publicly traded oil companies — the entirety of Britain’s listed [oil] industry excluding the top three of Shell, BP and BG — is the same as that of Marks & Spencer: £7bn…Two years ago, just one of the 112 — Tullow Oil — was worth more than Britain’s preferred seller of sandwiches and underwear, with a healthy £8.2bn market value. Its fall has been stunning. As the numbers above attest, it is but one of many.

North Sea oil was already waning even before prices started plunging, but many companies delayed expensive offshore decommissioning projects in the hope that they might wring out every dollar from these quickly maturing fields. That may have made sense when oil prices seemed stable at over $100 per barrel, but with Brent now trading under $32 (!) per barrel, many of these North Sea projects are no longer profitable. But abandoning these plays will incur further costs, which places these firms in quite the bind.

This could play into the politics of Scottish independence. With the UK facing a possible vote on Brexit, Scotland could have some tough choices ahead. The EU is much more popular north of the border than among the English, and it’s long been thought likely that Brexit would soon lead to Scottish secession. But life in the EU, on the euro, with no oil revenue to speak of, is not an attractive proposition.

Italy Wants in on Russian Pipeline

Italian papers are reporting (article in Italian) that Italy’s Prime Minister Matteo Renzi concluded two days of talks between Moscow and Rome with a conversation with Russian President Vladimir Putin, during which he insisted that Italy’s Eni get to participate in the proposed “Nord Stream 2” pipeline extension. Renzi made headlines late last year by very publicly holding up the extension of EU sanctions against Russia as he complained of Germany’s hypocrisy in killing off Russia’s South Stream pipeline project while greenlighting Nord Stream 2.

Critics of Nord Stream 2 also point out that it would negatively affect the bottom line of struggling Ukraine, which gets several billion euros in transit fees from the pipelines that cross its territory en route to Europe. Renzi is next due to discuss the issue with Germany’s Angela Merkel, reports say.Italy and Russia were close back in the Berlusconi days; Putin is very used to taking Rome’s phone calls. That this episode is playing out along these lines shouldn’t exactly surprise anyone. But it’s also probably not the end of the story: look for Poland and the Balts to keep crying bloody murder over the project, and to bring it up as a bargaining chip whenever they feel they need leverage over Brussels.

TPP Could Boost Chinese Exports

The Trans-Pacific Partnership remains unratified in the U.S. and elsewhere, but, eventually, it could become one of the defining accomplishments of President Obama’s foreign policy. Although other Asia stories have gotten more press lately, the TPP deserves attention. The WSJ gave it some last week, reporting on “the first detailed study of the pact”:

If the Pacific agreement is enacted, Vietnam would get the biggest percentage boost to its economy—about 10% by 2030—as its textiles and apparel industry gets new preferential access to the U.S. and other major markets. Japan would see extra economic growth of 2.7% by 2030 while the U.S. could expect additional economic growth of 0.4% by 2030, according to the study, released by the World Bank.

Malaysia’s economy would swell by 8% as its exporters acquire an advantage over regional competitors that aren’t part of the bloc, including Thailand, the Philippines and Indonesia.The U.S., Canada and Mexico would see relatively smaller economic benefits coming from the TPP because they already opened their borders two decades ago to huge volumes of trade through the North American Free Trade Agreement, or Nafta.

Arguably, the deal is just as important for the countries it does not include: China, Thailand, and Indonesia. Some hope that they will eventually feel pressure to join and perhaps make desirable concessions in the process. Others simply see the deal as a handy way to isolate Beijing. But, according to this study, the hit on China will be “negligible” and the agreement may in fact result in a “slight boost to exports” from the People’s Republic.

The article contains many interesting details, and we encourage you to read the whole thing. If you’re so inclined, you might even have a look at the original study itself.

Can the Supreme Court Avert a Blue Civil War?

Blue modelers are holding their breaths as the Supreme Court gears up for its Monday hearing in Friedrichs v. California Teachers Association, a challenge to the constitutionality of mandatory public sector union fees. They have good reason to be concerned: experts agree that there is a decent chance that the court will decide in favor of the plaintiff, dealing a severe blow to public sector unions from coast to coast.

