Trading standards

As Iran journeys back from isolation, Asian nations stand ready to engage

When Iran was welcomed cautiously back into the international fold in January, some were expecting a flood of suitors in front of Tehran’s door, while others thought the path back from exile might be a bit stop-start.

And while there have been business deals with some Western nations, such as France signing off an order for Airbus aircraft, it has been Asian nations that have been best-placed to improve, restore and underline trade agreements and mutual policies between themselves and the Islamic Republic.

Today, Tehran confirmed it had seen a 13% increase in oil exports to Asia, off the back of its energy market unshackling.

India and South Korea led the way in Iranian imports, picking up the slack after drops in crude purchases for China and Japan.

But even before international sanctions were relaxed earlier in the year, those four Asian countries mentioned above maintained their oil imports from Iran.

India, most of all, is brimming with infrastructure companies licking their lips at the chance to get involved in the re-opening Iran.

Its tech firms and place as the world’s biggest open-market democracy give it a unique position in the region.

And it has just announced annual growth for 2015/16 of 7.6%, outstripping the other so-called BRIC nations of Brazil, China and Russia and underlining its growing economic strength.

So with continued upward GDP expansion and the unbuttoning of business regulation in India, coupled with a change of policy towards Iran, has seen the 2014 Narendra Modi administration embed itself firmly with an old trading partner that is now seen by others in the world in a fresh light.

The times they are a-changin’

So when policies change or when governments are voted out and replaced, it is not just that specific country which sees the results internally. A new president or a lessening of sanctions can breathe new life into dusty agreements or encourage fresh engagement from different actors pursuing new angles.

Across the other side of the Pacific Ocean, the ongoing fade of the ‘pink left’ governments in Latin America has sparked possible new directions when it comes to trade.

The nascent, business-friendly presidential administration of Mauricio Macri in Argentina has been making tentative steps as an observer within the Pacific Alliance – a group of four Latin nations that is based on free-trade.

Argentina may not be a Pacific Rim country but it shows the fluidity of blocs and the alternating  popularity of regional partnerships when it comes to a change of government.

Under previous leader Cristina Fernández, protectionism was the bedrock for Argentinian trade and she called as her acolytes fellow leftists in Brazil, Venezuela, Ecuador and Bolivia.

Now the new leader wants to move his country in his preferred direction and that seems to be by nudging up to Mexico, Colombia, Peru and Chile’s integrated club.

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Crude behaviour

A new discovery of oil off the Falkland Islands hardens Argentinian resolve 

The price of crude has been on a substantial slide since last summer, losing more than half of its value since June 2014. Oil firms have had to pull back on expansion plans and slash job projections. Oil-dependent economies, such as Venezuela, have been ravaged by the crash of the black stuff.

But such is the aura around oil that it still has the power for that instant spark, no matter how difficult the extraction or how poor the oil and no matter that there may be more dampening announcements to come after the fanfare has died down.

(A case in point for this final example would be the recent row-back from the claim that up to 100bn barrels of oil could be sitting near Gatwick Airport to the south of London.)

At the start of this month, three small UK oil firms revealed a find at their ‘Zebedee’ well in the North Falklands Basin. Although there was a muted response as far as shares go, and despite the current problems for oil companies caused by the low price of the stuff, Buenos Aires bristled when news came through.

The mythical draw of black gold provokes wide-eyed excitement when discoveries of fields are announced. It does seem that part of the Argentinian reaction follows this line of thought. The area around the archipelago has been charted by prospective drillers regularly over recent years, but this latest British find has stoked the possibility of a new industry in the South Atlantic.

Buenos Aires seems to have less of a problem with the fishing carried out by Falkland Island fleets but this exploration and exploitation of oil has enraged the Casa Rosada.

The Argentinian government sees the Islas Malvinas as constituent parts of the South American nation. To this end, any investigation or development of natural resources around the islands is seen as an illicit territorial encroachment.

On an international diplomatic level, it disagrees that the exploration of natural resources should be taking place where sovereignty is disputed. But is there a dispute when only one party feels wronged?

There may be no feasible extraction of workable crude for many years to come, but this announcement still feels like a slap in the face for the fumbling Argentinian economy.

Plummeting opinion polls for outgoing president Cristina Fernandez de Kirchner could be roused by an oil rush. But she can only look out east over the ocean uneasily, and has resolved to support legal action against the companies involved.

