We turn back to the dictator's playbook. As you recall, we've identified the two general options in the dictator's playbook against an uprising -- the Shevardnadze play, referring to the decision by Georgia's Eduard Shevardnadze to step down in the face of massive 2003 protests in his country; and the Karimov play, referring to the calculus of Uzbekistan's Islam Karimov, who in 2005 gunned down hundreds of protesters in the city of Andijan. After weeks of Shevardnadze holding the advantage in the fervor of protests engulfing the Middle East, we see a decided shift in favor of the Karimov play. In Bahrain, Libya and Saudi Arabia, in addition to Azerbaijan and Uzbekistan, autocrats have rejected the example of Tunisia and Egypt (the Shevardnadze play), and are now flouting any obloquy of jailing, attacking or killing protesters in order to keep power.
The shift suggests that, while dictators may have to elevate their game in what had appeared to be a turbulent but politically rigid region, there may be much less immediate change than initially seemed possible.
In Libya, with the United States now backing the establishment of a no-fly zone, the situation could turn around yet again, that is if Col. Muammar al-Qaddafi's forces do not consolidate their rolling triumph before any outside intervention. In the video below, Saif al-Islam (pictured above), the Qaddafi son previously much-heralded in Great Britain, predicts that his father's forces will capture the rebel stronghold of Benghazi "within 48 hours." If that happens -- which at this point would be the betting outcome -- this chapter of the Libyan uprising would be over. Given Qaddafi's remarks in recent weeks, there could be a bloodbath.
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The last time we heard from Russell Zanca, a Central Asia expert at Northeastern Illinois University, he was reporting on the failures of Uzbek President Islam Karimov. Here Zanca suggests where the United States should go from here.
-- Steve LeVine
For some two years, U.S. diplomatic efforts in Uzbekistan have been oriented toward ensuring that the Uzbeks allow the U.S. military to transport all manner of supplies to Afghanistan safely and cheaply, an alternative to poorly safeguarded routes through Pakistan. As a result, the United States is loath to complain of the Uzbek regime's continued cruel behavior toward its population -- if it does, the risk is that President Islam Karimov, as he did in 2005, asks the United States to leave his country.
If the United States were expelled, would we completely compromise our effectiveness in Afghanistan? Alternative supply routes are few: Turkmenistan has the most to offer in terms of geography and terrain, but the United States has never enjoyed ideal relations with the Turkmen, who make matters difficult with their official policy of "neutrality." Tajikistan is also impractical -- infrastructure such as railroads and roads are undeveloped, its mountains are in the way, and it has too many Russian troops on its soil. With Uzbekistan, the U.S. trades one tyranny for another -- liberating the Afghans while leaving the Uzbeks at the mercy of Karimov -- but it also gets an excellent road-and-railroad network between Termez and Mazar-i-Sharif, along with friendly relations with the Uzbeks of northern Afghanistan.
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Drilling anywhere, any time: When in a negotiation, ask for the sky; perhaps you'll get half of it. So it is with the U.S. oil industry's chief lobbyist, Jack Gerard of the American Petroleum Institute. Interviewed by the Financial Times, Gerard says that the entire United States should be open for oil drilling, without exception. Just months after the unprecedented spill in the Gulf of Mexico, some might regard the position as a bit nervy. Not Gerard. "It is difficult to quantify how much increased production would affect imports," he told the FT, "but if companies had access to all U.S. areas now off limits, a substantial increase in domestic production would be possible." President Barack Obama has revived restrictions on offshore drilling on the U.S. East Coast, and new drilling in the Gulf of Mexico has been effectively frozen awaiting a decision on regulation of the area.
Another step toward speculation regulation: Three years ago, investor speculation rapidly drove global oil prices up to $147 a barrel, before it created a plunge to $32 a barrel. Amid another speculation-driven commodities price run-up, U.S. regulators have voted to impose caps on how much speculation a single investor can carry out. The vote in the Commodity Futures Trading Commission is not final -- that has to come later. But it would place position limits on bets on 28 commodities including oil, gas, gold, and certain foods. Such limits are required by financial-industry regulation approved by Congress last year.
Rare earths workaround: Toyota is trying to bypass a Chinese stranglehold on rare-earth elements by making cars that don't require them. Last year, China imposed a blockade on shipments of the elements to Japan, which uses them for high-tech products including missiles, windmills, advanced batteries, and hybrid vehicles. But blockades, sanctions, and shortages tend mostly to trigger inventiveness, and Toyota now says that it's close to a breakthrough in hybrid-electric motors that won't require rare-earth magnets, reports the Wall Street Journal. Rather than so-called permanent magnets, the motors would rely on electromagnets.
A new sultanate: Elections in the former Soviet Union are almost always scripted affairs -- in most cases, everyone knows who is going to win by a landslide before it happens. Such has been the case for the last two decades in oil-rich Kazakhstan, whose winner has always been President Nursultan Nazarbayev. But Nazarbayev appears to be dissatisfied with this state of affairs, and so a move is afoot to allow him to rule for another decade without the formality of the intervening two elections that are on the official calendar. The Parliament has voted to change the constitution to allow a public referendum on the question. If the referendum passes, Nazarbayev would be the first former Soviet leader to wholly dispense with the election charade.
Up or down? Oil spent much of last year climbing, climbing until the irrationally exuberant among us began to rub their hands together with glee (that would be the traders). This week, the market placed a speed bump in the road to $100-a-barrel and beyond. Today, oil closed with its biggest one-week fall in five months, plunging to $88.03, Bloomberg reports. As we discussed earlier this week, prudence is called for in the oil markets. Traders might want to look at some arbitrage between crude varieties, however -- that $88.03 price refers to West Texas Intermediate. Brent crude is selling at a $5 premium, closing at $93.44 a barrel, notes Gregory Meyer at the Financial Times.
The trouble with subsidies: In response to a demand from the International Monetary Fund, Pakistan raised the price of gasoline by about 9 percent on New Year's Day. Eight days later, the government reversed the increase. In between those two moves, Punjabi Gov. Salman Taseer was assassinated, a key government ally pulled out of the government, and there was general mayhem in the street. I discuss this in an interview at CNN. A lot of the turmoil stemmed from a poisonous debate over the country's so-called blasphemy law, which prohibits insults against the Prophet Mohammed. But the gasoline subsidy was also a primary player in the turbulence, which may yet return. The IMF wants the subsidy lifted as a condition of providing $11 billion to Pakistan. But a subsidy, once given, is hard to take away.