Our specialty at Via Meadia is politics, not jurisprudence, so we can’t offer an informed opinion on the First Amendment or federalism arguments that will ultimately determine the outcome of this case. However, as regular readers know, we are deeply skeptical about the wisdom of public sector unions as a matter of public policy. On balance, these organizations have degraded the quality of public services by blocking potentially fruitful reforms to government programs (like school choice) and shielding ineffective employees (like abusive police officers) from accountability. More importantly, by extracting utterly unrealistic pension promises from politicians, public unions have played an integral role in putting many of America’s state and local governments on the road to fiscal crisis.This tangle of failures is contributing to what we call the blue civil war—the conflict between various Democratic constituencies that is growing more intense as the blue model system of unionized governance starts to decay. As WRM wrote last week, this is the conflict that lies below the surface over the crisis over Rahm Emanuel’s mayoralty in Chicago. The interests of the unionized public workforce that has historically supported the city’s political machine—strong pensions, strong job protections, lifetime employment—are increasingly at odds with the interests of voters—low taxes, high-quality public services, and accountability. This conflict is exacerbated by the fact that the unionized public workforce has a different ethnic composition from its voting population, and it is likely to come to a head in more blue-dominated cities and states as the fiscal vise created by pension costs keeps tightening.That brings us back to Friedrichs. By reducing the power of public unions, the Justices could actually do Democrats a favor by averting similar meltdowns elsewhere, or at least making them swifter and more painless. The breakdown of the blue model is inexorable; in the long-run, state and local governments will simply not be able to afford to offer public employees the type of pension and job security packages that public unions are currently fighting to maintain. The question is whether the transition to a leaner and more efficient public sector will take place slowly and painfully, with crisis after crisis pitting blue constituencies against one another until the whole edifice collapses, or whether reformers can roll back the most untenable elements of the blue model in as orderly and rational a way as possible. Our money is still on the first possibility, but if the court defangs public unions in Friedrichs, the latter is at least somewhat more likely.

A Call for Caution on Marijuana

Though marijuana politics has been surprisingly absent from the 2016 campaign trail, the march toward legalization is quietly continuing apace. Legislatures are softening criminal penalties for pot possession, and several states are likely to hold referenda on Colorado-style legalization in November. And yet, it’s hard to escape the sense that enthusiasm for full-fledged legalization has declined somewhat since the first states made pot available for large-scale recreational use in 2012. A comprehensive essay in National Affairs by Jonathan P. Kaulkins outlines some good reasons for caution:

Marijuana use is highly concentrated among the growing minority who use daily or near-daily. Adults who use fewer than ten times per month and who suffer no problems with substance abuse or dependence account for less than 5% of consumption. More than half of marijuana is consumed by someone who is under the influence more than half of all their waking hours. Most marijuana users are healthy; most marijuana use is not.

In the resulting confusion, advocates of legalization often argue (effectively) that “marijuana is safer than alcohol.” It would be far more accurate to say “Marijuana is safer than alcohol, but it is also more likely to harm its users.”

The essay is essential reading for anyone looking to get a balanced and informed perspective of the tradeoffs involved in marijuana debate; read the whole thing. Kaulkins does not argue for a return to draconian penalties for possessing small amounts of marijuana; rather, he seems to think that some form of decriminalization is inevitable if not entirely desirable, and thinks that institutions need to prepare for the various problems that will ensue.

Loosening marijuana restrictions seems, as we have said before, like “the worst possible policy except all others.” As Kaulkins shows, however, the debate over marijuana is much more nuanced than “legal” or “illegal.” Policymakers will need to decide how it is distributed, taxed, and regulated.

This can and will lead to a Pandora’s Box of difficult situations, new laws and even new prison sentences for people who fall afoul of the new laws. Presumably there will be a minimum age for legally buying marijuana, and the penalties for sales to minors might well be made harsher as part of an effort to safeguard kids in a world in which marijuana is even more easily available than it now is. There will probably also be laws about the maximum strength permitted in legally sold pot; again, those who sell bootleg pot that is over the legal strength limit or hasn’t been appropriately taxed and inspected will face legal penalties. DUI laws will be adjusted to include those impaired by cannabis use; legalizing pot won’t empty the jails of pot offenders any more than ending Prohibition took the legal system out of the alcohol regulation business.