The fate of the islands has also been mentioned in the UK general election campaign, with the governing Conservative party committing in its manifesto to “uphold the democratic rights of the people of Gibraltar and the Falkland Islands to remain British, for as long as that is their wish.”

And late last month the British defence secretary said the UK government would invest £180m over the next ten years on improving and expanding the military presence in the islands.

The Falkland Islanders are sure to be feeling chipper and can picture an expansion of their own economy with all the industry and income that would accompany the development of the new finds, knowing that the mother country is still, for now, standing behind them.

The Argentinians believe the bolstering of soldier numbers by the British is another illegitimate move in the martial arena to protect unlawful actions in the civilian sector.

While the fog of diplomatic mistrust and the anxiety around military maneouvres shroud the windy shores of Tierra del Fuego and Stanley, there is to be no sharing of resources in those deep southern waves.

 

Foreign drills, internal slicks

Foreign oil companies are being both courted and sidelined by Iraq’s central government

Love and favour can be achieved in the Iraqi energy market if you drill in the right areas. And, for the central government in Baghdad, the country’s semi-autonomous Kurdish region is certainly not one of those areas. Over the last week, temperatures have been rising between the government, the Kurds and external energy firms. Baghdad seems to be dishing out most of the orders, and all its demands seem to follow the theme of ‘Them (the Kurds) or Us’.

In 2011, the US oil giant Exxon Mobil was censured by the central government after it penned a deal with the Kurdish regional government. It has now been given an ultimatum by Baghdad; politicians have been trying to win the Americans over with the prospect of developing the lucrative southern fields. Exxon would like to be able to work in both the north and south of the country but the relations between Iraq’s national government and its restless, independentist Kurds up north have been deteriorating quickly recently.

The Kurdish semi-autonomous region is made up of three of the northern provinces along with parts of three more neighbouring provinces. It has been in charge of its regional politics and its armed forces since 1991. It feels that it is constitutionally allowed to pursue its own oil deals with foreign countries without Baghdad’s permission. The central government says that signing any such agreements behind its back is illegal.

The central government has already been weighing in when it comes to those sought-after southern fields. Earlier in the week, Baghdad signed a deal with the Kuwait Energy and Dragon oil group to explore an area near the Iranian border. However, the government stuck its oar in to ensure that the Turkish affiliate which had originally been involved was kicked off the team. Turkey has been one of the countries doing pipeline deals with the northern Kurds.

These arguments aptly demonstrate the power of the the growing black gold market in the Middle East. They also show us the contentious flare-ups that can arise when outside forces get involved in regional disputes. What may seem a simple problem (who drills where in Iraq) can be shown to be a serious undertaking despite an outsider’s first glance showing both sides to be part of the same country. The Kurdish issue is one of Iraq’s domestic fault-lines but we can find examples of bitter religious and cultural divisions across the region. The Kurdish example includes four nations – any future Kurdistan state would encompass land from Iran, Turkey and Syria as well as Iraq. Then there is the obvious conflict between Israel and Palestinian Territories, which is taking place on disputed territory. Syria, which is suffering from a devastating civil war at the moment that, on a simple level, pits Sunni Muslim rebels against the Alawite-led government (the Alawites are a smaller group, split off from Shia Islam).

In Bahrain, the Shia majority have been demonstrating against their Sunni rulers but their protests have been suppressed, in part, by Saudi Arabia. Despite being wary of Shia unrest in Bahrain, Riyadh has been more than happy to help Sunni rebels in Libya and Syria. In Egypt, Coptic Christians (who number about an eighth of the population) have been on the receiving end of attacks on their churches. The whole region is split up externally and internally along blurry fault-lines.

This is why the choices of companies such as Exxon Mobil cannot be taken lightly. The risks, pitfalls and blood-letting are clear when outside powers try to exert their hard influences on a particular place. But the reaction of the Baghdad government to this current oil argument also shows the significance of soft outside influences inside such unsteady countries. It is all very well planning (although in the case of Iraq it could be argued that the Western forces did not do that as well as they should have done) for the problems and transitions caused by international conflict, or hard pressure. But it is just as important to focus on the soft pressure side of foreign relations – be it who is supplying arms to whom in Syria or who is drilling where in Iraq.