Price of the spill: President Obama's Gulf oil spill commission returned an early verdict on last year's massive blowout in the Gulf of Mexico, with a stinging rebuke of BP and its partners in the Macondo well. As is usually the case with such reports, one could read into it almost whatever one wished to. That might explain how Wall Street treated the report. The shares of both BP and Transocean ended the week just about where they were before the report was issued, as though investors in the aggregate couldn't decide whether the results were good or bad for the companies.
Electric spying: The world's electric-car combatants take their war seriously, the French no less than the Chinese, the Americans, and the Japanese. So it is that Renault suspended three senior managers for allegedly passing on secrets about the company's electric car plans to China. Renault is partners with Nissan, whose Leaf was launched last month. The probe has been ordered all the way up the chain of command, by President Nicolas Sarkozy himself, the Guardian's Kim Willsher reports.
One of our most prevalent current canards is the mantra that we must "get off foreign oil," by which we invariably mean Saudi Arabian crude -- and that we must generally distance ourselves from the kingdom and its leaders. Here is a rare issue that finds bipartisan traction. Last summer, for example, the comedian Jon Stewart looked and found that eight consecutive U.S. presidents starting with Richard Nixon, rolling through Ronald Reagan, both George Bushes, and finally Barack Obama have used the phrase in more or less the same formulation. Usually, the mantra is stated in the context of either the environment -- promotion of green industries -- or national security, meaning a way to confound terrorists who, it is said, are largely financed by Saudi and other Middle Eastern oil receipts. But ultimately they mean the same thing -- Saudi Arabia is bad, bad, bad.
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I become suspicious of phrases that roll off the tongue and get me riled up, because often they are intended to accomplish just that outcome. Such is the case with the get-off-foreign-oil sloganeering, as I write in the latest issue of Foreign Policy. News from the Middle East and elsewhere exhorts the United States not to distance itself from Saudi Arabia, but in fact to more fully embrace this definitively central relationship. The reasons include top-tier U.S. strategic priorities regarding Iran, terrorism, Afghanistan, and of course oil.
WikiLeaks showed that the Saudis, unsurprisingly, have been in lock step with Western policy on containing Iran's nuclear program. The most dramatic recent example of the Saudi alliance paying off came in October, in the form of abortive terrorist attacks that were halted in Europe before they could reach the United States. Last summer and fall, U.S. intelligence agencies received three progressively more unnerving warnings from Saudi Arabia, all suggesting that al Qaeda was preparing to set off bombs in either Europe or the United States. The final alert, sent Oct. 28, was the most explicit, providing tracking numbers for two suspected explosives-laden packages on their way to Chicago from Yemen. A day later, police intercepted the packages at FedEx and UPS facilities in Dubai and Britain and defused bombs containing enough of the explosive PETN to take down the cargo planes on which they were to be shipped. Al Qaeda's Yemen affiliate claimed responsibility and warned of more such attempts. The take-away: Short of Saudi Arabia's insistent calls to the Central Intelligence Agency, there is almost certainly no chance that the bombs would have been detected.
What about the other main theater of current U.S. strategic interest, Afghanistan and Pakistan? With its long close ties to all parties in the region -- Pakistan, including the Army's jihadi-linked Inter-Services Intelligence directorate; Afghanistan; and the Taliban -- Saudi Arabia was asked early last year by Afghan President Hamid Karzai to help mediate a political settlement with the Taliban. In February, the Saudi foreign minister, Prince Saud al-Faisal, agreed to receive a delegation of former Taliban, but in November he froze contacts after the Taliban refused to repudiate Osama bin Laden and al Qaeda. Riyadh's position is not new: The Saudis adopted a similar posture position prior to 9/11, when they severed ties with the Taliban after its leader, Mullah Omar, refused to force bin Laden out of Afghanistan. Yet it is yet another example of crucial alignment in U.S.-Saudi policy.
All the while there is oil, although many people seem to suggest that as a source of strategic importance it is a temporary artifice. What are the facts? Not only will Saudi Arabia's predominant oil market position not shrink over the coming decades -- it will grow. Consider the current activities of Chevron, the original developer of Saudi oil, in the partition zone that the kingdom shares with Kuwait. Vice Chairman George Kirkland told me about Chevron's findings in the Wafra field, a reservoir of highly viscous, heavy oil in which the company is using a method of steam-injection drilling to recover an expected 10 billion to 15 billion barrels of petroleum. (For perspective, the industry regards a 1 billion-barrel field as a supergiant.) Saudi Arabia, Kirkland says correctly, is "at the top of the mountain as it is. [Wafra] reinforces a longer future delivering liquid hydrocarbons to the world economy." Meaning probably far into the second half of this century, adding up to another pinion of U.S. strategic interest. Here, Bloomberg's Wael Mahdi reports on Chevron's current progress at Wafra.
Those who suggest getting off Saudi oil are violating the basics of economics. As the pithy Anthony Cordesman of the Center for Strategic and International Studies expressed it to me: "What is the benefit for the U.S. of 'deplete America first'?"
Vladimir Putin had a relaxing "year of adventure," as my colleagues call it, impressing Russia and entertaining the rest of the world with populism -- motorcycle riding, whale harpooning, fire-fighting -- and coquettish flutters of the eyelids regarding his political intentions or lack thereof in 2012. But the most telling events happened in the closing days and weeks of the year, in which the Russian prime minister revealed his more familiar dark side.
I don't necessarily mean today's harsh prison sentence of 13.5 years against oligarch Mikhail Khodorkovsky -- enough to keep him in jail until 2017, factoring in the time he's already served -- which reflects hard-nosed Putin re-election strategy rather than unadulterated venality on his part. Rather, the more instructive event of 2010 is his embrace this month of racist hoods with chilling power on the street, a thread of extremism that Putin himself kindled and now is racing to get ahead of. Putin's December suggests that, for the moment at least, Russia prefers to remain an unnerving outsider.