We would add that as the legal restrictions on marijuana fade, it is likely that social and institutional sanctions will become more important: Employers might be more likely to drug test employees, and marijuana use could become a problem for people in jobs and professions that require clarity and focus.

Marijuana policy is an important social question with very high stakes, and it would be nice to see it feature more prominently in 2016 races. Hopefully candidates will start to talk more about marijuana policy—but only after reading the Kaulkins piece and other well-informed analyses on the subject, like this one in TAI.

Russia’s New Target in Syria: The South

Government forces loyal to Syrian President Bashar al-Assad, backed by strong Russian air support, appear to be making a strong push in the country’s south—long a stronghold of more moderate rebel forces fighting against Damascus in the grinding Syrian Civil War.

Though rebels are currently holding their own in defending the strategically significant town of al-Shaikh Maskin, observers are nervous. With peace talks in Vienna set to take place in the coming weeks, analysts see the push as a gambit by Assad to gain maximum leverage at the negotiations. Syrian authority Joshua Landis went further in talking to the  Financial Times : “The regime is not going to compromise on talks. They now think they’re going to win on the battlefield, and that Russia is taking them to the finish line.”Over at Landis’ website Syria in Crisis, editor Aron Lund noted the history and strategic importance of the southern Syrian front to the overall war. In a must-read round up, “The Ten Most Important Developments in Syria in 2015,” Lund writes:

9. The Failure of the Southern Storm Offensive.

This summer, the loose coalition of rebel units known as the FSA’s Southern Front got ready to capitalize on a year of slow and steady progress, during which Sheikh Miskin and other towns had been captured from Assad. They encircled the provincial capital, Deraa, for a final offensive dubbed Southern Storm. The city actually looked ready to fall […]Stories differ on what happened next, but the Southern Storm campaign was a fiasco […]Of course, it might seem strange to say that rebels not taking a city was Syria’s ninth most significant event in 2015. It is not even a Dog Bit Man story, it’s a Dog Didn’t Bite Man story. But the Deraa affair seems to have done a great deal of damage to Western and Arab hopes for the FSA’s Southern Front, which had until then been portrayed as a model for the rest of Syria’s insurgency.

For anyone interested in the state of play in Syria, we highly recommend that you read the whole thing. Coming in at the top of the list, of course, is “The Russian Intervention”—Vlad’s involvement in Syria, which was perhaps the biggest game-changer in the Middle East as a whole in 2016.

And now, Russia is moving against rebels in southern Syria. The White House, which has been consistently flummoxed and outmaneuvered by Putin going back to his invasion of Ukraine, keeps spinning Syria as a quagmire and a disaster for Russia — even as the US gives more and more ground to Assad and Russia at the bargaining table. The push in the south — which has nothing to do with defeating ISIS and everything to do with smashing some of the last ‘moderate’ rebel groups with any credibility, raises another possibility. Is Putin going for the win? Will President Obama’s next Syria statement amend his earlier insistence that “Assad must go!” to something more in keeping with the new situation on the ground that Russian action and American dithering have combined to create?Will Obama’s next Syria statement be that “Assad must go on ruling Syria for as long as Russia wants?”

The Roots of Saudi Rage

One week ago, the Saudis executed Shi’a cleric Nimr al-Nimr, and Iran retaliated by torching the Saudi embassy in Tehran. The repercussions of both moves have roiled the Middle East since. If you’re interested in why exactly the Saudis have been acting the way they’re acting, Kenneth M. Pollack has a great explainer over at Brookings, starting with a look at the Shi’a regions of the Kingdom:

[B]oth the civil wars [in Syria, Yemen, etc.] and the spillover they generate have also produced a general mobilization of the Middle East’s Shiites, instigated and led by Iran. And that includes the Shiites in the Saudi kingdom. Officials in private and press reports occasionally note that hundreds of Saudi security service personnel have been killed and wounded in operations in the Eastern Province, the home to the vast majority of the kingdom’s Shiites. Americans tend not to pay attention to these operations because we see them as proof that the Saudis have things well in hand; but another way to look at it is that the Saudis are fighting pitched battles with someone in the cities of the Eastern Province. In other words, there seems to be a much higher degree of mobilization and violent confrontation among the Saudi Shiites than most realize.

