The West zigs, China zags: The West is erecting tariff barriers to prevent Chinese renewable energy companies from dumping their products. What is China's reaction? To set its sights on the developing world. So far at least, this may be one of the few win-win areas in the East-West relationship.
In May, the Obama administration imposed 26 percent tariffs on Chinese-made steel towers that support wind turbines. Regulations and tariffs like these have made it challenging for Chinese wind companies to penetrate the U.S. or Europe, one result of which is that European manufacturers account for 89 percent of the installed wind capacity on the continent. That is good news for Western turbine-makers.
But it is only part of the story -- 63.5 percent of new wind capacity last year was installed outside North America and the European Union. And in these areas, Chinese manufacturers have the advantage. Chinese companies accounted for 30 percent of global wind turbine sales last year, and they hold four positions among the world's top ten turbine manufacturers (including Nos. two and three, Sinovel and Goldwind, respectively). Much of this success has come at home -- 44 percent of new capacity was in China itself last year. But Ming Yang Power Group is also partnering with India's Reliance Group to develop 2.5 gigawatts of wind energy in India. In Argentina, Chinese turbines and financing are building Latin America's largest wind-power project. And Hydro China has been assessing a wind farm project in Ethiopia. Lower costs account for China's success in frontier markets. Chinese-state financing helps Chinese companies to underbid Western rivals by 20 percent to 30 percent, report the Financial Times' Leslie Hook and Pilita Clark.
This bifurcated global market appears likely to grow, providing scope for both Western and Chinese companies to continue to compete side by side, according to Pike Research. Western companies still have the edge when it comes to integrating wind farms into electricity grid systems. Pike's Dexter Gauntlett told us: "With the switch to renewables, whole systems are going to change, and there will be a big market for Western tech and products."
Go the the Jump for the rest of the Wrap.
Joel Saget AFP/Getty Images
What happens when you mix a cocktail of scandal, professional ambition, raw emotion, bungled public relations, and the dual scents of oil and money? In Brazil, you get 17 oil executives and rig hands from American companies under threat of decades of imprisonment.
In Rio de Janeiro, a federal prosecutor yesterday indicted the men -- from Chevron and the oil services company Transocean -- for their involvement in a small November oil spill off the Brazilian coast. This is showmanship -- Chevron will probably have to pay a large fine, but these men are unlikely actually to sit in prison. Similarly, notwithstanding suggestions to the contrary by Chevron CEO John Watson, the company will take its lumps and continue working in Brazil, if it is permitted to, and most probably anywhere else it can obtain access to billion-barrel oilfields.
Yet the set of events highlights both a new world in which "any small spill is a big spill," as an oilman told me yesterday, and why the flurry of announcements of fresh discoveries around the world are only the beginning. After the find comes local politics, whether it is Russia, Mozambique or the United States.
Luiza Castro AFP/Getty Image
In a 2006 cover story in FP, the columnist Thomas Friedman described what he called "The First Law of Petropolitics." In it, Friedman revealed an inverse relationship between oil prices and the kindliness of petrocrats: As oil prices surge, the rulers of oil-producing countries tend to become inflated jerks; when prices are low, they are high-minded pussy cats.
Yet for all its genius, Friedman's law is limited: He was talking about pure petro-states such as Russia, Nigeria and Saudi Arabia. Isn't the behavior of freely elected leaders in developed economies influenced by any oil commandments?
I raise this question while observing President Barack Obama and oil companies act upon some other mutually understood political principle in the heat of the election-year campaign: Over the last week or so, American oil giants Chevron (see interview below) and ExxonMobil have suggested that Obama wise up and embrace America's inner-petrostate. Obama has responded by embracing his inner-cudgel, urging oil companies to accept a non-fossil fuel future, and meanwhile surrender $4 billion in tax breaks.
Oil is pivotal in the campaign platform of Obama's opponents. We see this most recently in finger-pointing over gasoline prices. But gasoline is not the operative hothouse for the top-line political battle. Instead, it is a sideshow to the central backdrop, which is the nation's high-stakes oil boom, a projected surge in the U.S. oil supply over the coming decade from shale oil, deepwater Gulf of Mexico reserves and imports from Canada's oil sands.
The opposing sides are capitalizing on high gas prices to advance competing, long-existing agendas -- Big Oil to pry open coveted basins underlying coastal and federal areas, and Obama to keep incubating still-early clean-energy technology.
Toward these aims, the oil industry's strategy is to persuade Americans that these closed-off lands are all that stand between U.S. independence from foreign oil, and continued fealty to those fellows governed by Friedman's First Law. For Obama, it is to contextualize the oil boom as big but historically ephemeral: Americans can bask in their gas-guzzling ways now, but must also begin to pave the way for the inescapable post-hydrocarbon era.