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It seems much longer than eight months since the worst oil accident in history struck the Gulf of Mexico. Certainly BP wishes it was a lot further behind it, given that it is still working to raise $30 billion that it owes the U.S. government for a victims compensation fund and additional expected bills, with the potential for tens of billions more in penalties for the worst self-inflicted corporate disaster in recent memory (we can debate comparisons in the comments section below). The spill made a fall guy of Tony Hayward, ending his short career as CEO at the age of 53 and making him the second-straight BP chief executive after John Browne to collapse in a scandal (Beware, current BP CEO Bob Dudley: disasters can come in threes).
Yet eight months later, there has been almost no major fallout from the disaster for the oil industry, apart from a tighter production regime in the Gulf of Mexico: BP and everyone else continue to do business around the world, including in offshore zones. Which signals either a perception that BP handled the spill much better than the conventional wisdom suggests, or that Americans and the rest of the world are more inured to environmental disruption than they used to be. Most probably, it's the latter. But should that be the case? We discuss that question below.
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Turkmen President Saparmurat Niyazov generated yuks during the 1990s, given eccentricities such as his variable taste in hair color, his creative renaming of months, days, cities, and ports, and a megalomaniacal festooning of his photo and bust everywhere. But Niyazov also had less-amusing habits, such as truncating high-school education so that Turkmen students couldn't qualify for foreign universities -- not to mention his taste for big bribes. All of it made many people celebrate when he died of heart disease in 2006.
But as we learn in the latest WikiLeaks cables, not much has materially changed since President Gurbanguly Berdymukhamedov succeeded him. For starters, Berdymukhamedov is a dead ringer for Niyazov, as anyone visiting the country can see: The new president has taken down his predecessor's portraits and frequently replaced them with his own.
A Dec. 17, 2009 cable signed by Sylvia Reed Curran,the charge d'affaires in the U.S. embassy in Ashgabat, relates a chat with an unidentified source with apparent proximity to Berdymukhamedov. Turkmenistan's leader, Curran's source tells her, is "vain, fastidious, vindictive, a micro-manager, and a bit of an Akhal Teke nationalist." (Akhal Teke is a Turkmen tribal zone near Ashkabad. It is also a prized horse breed.) Later in the cable, Curran adds that the president is also "suspicious, guarded, strict,very conservative, a practiced liar, ‘a good actor,' and (again) vindictive." (Of course Berdymukhamedov himself might not agree with any of that, seeing as how he views himself as "an author, surgeon, pilot, sportsman [and] statesman,"Curran said.)
Is Tehran convinced the United States is out to steal its oil? Here's Kazakh President Nursultan Nazarbayev, in a cable describing a Jan. 14, 2009, meeting in the capital city of Astana between Nazarbayev and U.S. Gen. David Petraeus, in which the Kazakh leader recounts his recent conversations with Iran's leaders:
[Nazarbayev] said Supreme Leader Ayatollah Khameni told him that even if Iran compromises on the nuclear issue, the United States would always find another reason to criticize "because they hate us -- all the United States wants is to conquer the entire region and steal the oil." General Petraeus interjected, "We could have bought all the oil in the region for 100 years for what we've spent in Iraq!" Nazarbayev, looking a bit amused, said, "I know. I'm just telling you what he said."
The cable, signed by Richard Hoagland, the U.S. ambassador to Kazakhstan, is also interesting for Nazarbayev's pretty shrewd insights into Afghan politics. Nazarbayev is worried about publicized efforts to bring the Taliban into the Kabul government. Petraeus, then the head of U.S. Central Command, replies that this is just an attempt to break up the movement, while roping certain elements into the power circle. That's all well and good, Nazarbayev replies, but suggests that the Taliban is all about control, and not sharing power: "The Taliban leadership will never change its position," Nazarbayev says.
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James Giffen, the oil dealmaker at the center of what was once the largest foreign bribery case in U.S. history, is officially a free man.
The 69-year-old former oil adviser to Kazakhstan's president, accused of diverting $78 million from oil companies to the Kazakh government, waited out more than a dozen federal prosecutors and sat through some two dozen court appearances and five trial dates over the course of seven years. Today, the effort paid off. Three months after prosecutors announced a stunning capitulation, dropping all foreign bribery, money laundering, and fraud charges against Giffen in exchange for a guilty plea on a misdemeanor tax charge, U.S. District Judge William Pauley ordered no prison time and no fines in sentencing proceedings at a Manhattan courthouse.
In handing down the non-sentence, Pauley seemingly validated the argument to which Giffen's lawyers had clung since 2003: that whatever crimes Giffen had allegedly committed occurred while he was a highly valued foreign asset of the American intelligence. "Suffice it to say, Mr. Giffen was a significant source of information to the U.S. government and a conduit of secret information from the Soviet Union during the Cold War," Pauley said today.
Giffen may have been lesser-known than the other businessmen-cum-criminal-defendants of recent decades, but he was equally colorful, a swaggering, coarse-talking, heavy-drinking womanizer and a charismatic fixture on the Caspian Sea. He arrived in Kazakhstan in 1992, but the trajectory that ultimately landed him there began in 1969, when he started traveling to Moscow as an aide to a Connecticut metals trader. Giffen worked his way up to become a major player in a U.S-Soviet business association with top-level political ties in both Washington and Moscow. When the Soviet Union collapsed in 1991, business in Russia dried up, and Giffen moved on to Kazakhstan, which was quickly becoming one of the hottest oil plays on the planet.
Giffen managed to ingratiate himself with a man he called The Boss: Kazakh President Nursultan Nazarbayev. He became Nazarbayev's chief oil negotiator and, prosecutors alleged, his personal banker. While honchoing some of the era's biggest oil deals, he also diverted some $78 million in payments made to Kazakhstan by now-dead companies like Mobil, Amoco, and Texaco into Swiss and other bank accounts that he set up in the name of Nazarbayev, other senior Kazakh officials, and their relatives, prosecutors alleged. (U.S. diplomats said that Nazarbayev, an unindicted co-conspirator in the case, so dreaded being tarnished by a Giffen conviction that both he and his envoys pleaded repeatedly for the George W. Bush Administration to order the case dropped.)