And then there’s the drop in oil markets and the ever-hotter flames from regional wars that lick around the borders of the kingdom. What do these all have in common?

And there sits Iran, at the intersection of all of these problems, from the Saudi perspective. The Saudis think the Iranians are to blame for the civil wars in Syria, Yemen, and (to a lesser extent) Iraq by mobilizing Shiites to destabilize the kingdom and its Sunni Arab allies. (They also blame the United States for the Iraqi civil war, appropriately, I might add.) They see the Iranians as threatening to pump new oil out onto the market to fight the Saudis for market share regardless of how low the price goes; Iranian officials openly crow that all of the money that will finally be released to them after the nuclear sanctions are lifted will be used to enable them to take market share away from Riyadh. In addition, the Iranians are waging proxy wars against the Saudis in Iraq, Syria, and Yemen and aiding subversive elements in Bahrain, Kuwait, and the kingdom itself. So, as the Saudis see it, Tehran contributes to Riyadh’s financial problems by driving down Saudi revenues and jacking up expenditures, both of which threaten the kingdom’s internal stability.

And while we may believe that the Saudis exaggerate both Iranian capabilities and intentions, the Saudis have a number of good points when it comes to Iran. The Iranians do seek to overturn the regional order, and they have repeatedly attempted to overthrow Arab governments (including Saudi Arabia’s, albeit several decades ago). The Iranians do tend to back Shiite populations, whether they are in power or out, majority or minority. And they do often incite them to violence and provide them with the wherewithal to do so. As a result, the Iranians have become deeply embroiled in the civil wars of the region. I would argue their involvement in both Iraq and Syria is primarily defensive (seeking to preserve the control over the state by their allies), but in Yemen it has unquestionably been offensive. There is no other explanation for Iran’s involvement in Yemen other than to annoy, weaken, or even undermine the Saudis—as strategic leverage or a genuine bid at regime change. And the Iranians do not make matters any better by arrogantly dismissing Arab fear and interests and placing themselves on a higher level than their neighbors across the Persian Gulf.Finally, the Saudis feel frustrated and abandoned by the United States. Many Saudis and other Gulf Arabs consider President Barack Obama deeply ignorant, if not outright foolish, about the world and the Middle East. They evince out-and-out contempt for him and his policies. From their perspective, the United States has turned its back on its traditional allies in the Middle East. Washington is doing the least it can in Iraq, and effectively nothing in Libya and Syria, with the result that none of those conflicts is getting better. If anything, they are actually getting worse. Moreover, Saudi Arabia seems to differ over whether Obama is using the new nuclear deal with Tehran to deliberately try to shift the United States from the Saudi side to the Iranian side in the grand, regional struggle or if he is allowing it to happen unintentionally. The more charitable Saudi position is the former, because that suggests that Obama at least understands what he is doing, even if they think it a mistake and a betrayal. The latter view, for Saudis, sees him as a virtual imbecile who is destroying the Middle East without any understanding or recognition.

For anyone interested in the geopolitics of the Middle East, we highly recommend you read the whole thing—one of the best and most comprehensive explainers of Saudi thinking in some time.

Why We Need GMOs

A study published in the journal Nature earlier this week found that “extreme weather” decimated global cereal crops (think grains, not Lucky Charms) over the past fifty years. Between 1964 and 2007, drought, extreme heat, and extreme cold weather cut yields of these important food crops by 9-10 percent, and the effects of these events was between 8 and 11 percent more pronounced in the developing world.

