Algeria

Nations, like individuals, are judged in part by the company they keep: their alliances and close relationships, and the governments they support. And that old adage is creating real trouble for the ayatollahs in Tehran. As an informative Wall Street Journal article reminds us, Iran has been on the wrong side in the Arab Spring—nowhere more than in Syria: Iran’s steadfast support for Syria’s regime has rapidly eroded Tehran’s credibility among Arabs, leaving the country with a foreign-policy dilemma as popular uprisings mount across the region. Supporting President Bashar al-Assad will further diminish Tehran’s already troubled standing in the region…. a new poll the Arab-American Institute conducted in six Arab countries and released in July showed Iran’s popularity has fallen drastically. The poll, taken during the first three weeks of June, asked more than 4,000 Arabs questions that included whether Iran contributed to peace and stability in the Middle East. In Egypt, only 37% had a favorable view of Iran, compared with 89% in 2006. In Saudi Arabia, the number dropped to 6% from 85%, while in Jordan it fell to 23% from 75%. Nor can Iran fix the problem, for it cannot abandon its only Arab ally—the Assad regime in Damascus. More generally, what Arabs are demanding this year cannot be supplied or supported by the regime in Tehran: free elections, freedom of speech and press, justice. So the Arab Spring and the ideal of democracy inevitably diminish the appeal of Iran, ending the period of years in which its influence was felt to be expanding unstoppably. Iran is not the only “republic” lacking enthusiasm for the Arab Spring. Several members of the Qaddafi family have fled to Algeria. In view of the UN-approved travel ban on them, Algeria’s reception of them may be in violation of the international sanctions. But even assuming it is not, even assuming it was a justifiable humanitarian measure or a gesture made to advance peace in Libya, it must be a reminder to Algerians that their own “republic” is one of the few remaining hold-outs to the advance of democracy outside of the monarchies. Despite a few vague promises of reform, there has been no real change in Algeria and “le pouvoir” (French for “the power,” the network of military and security officials who run the country behind the visible officials) remains in control. Algeria is a rich country due to oil and gas resources, but little of that wealth trickles down to the populace. As for democracy and human rights, Freedom House gives Algeria a very low rating and calls it “not free.”  The regime in Algeria, like that Iran, must be nervously watching the neighborhood reject just such political systems.          

E&E News reports this morning that senators are considering including a low-carbon fuel standard (LCFS) in the impending energy bill. The (laudable) idea would be to force more low-carbon biofuels and electricity into the transportation system. They should proceed with great caution, though, since most standard variations on the theme could be dangerous. There are, however, some simple potential fixes that would probably take the rough edges off. Each gallon of transportation fuel consumed in the United States has “lifecycle” or “well-to-wheels” (WTW) emissions associated with it. With oil, for example, this includes the emissions entailed in producing, transporting, and refining the oil, as well as the emissions generated when the final product (gasoline, diesel, or jet fuel) is ultimately burned. With electric cars, this includes the emissions generated in producing the electricity used to charge the car. With biofuels, it includes the emissions created in making the fuel and burning it in a car, minus a credit for the carbon captured while growing the original feedstock (like corn or sugarcane). An LCFS would require the average WTW emissions associated with transportation fuels used in the United States to drop to some set (declining) target each year. This would increase the proportion of low-carbon biofuels and electrified transportation in the U.S. system while decreasing the proportion of carbon-intensive fossil fuels. It would, in the typical conception, do this by requiring refiners, blenders, and importers to hold special permits for their fuels. Those permits would be tradable – if I produced gasoline, I could buy permits from a biofuels producer to cover my extra emissions. This is basically cap-and-trade restricted to a small slice of the emissions picture. The impact on markets works similarly to cap-and-trade too: high-carbon fuels would get more expensive, leading people to reduce their relative consumption of them. This may sound elegant, but it is an extraordinarily inefficient way to cut emissions, and could get very ugly in practice. Let me highlight two big problems. There are three ways to hit any target for cutting the average WTW emissions of U.S. transportation fuel. First, we increase the proportion of low-carbon biofuels and electric cars. Second, we cut the use of higher-carbon fossil fuels (like fuels from California, Canada, Mexico, and Nigeria; more on this below). The mechanics of these two make obvious sense. Third, we cut the use of all fossil fuels. This helps meet the target because it ensures that low-carbon biofuels electricity make up a larger fraction of all fuels combined. (Basically, we’re cutting the denominator rather than increasing the numerator.) Depending on how the target is set, it’s eminently possible that the combination of more low-carbon biofuels / electricity and less high-carbon fossil fuels won’t be enough to meet the target, simply because not enough low-carbon fuels will be available, and because there won’t be enough high-carbon fuels to cut. In that case, we’ll need to drop overall fuel consumption to hit our