The case seemed open and shut, since the prosecutors presented a detailed paper trail -- provided by a Swiss magistrate -- of Giffen slicing payments into tiny discrete pieces for transfer into secret Swiss bank accounts, rather than shifting them as a whole, a classic method of money laundering. Even at their most voluble and expansive in court, Giffen's lawyers made no attempt openly to dispute the prosecution's facts. They simply kept repeating that, whatever Giffen may have done, he was taking orders from the Kazakh government -- a sovereign state entitled to its own ideas of legality -- and otherwise serving the patriotic interests of the Central Intelligence Agency.
It was an audacious defense that many thought verged on the preposterous. For one thing, CIA officers of the era deny that Giffen was anything of the sort -- he walked into CIA headquarters on his own volition and talked to agency officers about Kazakhstan, they said, but that was very different from being a trusted asset on an informal assignment. In short, they asserted, Giffen was simply another dude talking.
The CIA, however, appears to have refused to hand over many -- if any -- documents sought by the defense. Judge Pauley had ruled that such documents were obligatory if Giffen were to have access to his rights to adequately defend himself. So the prosecution was left with having to drop the charges.
In his sentencing remarks, Pauley said that he had had access to classified documents that no one else in the courtroom had seen, and that they largely validated Giffen's claims. "He was one of the only Americans with sustained access to" high levels of government in the region, Pauley said. "These relationships, built up over a lifetime, were lost the day of his arrest. This ordeal must end. How does Mr. Giffen reclaim his reputation? This court begins by acknowledging his service."
Some Russia specialists in the Obama Administration and leading think tanks are upset with Bush-era U.S. policy towards Moscow, and are trying to correct this misguided past. Case in point: "Reset," the National Security Council-led Russian policy which has smoothed relations and produced some serious achievements, among them a new arms treaty (if it can survive Washington's poisonous political atmosphere) and Russian realignment on Iran strategy.
I have differed with the Reset group when it comes to the Near Abroad, as the Russians prefer to call their former Soviet colonies. The main reason is its revised understanding of the history. Prior thinkers found grounds to push back at what they regarded as Russian excesses, but the Reset group rejects this as "Great Game" brinksmanship; Russia was somehow boxed into a corner, mislabeled, manhandled, and generally misunderstood.
What brings this to mind at the moment is a recent conference championing the Reset thinking at the Center for American Progress, which plays the same intellectual promotional role for the Obama Administration as the American Enterprise Institute and the Heritage Foundation did for Republican presidents. The conference was led by two active purveyors of this new thinking, Samuel Charap and Alexandros Petersen, the authors of a Foreign Affairs piece outlining their views.
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Hillary Clinton has urged Asia's smaller countries to rally around the United States. She has offered to mediate prickly territorial disputes between Asian allies and Beijing, and is trumpeting the early stages of an embryonic U.S.-India axis to thwart Chinese excesses in Asia. This is giving the United States some newfound credibility in Asia, where President Barack Obama begins a four-nation visit on Saturday. Leaving domestic trouble behind him, Obama will find Japan cooling down in a dispute with the United States over a Marine air base; the Vietnamese negotiating a deal to obtain U.S. nuclear power technology; and the Philippines thinking about turning to the United States as a go-between in its dispute with China over the Spratley Islands.
The forces behind this activity are not new -- Japan and the other rising tigers in Asia have been increasingly worried as China becomes less huggy and cuddly in the wake of a financial crisis that has accelerated its rise as a global power. But what's triggered the sudden upsurge now of tete-a-tetes, the type that have driven China's foreign minister, Yang Jiechi, to glare at the foreign minister of Singapore, George Yong-Boon Yeo, and pointedly declare, "China is a big country and other countries are small countries, and that is just a fact"?
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In the weeks before President Barack Obama took his oath of office, Exxon Mobil CEO Rex Tillerson determined to get a march on the new, less greenhouse-gas-emitter-friendly world that he and almost everyone else believed was coming, in the form of some sort of carbon-trading system. Tillerson was so certain of facing this new set of circumstances that he went to Washington to push publicly for something that Exxon opposed constitutionally: A straightforward tax on carbon.
As we all know now, the political sausage machine on Capitol Hill chewed up cap and trade, and the conventional wisdom now is that if such a system ever does materialize, it may be decade or more down the road. So it's surprising to find that Tillerson's lobbying wasn't just a matter of short term political triage -- he actually believes this stuff.
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Six months after a U.S. fuel contract contributed to the ouster of Kyrgyz President Kurmanbek Bakiyev, we appear no closer to knowing whether his opponents are correct in assuming corruption and other criminality in the deal. At issue is a $3 billion U.S. military contract with two companies registered at mail drops and in offshore tax havens, and run by a cloak-and-dagger California native who makes Julian Assange look as open as Oprah, the Washington Post's Andy Higgins suggests in a weekend piece. The current Kyrgyz government says the contract enriched the Bakiyev family, and that the U.S. tolerated the situation to guarantee the longevity of Manas Air Base, which services the war in Afghanistan. Incidentally, Bakiyev alleged the same thing when he helped overthrow the Askar Akayev regime in 2005.
By approving such contracts, does the U.S. in effect cultivate the very corruption that it aggressively abhors in governments around the world? Scott Horton, a New York lawyer who sits on the board of American University in Bishkek, is among those who think so. At the Harriman Institute last Friday, Horton said:
The latest Transparency International corruption index is out, and it shows that countries occupied by the United States, in which U.S. contract awards have decisive importance to the economy, are two of the five most corrupt on earth. These nations have, moreover, become dramatically more corrupt since the U.S. took over. What is the relationship between having a large U.S. military installation and military contracting on your territory and corruption? The TI index points to a direct relationship. The U.S. talks a good tune about democracy, transparency and the rule of law. What it delivers is just the opposite.
(Full speech transcript here.)
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Worries about geopolitical bogeymen can overwhelm good sense. Case in point: today's melee over the discovery that Iran has been regularly handing Afghan President Hamid Karzai fistfuls of cash. Just who is Tehran endangering by keeping Karzai lubricated with pocket change? For one, the fellows U.S. troops are fighting: the Taliban. Karzai calls the payments "normal," and he is right. In the case of Afghanistan, Iran is in effect a U.S. ally.