If this study is accurate, this isn’t just a history lesson. Climate scientists tell us that we’ll be seeing more extreme weather in the future as a result of rising surface temperatures. This new research suggests that these events could pose a significant challenge to global food security, an issue only growing in importance as our total population continues to swell.So are we doomed, then? Hardly. Scientists have already spent decades working on developing crops capable of thriving in wider temperature ranges and more resistant to drought. By modifying genes, researchers have found ways to increase crop yields even in more extreme environments, a technology seemingly tailor-made for helping to solve growing problems with food security in a world with a changing climate. And, as Reuters reports, drought-stricken Africa is starting to come around to GMOs:

Perceptions are shifting, with Burkina Faso in West Africa, and lately Sudan having started to grow GM cotton commercially, Getachew Belay, an African expert on GM crops told Reuters. “Historically, Africa has been a laggard to accept new agricultural technologies. For GM crops, much of the problem lies in the perception, exaggerated fear and conflicting messages sent to policy making,” said Belay. […]

[L]ast month, Zambia’s Higher Education Minister Michael Kaingu told parliament his country was embracing GM crops. “We recognize that modern biotechnology has advanced worldwide and, as a nation, we cannot afford to ignore the benefits of this technology. We are alert and prepared to deal with possible adverse risks,” said Kaingu.

GM crops can be of use anywhere there’s arable land, but they’re especially valuable in the developing world where, this new study concluded, extreme weather has an outsized effect. But a negative public perception and rampant misinformation remain the technology’s biggest obstacles. Studies have repeatedly shown GMOs to be safe, and the quasi-science peddled by misguided environmentalists has wilted under closer scrutiny.

The technology is there, the science says it’s safe, and all that remains is a PR battle. This is a fight with massive consequences, one that will affect how future generations feed themselves, and the modern green movement finds itself on the Luddite, anti-science side of the fence. Somehow environmentalists don’t see the irony of heaping scorn on those who question the settled state of climate science while they themselves ignore scientific consensus so that they might continue their crusade against a technology they somehow view as unnatural.If greens had as good ideas for the well-being of future generations on this planet as they claim to, they would be GMO’s biggest cheerleaders of all. Instead, they’re setting humanity back by actively campaigning against one of our best tools for adapting to a changing climate. Anti-GMO activists are the equivalent, on the left, of climate deniers, but they don’t take nearly as much heat for their position.

China’s Disappearing Billionaires

Another billionaire has gone missing in China, the second in the past few weeks. Zhou Chengjian, the head of the Chinese fashion chain Metersbonwe, disappeared yesterday, the BBC reports:

A company statement said it could reach neither the chairman nor his secretary. Metersbonwe also halted trading of its shares “to protect investors’ interests”.

His disappearance comes only weeks after Guo Guangchang, chairman of private sector conglomerate Fosun, temporarily went missing […]Chinese media reports on links between the disappearance of businessmen and the authorities sweeping anti-corruption campaign remain unconfirmed.

Assuming Beijing does have something to do with them (likely a safe assumption), these disappearances mark an emerging trend in President Xi Jinping’s anti-corruption drive: more attention on China’s private sector. Even in a weak economy, Xi appears to be moving full steam ahead with the potentially destabilizing purges.

Waiting for the Moderate Backlash

Hoping that that Iranian moderate will triumph over hardlines, observers are latching onto Tweets from the Iranian President and Foreign Minister in the wake of the burning of the Saudi embassy in Tehran. See for instance this Financial Times report, which claims that “the latest political crisis between Tehran and Riyadh has prompted a backlash against hardliners in Iran.” More:

President Hassan Rouhani on Wednesday condemned both the Saudi government for executing Nimr, but also the attack on the Saudi missions. “Attack on #Saudi missions was wrong & against the law — condemned by all Iranian officials,” he wrote on his Twitter feed.

Mohammad Javad Zarif, the moderate foreign minister, said the damage inflicted on the embassy building in Tehran and the Saudi consulate in Mashhad was “in no way acceptable”.

The report goes on to cite other Tweets from ordinary Iranians—but makes no mention of the Supreme Leader, the IRGC, or how the mob came to be able to ransack the embassy. (As Mark Dubowitz has noted, the dual structure of the Iranian government has allowed it to perfect the good cop, bad cop routine.)

So is this kind of Twitter-based, moderates-only look into Iran’s intentions insightful analysis or grasping at straws? Here’s a hint: This kind of evidence led the CIA to report that the Shah was secure in 1979, which in turn led many in the West to believe that the Egyptian Revolution was the start of real democracy.