goals. That’s fine (actually, desirable) in principle, but the way this happens gets messy. Basically, the LCFS becomes a potentially huge gasoline and diesel tax. (That’s how you get people to consume far less fuel.) One simulation of a superficially attractive LCFS predicts gasoline price increases of $3-$20/gallon over a decade (above business as usual). That curbs fuel demand and allows the LCFS targets to be met. I have some problems with this specific analysis, and am very skeptical of the high end of the spectrum, but it’s the only decent one out there, and gives some indication of how things could turn out unexpectedly, even near the low end. (If what we want is a gasoline tax, we should just do that, an eliminate the risk that it will end up being $10/gallon because of some quirks in the system.) The other problem with the LCFS is the mess that it could create for different sources of imported oil. Oil and fuels from the Canadian oil/tar sands and from Nigeria have unusually high WTW emissions (10-20% higher than the typical barrel consumed in the United States). Mexico is almost as bad. Algeria is much better than average. Middle Eastern countries are all over the map. A simple LCFS could create large financial incentives to totally reorder the patterns oil imports, with little if any environmental impact (since, unless we reduced our overall fuel consumption at the same time, they’d just send their fuel somewhere else). We’d cut imports from Canada and Mexico and switch them to Algeria and the Middle East. The international political consequences would be a mess. The upside to an LCFS, of course, is that it would encourage the use of low-carbon biofuels and electricity for transportation. There are other ways to do this, but if senators are dead-set on using an LCFS, there are a couple tweaks they could use to keep things under control. In order to avoid the danger of the LCFS becoming a ridiculously large gas tax (as opposed to a modest and sensible one), they could impose a price ceiling on the permits that refiners, blenders, and importers would be required to hold. To avoid creating an international political mess, they could declare that the system would treat all petroleum-derived fuels as having the same WTW emissions. That would mean that all oil, whether from Mexico, Algeria, Canada, or the United States, would be treated the same – it would be penalized, but not differentially. Bottom lines: An LCFS could get ugly. There are some simple fixes, though these could make it harder for the LCFS to achieve its goals. Senators would be wise to think about better ways to achieve their ends. But if they go with an LCFS, they should do that with care.

A profile of the Algerian terrorist organization, Armed Islamic Group (GIA).

This publication is now archived. IntroductionGiven the tight supply and surging demand of the world oil market, small countries that produce oil can have a major impact on global markets. This is in contrast to many previous oil shocks, when international cartels like the Organization of Petroleum Exporting Countries (OPEC) effectively controlled world oil supply. As a result, the impact of corruption and mismanagement in countries like Angola, Chad, and Nigeria-which can lead to unrest and force halts to production-are magnified on a global scale. For example, ethnic strife in the southern Nigerian town of Warri in March 2003 shut down 40 percent of Nigeria’s oil production for several weeks. "When the market’s as tight as it is now, every barrel of export counts," says Richard Karp of the American Petroleum Institute, a trade organization. "Community strife or local unrest" in small countries can raise oil prices around the world, he says. The Cost of CorruptionExacerbating the problem in many of these countries is entrenched graft. Corruption "makes it very difficult to create governments that are accountable to people in their own countries, and hurts efforts in those countries to build sustainable development," says Edward Morse, former deputy assistant secretary of state for international energy policy. Throughout the 1990s, he says, there were a number of international initiatives to increase transparency in oil-producing countries, made possible because oil prices were low. Since oil-rich countries couldn’t earn enough on oil revenues alone to run their states, they had to think about cooperating with international efforts toward diversification and more responsible governance. "That was working very well, until prices went up," Morse says. With prices currently over $60 a barrel, "it’s far more difficult to ensure transparency," he says.At the same time, "Western governments were giving hundreds of millions of dollars" to many of these same countries to help build hospitals, feed the hungry, and otherwise improve society, says Clarence Daryl Edwards of the Britain-based nonprofit advocacy group Global Witness. These funds were stolen or wasted, as oil revenues were diverted to the top 1 percent of these countries’ populations, leaving the vast majority of their citizens still poor. Unequal oil revenue distribution also exacerbates tribal and ethnic conflicts, such as those between Muslims and Christians in Nigeria, or Nuer [cattle herders] and Muslims in Sudan. As revenues grow, experts say, the number of stakeholders in the oil industry also grows; tribal leaders, local government, national government, armed militias, and the military all want a share of the pie.Many oil-producing nations, particularly in Africa, are widely viewed as corrupt, with elites who embezzle oil funds and governments that can barely provide security for oil production, much less housing, education, or services for their citizens. Since these countries are so-called rentier states-that is, they derive all or most of their