It's useful to keep in mind that Iranian influence in Afghanistan is traditional. The two countries share a language, after all -- making it easy for the Iranians, for instance, to be particularly close to the leaders of the populous Herat and Balkh provinces, in the west and north of the country. Since the mid-1990s, the Iranians have served a useful balancing purpose to the Pashtun Taliban.
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The rare earths imbroglio continues. The New York Times' Keith Bradsher has another report on the slowdown of rare-earth exports from China: This time, he wrote, the flow of the strategic elements has slowed to not just the United States but also Europe. The Obama Administration ordered an investigation into the report. Two weeks before the U.S. mid-term elections -- in which the dastardly Chinese are already emerging as a popular bogeyman -- the elements are likely to come up as a political issue.
Sanctions tighten on Iran. The United States succeeded in further tightening oil sanctions on Iran this week, when Japan's Inpex said it would join European companies and halt its relationship with Tehran, which Washington is attempting to push to the negotiating table over its nuclear development program. (The Iranian government, meanwhile, played down Inpex's announced withdrawal from development of the Azadegan natural gas field.) That now leaves China as the last major country with significant energy investments in Iran, John Pomfret reported in The Washington Post.
Did Britain just institute a carbon tax? Earlier this year, Britain's Department of Energy and Climate Change launched a carbon emissions reduction policy that would have levied a pollution charge -- about $22 per ton of carbon -- on Britain's 4,000 biggest energy users, then paid the money back to the same companies in the form of energy efficiency incentives. It was a revenue-neutral approach -- until Wednesday, when the government quietly decided to keep the money, on the order of $1.58 billion a year. David Roberts at Grist explains.
China braces for a flood of LNG. If you want to gauge how much liquefied natural gas a country plans on using in the coming years, look to the shipyards. Case in point: The Chinese shipbuilding company that has built all of China's LNG tankers to date is ramping up its tanker construction efforts in preparation for what it anticipates will be a quadrupling of LNG imports between now and 2015, one of the company's top executives told Bloomberg News on Thursday. China's LNG consumption, if it lives up to the current projections, will have ramifications far beyond the country's shores -- just ask the companies building pipelines in Alaska.
Another $1.5 billion for biofuels in the United States. After the collapse of efforts to pass cap-and-trade legislation and hopes fading for even more modest renewable energy legislation, these are not the best of times for the clean energy industry in Washington -- unless, of course, you're in the biofuels business. Reuters reports that the U.S. Department of Agriculture is throwing another $1.5 billion at the industry in an effort to meet congressionally mandated targets for the production of still-commercially-unproven advanced biofuels by 2022. As for the 54-cents-a-gallon tariff on imported ethanol -- a reliable source of teeth-grinding for Brazil's government and sugar cane industry -- Agriculture Secretary Tom Vilsack says it's probably sticking around, though it's likely to be phased out in the future. File that in the "I'll believe it when I see it" folder.
Chevron drills deeper. Well, that didn't take long -- barely a week after the Obama administration lifted its moratorium on deepwater drilling in the Gulf of Mexico, Chevron announced Thursday that it would develop two fields in the Gulf estimated to contain some 500 million barrels of oil. The project is pegged at $7.5 billion, and would involve drilling wells deeper than BP's ill-fated Macondo operation. "In the end, the United States needs the oil and gas and other countries need the oil and gas, and some of the best places to explore are deepwater environments," Bobby Ryan, Chevron's vice president for global operations, told the New York Times' Clifford Krauss.
A few days ago, the United States responded to a United Steelworkers suit by announcing an investigation of China's alleged gargantuan subsidizing of its clean-energy industries -- something regarded by many countries, including China, as a strategic priority. Today we get China's apparent reply: Beijing is cutting off its exports of rare-earth minerals to the United States, according to the New York Times' Keith Bradsher.
The 17 rare-earth minerals are crucial to the manufacture of high-tech products such as advanced batteries and flat-screen televisions, and in military equipment such as missiles and jets. China mines about 95 percent of the world's rare earths.
The news comes the same day that China announced that it is further reducing the export of the minerals to all countries next year. In July, Beijing said it would reduce its rare earth exports by about 40 percent. Next year, it's set to reduce that volume by another 30 percent, according to another report by Bradsher.
The issue of rare earth availability has alarmed numerous companies and countries. Japan got cut off Sept. 21 after one of its naval cutters arrested a Chinese fisherman for ramming Japanese patrol boats. Since then, several companies have announced plans to accelerate the re-opening of rare earth mines in Australia, the United States, Mongolia, and Kazakhstan, but bringing such projects to fruition can take years.
This latest move significantly escalates a steady increase in economic and trade moves by both countries. If confirmed, the Obama administration might have no choice but to reply with some similar action, particularly given the poisonous mid-term election atmosphere in the United States.
CNOOC, Statoil Invest $1 billion in south Texas' Eagle Ford oil shale. Guess who will be scrutinized and who won't? The betting is that the Chinese National Offshore Oil Corp. will not suffer another fiasco like in 2005, when it lost in its attempt to land Unocal. This time it will manage to hold on to its investment, in this case a $1.1 billion buy-in into the scorching hot shale bonanza. Yet some analysts say that election-year jingoism in the United States could again leave China out in the cold. Ditching the deal will be difficult, however, since it was announced on the same day -- Oct. 10 - that Norway's Statoil unveiled its own, $1.3 billion deal with Talisman involving another section of the Eagle Ford field. Given the continued interest of U.S. energy companies in China, the Administration and Congress may have to tough out any instinct to scuttle the CNOOC project.
IEA Bumps Up Oil Demand Forecast for 2010, 2011. The Paris-based International Energy Agency lent credence to those who believe that the global economy is slowly recovering with its much-watched oil report. The agency said increased demand in both developing and industrialized countries means the world will use 86.9 million barrels a day this year, 300,000 barrels a day higher than previously forecast, and a full 1.5 million barrels a day more than last year's recessionary pullback. Next year, the IEA predicts, demand will rise another 1.3 million barrels a day. What does this mean? Not lower gasoline prices at the pump, that's for sure. Possibly, however, that the record inventories of oil around the world will start falling, and put a floor under what this year has been a volatile market. Reports by Deutsche Bank, France's Total and a couple of think tanks have foreseen comparatively high oil prices headed into the middle of the decade, before falling again, and this could be the start of that climb.