To state this as a corollary, there is a direct relationship between the vigor of an oil boom, and the temperature of high-flown political rhetoric. (Given the apparent hurt feelings afflicting both sides, one observes another active corollary -- a direct association between rising wealth and thinning skin, a sublaw that seems to straddle the oil and financial industries.)
Chip Somodevilla/Getty Images
Oil, and the geopolitics of China and Iran: President Barack Obama's new military policy -- the U.S. focus will shift to two geographic areas, China and Iran -- steps up the geopolitics of oil. In the case of China, what keeps American policymakers up at night? It is the prospect of a challenge to the U.S. control of movement on the world's seas. As of now, Beijing's navy isn't impressive, but it has proven a nuisance in one place -- the South China Sea. It is there that Washington -- along with Chinese neighbors such as Vietnam and the Philippines -- has thrown down a red line. What has the South China Sea friction been about? As suggested, for the U.S. it is the geopolitical influence that accompanies dominance of the world's seaways. But, locally speaking, it is mostly a belief that the South China Sea lies above massive volumes of oil and gas. So the U.S. will maintain a naval presence in the area.
No one at the moment is going to go to war over the South China Sea, but in the case of Iran, we enter a different universe. Europe appears likely Jan. 30 to approve a near-cutoff of oil purchases from Iran. Obama signed a U.S. version of the sanctions this week. Iran's response has been military -- it calls the sanctions an act of war, and has threatened to close the Strait of Hormuz, the channel for 17 percent of the world's daily oil supply. As a demonstration that it can do so, Iran has announced more naval maneuvers, to be held next month, reports Reuters' Robin Pomeroy. So are we at the cusp of World War III, as some have suggested, especially if Iran unleashes Hezbollah on Israel? In Tehran, the Washington Post's Thomas Erdbrink and Joby Warrick describe a populace stocking up in the event of fighting. At Foreign Affairs, Suzanne Maloney suggests that Iran correctly defines the sanctions as a war footing: By attacking Iran's Central Bank, and thus its ability to pay its bills, and be paid, the West has "backed itself into a policy of regime change." Even if one regards negotiations as ineffectual, Maloney writes, a shift to promoting the ouster of Iran's rulers is worse, placing a reliance on dynamics that "Washington has little ability to influence." Commentator Fareed Zakaria disagrees. He says that Iran is no threat, but instead is becoming "weak and getting weaker."
Read on for more on Iran, and the rest of the Wrap.
A question of power in Saudi Arabia: The al-Saud family of Riyadh has two principal tasks -- securing its rule, and guaranteeing the smooth, long-term flow of oil income. When these dual objectives come in conflict -- such as they have in the Arab Spring -- the former takes precedence. So it is that, with King Abdullah having allocated a whopping $129 billion in social spending over five years in order to pre-empt restiveness within his population, he has cancelled plans for a $100 billion buildup of the Kingdom's oil production capacity. Saudi Arabia can currently produce about 12.5 million barrels of oil a day, and it had plans to increase capacity to 15 million barrels a day by 2020. In the Financial Times, Aramco CEO Khalid al-Falih said the expansion is no longer necessary because of increased supplies announced elsewhere. The new Saudi plans could exacerbate a projected significant tightening of global supplies in the coming years. But Barclays Capital's Amrita Sen, quoted in the FT, suggested that the rationale is the family's core agenda: "The current focus of Saudi is on domestic social spending on the back of [the] Arab Spring."
Go to the Jump for more of the Wrap
An Ecuadoran judge has slapped Chevron with an $8.6 billion fine for defiling a pristine Amazon rain forest and making a lot of people sick -- and double that if the California company doesn't apologize fast and publicly. Chevron and its powerful Washington lawyers have filed fraud and racketeering charges against the opposing attorneys, who themselves are suing Chevron for alleged conspiracy.
All of this has happened in recent days in a class-action suit filed in Ecuador by alleged victims of an oil operation in a place called Lago Agrio, in the Amazon River basin. The allegation is that Texaco (now owned by Chevron) dumped chemicals into the river. Chevron retorts that Texaco did damage the forest, but that it conducted a cleanup, and that what the plaintiffs are angry about happened after Texaco left Ecuador in 1992.
The lack of decorum we see today is de rigueur for Washington; since moving here, I have found the capital to be home to some of the nastiest and most offensive lawyers in the world -- and that includes Russia, Pakistan, and Uzbekistan. Yet is it pollyannaish to look at this 18-year-old case and see something unseemly in, on one side, a lawyerly rush to capitalize financially on environmental degradation in a third world country, and, on the other, a strategy of eluding and crushing adversaries?
Martin Bernetti AFP/Getty Images
Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.