income from renting or selling natural resources to outsiders, instead of collecting taxes from their citizens-they have no accountability to their people and little incentive to democratize. Instead, the government focuses on "keeping its people in line so they do not overthrow it and start collecting the oil rents themselves," Noah Feldman writes in his book After Jihad.The international community also has limited power over rentier states. "The leverage the international community had was over debt payments [from developing countries], and when the oil price is high, oil-producing countries can service their debts with the money they’re making, and the leverage is lost," Morse says. "Venezuela, for example, made enormous strides toward greater transparency-until the election of Hugo Chavez. Now we don’t know if Venezuela even knows how much oil it’s producing."Corruption also limits the ability of developing countries to provide security, either for their citizens or for the multinational companies extracting their resources. Attacks by armed gangs on oil operations are often answered by harsh military repression into local villages; one such operation in the Nigerian town of Odi in the Bayelsa province left hundreds of civilians dead in November 1999, according to Human Rights Watch. Oil workers are often kidnapped or killed; such was the case when five Chevron employees were killed in Nigeria in April 2004. In response, many oil companies are hiring private security firms or threatening to concentrate their operations on offshore oil rigs, hundreds of miles away from local unrest. Ian Gary, strategic-issues adviser for extractive industries with Catholic Relief Services, says governments around the world must help civil-society groups monitor (PDF) countries’ oil revenues, and push oil-producing states to invest in poverty reduction and development, human rights, and the rule of law. The "Oil Curse"There are all too many countries that are resource-rich and still desperately poor: Nigeria is the prime example. Although Nigeria has taken in more than $350 billion in oil revenues over the last forty years, 70 percent of Nigeria’s population still lives on less than a dollar per day. One of Africa’s largest oil producers, the West African nation turns out about 2.5 million barrels per day. Experts say offshore oil production could add another 1.5 million barrels per day by 2010. However, the oil-rich Niger delta region, which produces nearly all of Nigeria’s oil revenue, is abjectly poor and plagued by chronic unrest. The Nigerian military is unable to control the armed groups, which routinely steal oil from pipelines. More than half the country’s thirty-six states have seen violence from armed militias since 1999; over one million illicit weapons and small arms are circulating in the country.Experts say the Nigerian dictator Sani Abacha stole an estimated $2.2 billion between 1993 and 1998. Much of this money was stashed in Swiss bank accounts. Some $358 million has been returned by Swiss authorities, who asked the World Bank to monitor the funds to make sure they are not stolen again. The country routinely ranks near the bottom of countries’ perceived honesty released by Transparency International, a Berlin-based non-governmental organization (NGO) that monitors corruption.Current president Olusegun Obasanjo is taking some important steps to improve Nigeria’s transparency and reduce corruption, experts say, including adequately funding the police in some areas, developing roads and schools in some parts of the Niger Delta, and allowing government officials-including two ministers, a police chief, and the president of the Senate-to be prosecuted for embezzlement. Petroleum and Energy Minister Edmund Doukuru recently said the country will make more oil-related information-such as fees collected from oil companies-available to the public. Nigeria has even hired a Western firm to audit its oil revenues. Signs of ProgressNigeria is also one of four African nations to sign onto the 2003 British-led Extractive Industries Transparency Initiative, aimed at pressuring oil-producing nations to be more transparent about their oil revenues and commit more of their resources to development and poverty reduction. "EITI is a great example of a voluntary initiative where companies, NGOs, and governments work together," Karp says, citing Nigeria and Azerbaijan as two examples of nations that have seen real improvements under the initiative. In November 2004, the government of Azerbaijan signed a Memorandum of Understanding with a coalition of civil society groups and local and foreign companies. The memo sets out rules for the disclosure of payments made by oil and gas companies to the government and those received by the government from all extractive industries. It also calls for an international auditing firm to review and verify the disclosures.Morse says Algeria, another country showing improvement, is carrying out "the bravest set of experiments" toward liberalization being done by a government today. Economic and structural reforms-including cutting tariffs and signing several important trade agreements with the EU-are earning praise from international watchdogs. Morse credits the progress in Algeria to a combination of "luck and wise leadership," but experts say any oil-rich country can make real strides toward fighting corruption and managing its natural resources wisely. It’s just a question of making them want to. "Western governments need to keep in mind that governance issues, the transparency of operations, and political stability matter in every oil-producing country, not just Saudi Arabia and Kuwait," Karp says. "It’s a concern everywhere. [Reforms] don’t just produce benefits for the citizens, but they create a more stable investment climate."