Oil: another target in the Afghan war. Militants linked to the Taliban have spent much of the last 10 days or so blowing up NATO oil and fuel tankers plying routes from Pakistan into Afghanistan. Today there was another attack in the Khyber Pass leading from the Pakistani city of Peshawar into eastern Afghanistan near Jalalabad, where two died in an attack on a NATO fuel truck. It is a time-tested strategy -- war combatants have been targeting each other's fuel supplies ever since Winston Churchill triggered the age of strategic oil just before the outbreak of World War I. Over at Wired's Danger Room blog, Katie Drummond writes of a three-mile-long jam of NATO fuel trucks on the very same route (the piece includes must-see satellite images of the bottleneck by DigitalGlobe).
Moratorium lifted in the Gulf of Mexico. Taking no chances with control of Congress on the line in Washington, President Barack Obama lifted a moratorium on drilling in the Gulf of Mexico more than a month before scheduled. Six months after five million barrels began spilling into the Gulf from BP's Macondo well, the administration said that oil companies again can drill in both shallow and deep water, though under a tighter regulation regime, and with more surprise inspections. At Investing Daily, Jim Fink calls it Obama's "October Surprise." But Obama was wrong if he thought the move would silence the hecklers. Over at the State Column, a still-dissatisfied Louisiana Gov. Bobby Jindal took a swipe at Obama and his "harsh," "job-killing," "arbitrary," and "capricious" decisions regarding the Gulf.
The crazes come upon us with such increasing frequency that it's easy to become jaded. There are the "i's" for instance -- the iPod, iPhone, iPad. Before we know it, many of them become bubbles -- solar panels, mortgage-backed securities, ocean-front Florida real estate. So is President Barack Obama feeding another of these manias with his push for advanced batteries and electric cars? He is getting push back, to be sure. At Slate, for example, Charles Lane says basically that Obama has gone in for rich, snobbish sissies. The Economist says electric cars are "neither as useful nor as green as their proponents claim."
But, in a piece in the new issue of Foreign Policy (just out today), I argue that, notwithstanding whether the surge of electric cars upon us actually gains traction, the race to create and dominate this new industry is very real. And the contestants - every major economy on the planet, and more - think the prize to the winner will be geopolitical power. In a nutshell, China, Japan, South Korea, a bunch of European nations, the U.S. and others think the winner will dominate the last half of this century. All could be wrong, but they would feel worse if they weren't in the race at all. Here is a slide show of some of the cars we are talking about.
For the Chinese National Offshore Oil Co., otherwise known as CNOOC, the summer of 2005 must seem like ages ago. That's when the entirety of the U.S. foreign policy apparatus, the state of California and all good American patriots arose in unison and said no, a Chinese company could not buy the highly important strategic U.S. asset known as Unocal. So it was that Chevron swallowed Unocal, and CNOOC (pronounced Shnoss) and other Chinese companies went on to acquisitions elsewhere in the world.
Over the weekend, CNOOC closed a $1.1 billion deal to help finance Chesapeake Energy's enormous gamble on shale oil and gas drilling, the big new rush in the energy industry. Specifically, the money will go for Chesapeake's shale oil play called Eagle Ford, in south Texas.
Has anyone heard a peep from the anti-foreign investment crowd this time around? Not me.
In my third year reporting in Central Asia, I was summoned to the press spokesman for Uzbekistan President Islam Karimov. My articles from Newsweek and the Washington Post were spread across his desk. "Can you not find one good thing to say about my country?" he asked. His face was stretched taut. And with that, I was invited to leave Tashkent. For the next five years.
Fortunately, I was able simply to cross the border and set up in neighboring Kazakhstan, from which I reported for the subsequent years -- including cross-border news-gathering forays on foot back to Tashkent in a charade with the Uzbek authorities. (I pretended I wasn't there, and they pretended not to be watching.) The situation is completely different for Abdumalik Boboyev, an Uzbek reporter for the Voice of America, and one of the last -- perhaps the last -- journalist on the ground delivering the type of globally distributed reporting that can get you expelled or jailed.
Radio Free Europe/Radio Liberty
In February 1989, Soviet troops withdrew from Afghanistan after a decade-long U.S.-backed rebellion in the country. But already the United States was greatly reducing spending in Afghanistan and Pakistan, the staging ground for the arming of mujahideen guerrillas. President George H.W. Bush ordered the Central Intelligence Agency to stop sending agents into Afghanistan. Even as the Taliban was born in 1994, taking power in Kabul two years later, the United States remained aloof. We know what happened next.
Today, my FP colleague Dan Drezner in effect suggests a similar U.S. path in former Soviet Central Asia and the Caucasus. Responding to an essay I wrote for the New Republic, Drezner argues that the region was perhaps once a U.S. strategic interest, but that those days are over. The United States should not fight for its place: "There are a lot of regions in the world where I think a robust U.S. presence is a good idea. Central Asia is no longer one of them," he writes.
DOUGLAS E. CURRAN/AFP/Getty Images
Some of the big U.S. newspapers -- the Wall Street Journal, The Washington Post -- are unhappy with how ambassador-designates are being treated in the vetting process for posts in the oil- and geopolitics-soaked lands of Eurasia.
U.S. designees to this region are, in fact, experiencing unusual turbulence. In the midst of the turmoil that has engulfed Kyrgyzstan over the last few months, Tatiana Gfoeller will be replaced as U.S. ambassador by Pamela Spratlen, currently the deputy chief of mission in Kazakhstan. An unexplained bureaucratic snafu is preventing Douglas Hengel, a deputy assistant secretary of state, from occupying the long-vacant slot in Turkmenistan. And Frank Ricciardone's move to the embassy in Ankara is being held up in the Senate, as my colleague Josh Rogin has written.
Yet the main reason for these newspapers' angst is the ambassador's post in Azerbaijan, which has been empty for some 14 months now. Perhaps not since the kitty-cat John Bolton was nominated to the United Nations has a designee attracted at turns such adoration and venom as Matthew Bryza, the choice of the George W. Bush and now the Obama administrations for the Baku post, as Laura Rozen has reported at Politico.
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Energy alarmism is on the rise again in the United States. This time, the looming phantom is not peak oil, but the danger of the United States falling behind in alternative energy development. Reprising a role it has played well in trade circles for years, China is a primary culprit. Beijing is accused of illegally subsidizing its clean-energy industry, most recently by the United Steelworkers in a suit filed with the U.S. Trade Representative a few weeks ago. Businesses, clean energy advocates and the U.S. government have make China a focus of attack.
Last Thursday, General Electric CEO Jeff Immelt sounded off on what he calls Washington's "stupid" energy policy, warning that, absent more support for nuclear power, wind, and smart grid technology, the country will risk surrendering its lead in energy innovation to the Chinese. On Capitol Hill, Democratic congressman Ed Markey of Massachusetts has tirelessly urged the country to catch up in the "Global Clean Energy Race."
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Call it the Georgia lesson. In 2008, Russia informed the United States and the rest of the West that the former Soviet Caucasus and Central Asia were no longer their playland, but rather Moscow's sovereign sphere of influence. How did it do so? By going to war with Georgia.
Now we have China informing Japan -- and the rest of Asia -- that the Diaoyu Islands in the East China Sea are its territory in which to fish and whatever else it wishes. Like Russia, Beijing did so by demonstrating that it was prepared to go to almost any extreme -- in this case short of war, but including the crippling of several Japanese industries -- to press its territorial claim. This includes rights over the big oil and gas reserves in the islands. Today Japan blinked. After this, will Japan continue the presumption that it is in charge of what it calls the Senkaku islands? Not if it wishes to continue to manufacture the Prius, as Andrew Leonard notes at Salon.
The difference of course is that, with all due respect to Russia and Georgia, this case concerns truly serious players. The breathtaking part is China's readiness to dismissively take on Japan, the world's third-largest economy.
Today, President Barack Obama is to meet with the 10 worried member states of the Association of Southeast Asian Nations. In a joint statement and with Obama behind them, they will suggest that China is bad, bad, bad to have forced its way with Japan, and wrong, wrong, wrong if it thinks it will get away with it again. But, as with the Georgian incident, is the U.S. prepared to go to war to press its case? Are any of the ASEAN nations? That was Russia's bluff in 2008; it is China's now.
A smart oilman told me yesterday over lunch that the rise of China was never going to be like the rise of Japan in the 1980s. Japan was a commercial power without imperial pretensions; China is both.
At the Financial Times, Geoff Dyer says this is not just the caprice of Chinese rulers, but the prodding "of powerful groups within the party-state system." This includes China's oilmen and other industrial leaders, Linda Jakobson of the Stockholm International Peace Institute tells Dyer, "new actors [who think] it is time for China to take its place on the world stage."
China's leviathan brawl over a single fishing boat captain over the last few days is a territorial issue: China's red line. In 2008, Russia signaled that it could be friends with the West, as long as no one presumptuously trod on its turf. China is saying the same thing now. That, in addition to the value of the yuan, marks out the new arena of tension between it and the West.
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At graduate school, a professor of mine voiced a strong distaste for Steven Rattner, the New York Times' young chief economics reporter, based in Washington. This professor, an adjunct who worked at the World Bank, thought Rattner just didn't get economics; he advised us to rely instead on The Wall Street Journal. Soon after, Rattner left the Times for Wall Street, becoming a billionaire in the employ of the investment bank Lazard Frères (now Lazard), an influential voice in Democratic politics, and generally a guy with serious connections. Last year, President Barack Obama, beset with crises domestic and foreign, asked Rattner to figure out what to do about America's failing car industry. So it is that this week, we get Rattner's memoir of the car company rescue, Overhaul: An Insider's Account of the Obama Administration's Emergency Rescue of the Auto Industry.
Rattner is getting serious attention. Tom Braithwaite at the Financial Times interviewed him. Jonathan Cohn at The New Republic interviewed him. Holman Jenkins, a writer for The Journal‘s editorial page, didn't praise the book, but did offer free publicity while using it as a platform for yet another swipe at unions and mileage-efficient cars.
Neilson Barnard/Getty Images for Fortune Magazine
The United States is at war in Afghanistan and Iraq. It is trying to make peace between the Israelis and the Palestinians. Washington's relationship with Russia is still fragile.
Thank goodness for the annual United Nations General Assembly, a place to meet casually, massage some shoulders, and point fingers at some chests -- in short, an opportunity to get much important business accomplished efficiently. Since time is short, and demands for face time high, fixing the bilaterals can be tricky -- these are the few people a U.S. president chooses to grace with direct, one-on-one chats. Basically there are five such meetings. But such matters are ironed out with diplomacy.
So who are President Barack Obama's bilateral five this Thursday and Friday? If you guessed Azerbaijan's Ilham Aliyev and Kyrgyzstan's Roza Otunbayeva, you would be correct (oh, and also China's Wen Jiabao, Japan's Naoto Kan, and Colombia's Juan Manuel Santos.).
How is it that two of the ‘Stans won the beauty contest? Bluntly speaking, it's because of their status as war entrepots.
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Macondo well to be "declared dead" this Sunday. Five months after a blow-out caused 4.9 million barrels of oil to spill into the Gulf of Mexico, the Macondo well is on track to be permanently sealed off by Sunday, according to National Incident Commander Thad Allen. On Thursday the relief well, which BP has been drilling since May 2, finally intersected with the blown-out well where it meets the oil reservoir some 2.5 miles below the Gulf's surface. Cement and heavy drilling mud are now being pumped down the relief well to kill the Macondo well once and for all. As the well is sealed, BP expects to scale back its spill response, a sign that cheered investors and ratings agencies on Thursday. Meanwhile, embattled BP CEO Tony Hayward, who will be stepping down from the post on October 1, made his first public appearance in weeks on Wednesday when he testified before a U.K. parliamentary committee. One week after BP published a report on the causes of the Gulf oil spill, Hayward told the committee that the company had exhibited "a lack of rigor and a lack of oversight of contractors," admitting that there had been a level of industry "complacency" towards offshore drilling risks prior to the accident.
China's coal and carbon conundrum. As Europe takes steps to scale back its coal usage, China remains as dependent as ever on black diamonds to fuel its rapid economic growth: The International Energy Agency has predicted that Chinese coal usage will more than double by 2050. After IEA executive director Nobuo Tanaka outlined this week that China's adoption of carbon capture and sequestration technology would be crucial to combating climate change, Elisabeth Rosenthal at the New York Times Green blog describes the challenge of making this adoption happen. Carbon sequestration is still an expensive technology, and it's not likely that China will be willing to embrace it on the massive scale needed to reduce its carbon emissions, unless it has outside investment. Beijing is already facing huge problems of meeting growth and energy efficiency goals at the same time, but given that it has poured $1.5 billion into green technologies, including $300 million for electric cars, attempts to mitigate the effects of its primary energy source may not be too far off.
A new use for those old oil wells. While the Interior Department on Wednesday ordered all non-producing oil wells in the Gulf to be permanently plugged, these wells might prove to be a new business opportunity for carbon capturing technology. BP and Shell may begin storing carbon dioxide by pumping the greenhouse gas into old oil wells in the North Sea, which could net them a sizeable profit as they work to extract the remaining oil in these wells. Though the costs of capturing, transporting, and pumping carbon dioxide into the wells remain high, turning older oilfields into CO2 storage sites could be a viable means of reducing carbon emissions.
As if the oil wasn't enough... Khalid al-Falih, the head of Saudi Aramco, revealed this week that Saudi Arabia could hold massive reserves of unconventional gas, totaling in the trillions of cubic feet. This is good news for the kingdom, which has lately been pouring more money into gas development than into oil, in a bid to satisfy its rapidly growing domestic energy demand. Burning oil for power generation is expensive and polluting, and a shift to natural gas-fired power plants would free up more oil for export, where profit margins are higher. However, developing the unconventional gas reserves poses new challenges; "fracking," the procedure used to access shale gas in the United States, requires large amounts of water -- clearly a problem for a country where water may be more valuable than oil. Aramco says it is working with the major oil companies to look at alternative extracting solutions.
The West's geothermal boom. Clean, renewable, and reliable, geothermal energy seems to be the perfect green energy source, but it has usually been difficult to develop due to the costs of locating geothermal resources on a commercially viable scale. However, technological advancements and government funding are giving geothermal energy a boost in the American West. Geothermal producers have been using such methods as aerial mapping and reflection seismology -- which uses man-made vibrations to map out geothermal resources underground -- to reduce exploration and development costs. At the same time, millions of dollars in federal grants towards renewable energy development, as well as state renewable portfolio standards, are suddenly making geothermal energy an attractive alternative in the West, where the U.S. Geological Survey estimates that there could be 30,000 megawatts of untapped geothermal power. Having proved itself in Iceland, geothermal energy could soon become a major electricity source for Nevada, Utah, and California.
Oil slips on lagging economic indicators. After topping $77 earlier this week, oil prices began a long slide, closing the week at $73.66 on Friday in New York. Crude saw a 3.7 percent loss for the week, the biggest weekly decline since mid-August and reaching its lowest price so far this month. Earlier in the week, pipeline operator Enbridge Energy reopened a major pipeline from Canada to the U.S., releasing tension in the markets that had helped push prices up last week after a leak near Chicago forced the pipeline's shutdown. Rising U.S. stocks and a falling dollar kept crude above $75 until Thursday, but continued high U.S. oil inventories and reports showing a drop in consumer confidence (indicating a negative economic outlook) contributed to a fall in prices towards the end of the week. Analysts continue to forecast oil in the $70 to $80 range, with Credit Suisse revising its estimates for 2011 prices down from $80 a barrel to $72.50.
We know Iran as a nuclear story -- Israel, the United States, and much of the rest of the West are convinced that Tehran is uncomfortably close to deploying a workable atomic weapon, while President Mahmoud Ahmadinejad delights in tweaking his detractors with, at turns, vows to continue the country's nuclear activities, and to attack Israel. The latest installment is a dust-up over access rights for international inspectors.
But Iran is also an energy story. The United States spent much time trying to prevent Iran from activating its long-in-the-works Bushehr nuclear power station, which, with Russian expertise, will begin to produce electricity in the next month or so.
Having lost that game, the Obama administration is working to shut down Iran's life-blood oil and gasoline complex, testing whether the Iranian government is prepared to sustain an economic body blow -- and thus risk local public support -- in order to preserve its presumed nuclear program. The Financial Times' Roula Khalaf reports that the U.S.-advanced sanctions are biting: Iran is being forced to stop making potentially crucial chemicals, and instead convert those plants to gasoline production. Likewise, Javier Blas reports in the FT that banking and shipping restrictions are making it harder for Tehran to sell its oil abroad.
But let's face facts: Around the world, nuclear weapon capabilities play well to domestic audiences -- in India, Israel, Pakistan, and in Iran. So does confounding the desires of great powers. Karim Sadjadpour, of the Carnegie Endowment for International Peace, told Khalaf that a plummet in oil prices under $50 a barrel might turn Iran's head, since it wouldn't be able to pay its bills. There is something to that -- Vladimir Putin and Hugo Chavez have become more agreeable negotiating partners when oil prices have dipped. But given Ahmadinejad's record, and his apparent support within the senior clergy, it's hard to see these measures resulting in a nuclear stand down.
Finally getting Russia to turn on Bushehr has been a key public relations development for Iran's leadership. I talked to Dan Byman, an Iran expert and my colleague at Georgetown University. "It showed [Iranians] that they are escaping from isolation," Byman told me. "It's something that you play up domestically."
So we have the continuing game of chicken. Iran says its nuclear efforts are peaceful; the Obama administration says "prove it," and meanwhile threatens to make the country go dark.
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Deutsche Bank's Kevin Parker, who manages $7 billion in climate change-related investments, has thrown up his hands at Congress's seeming inability to pass an energy bill, accusing Washington of being "asleep at the wheel on climate change...[and] on this industrial revolution taking place in the energy industry." Yet, stalemates and sound bites notwithstanding, investment in clean energy is still growing, and appears to have a brighter future than conventional wisdom suggests. Why?
The growth hasn't come entirely independent from government policy. The Obama administration's ambitious plan to double America's renewable energy capacity led to the earmarking of $67 billion in federal stimulus money for renewable energy, biofuels, and such energy efficiency projects as smart grids. Those capital injections helped clean energy investment grow by 72 percent from June 2009 to June 2010, to a total of $43.7 billion for the first half of 2010, according to Bloomberg New Energy Finance.
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Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.