Petróleo problems

Ecuador, Brazil and Chevron take legal action against each other

Although Chevron maintains that it acted in “diligent and appropriate way”, the Agencia Nacional do Petroleo, Brazil’s oil industry watchdog, has indicted the company three times over an oil leak in November. Across the other side of the continent, Ecuadorean judges have upheld damage claims against Chevron totalling $18bn over alleged pollution in the Amazon jungle.

In Ecuador, the oil firm has been accused of spilling toxic waste in precious areas of the rainforest and having a detrimental effect on the health of the local population due to its operations. It has admitted that its subsidiary Texaco “fully remediated its share of environmental impacts arising from oil production operations prior to 1992”. In this instance the ‘remediation’ that took place was to set alight any mess they had created.

The case has been from court to court but Chevron maintains its innocence from the very expensive legal wrangling building up against it:

“Chevron is defending itself against false allegations that it is responsible for alleged environmental and social harms in the Amazon region of Ecuador”

The company has accused the Ecuadorean legal teams of exercising undue pressure on the justice system in order to achieve the favourable judgment. But the Pacific nation’s government is also in the dock as the US company has brought a claim against Quito of international law violations relating to the pollution case. And a tribunal in The Hague has ordered Ecuador to suspend enforcement of any judgment against Chevron until it resolves the claims the company has made.

In Brazil, Chevron has taken full responsibility for an oil leak in November in the Frade field. The company blamed the spill on higher pressure than expected in the oil reservoir. However, it was at pains to highlight that further damage was avoided due to a seabed valve encapsulating some reserves.

But owning up to the spill has not exonerated Chevron. The Agencia Nacional do Petroleo said it would fine the company (as yet an unspecified amount) because they did not take sufficient protective and preventive measures during the drilling. In addition, federal police have brought a criminal case against Chevron for alleged environmental crimes.

So both Quito and Brasilia, whilst opening up their natural resources to foreign paws, have come down hard after apparent crimes against Nature. The biodiversity and outstanding natural beauty that both countries enjoy must be celebrated and protected. Nevertheless, the two governments realise that outside investment in their black gold is a policy that must be continued.

But, as we saw with BP in the Gulf of Mexico, the fervour for oil and the subsequent accidents seem to know no bounds. The oil companies must work more carefully. But no matter how hard Chevron is battered legally by Quito and Brasilia, the welcoming governments must play more of a role from the start with the drillers and not just intervene with the lawyers’ fees when there is an unfortunate spill at the end.

A fortress made of BRICS

The BRICS countries are building a formidable global power base but there are still cracks in the foundations

With the addition of South Africa to the group late last year, the emerging markets bloc has expanded its reach and capability considerably. It now has fingers in pies cooking in all corners of the globe and each member-state has a rough home ‘region’ where it is the dominate force. Brazil has majority sway over Latin American affairs, China rules the construction industry in Africa and Russia has diplomatic and industrial control throughout the former Soviet Union nations. But the way they influence and react with each other – let alone other countries – is both a cause for celebration and concern.

China is the most successful of the BRICS. It competes with Brazil in Latin America and rivals South Africa throughout Africa, be it through construction contracts in Angola or oil agreements in Sudan. Its conveyor lines drive European businesses back home and its markets are being opened up to foreign firms. It is powerful militarily, diplomatically and economically. China also is skilled at both comforting and irritating rival BRICS. It is happy to let South Africa be a diplomatic voice for Africa while it maintains its industrial strength there. But it has annoyed India by cosying up to Pakistan recently with economic agreements and plans for motorways and railways between the two countries. The transport links would pass through a part of Kashmir that India sees as its own and that Islamabad ceded to Beijing in 1963.

The other powers have also tried to carve out distinct paths across the globe. Brazil is promoting itself as a leader of a new international diplomacy by flexing its negotiation muscles and by engaging with Iran and the Middle East. Russia is still sending rockets to the International Space Station and is arguably the closest of the BRICS to Europe. India is starting to move its weight in South East Asia and has belatedly broken free from its comfortable domestic engine room to engage with African nations and make its nuclear-backed voice heard. South Africa is aiming to make the continent it foots its own, at first through diplomacy (President Jacob Zuma recently met Colonel Gaddafi for talks), and later by possibly challenging China industrially.

There are many sticking points. China and India have a disputed border and Beijing is cross that Delhi lets the Dalai Lama use India as his base-in-exile. Diplomatically, Brazil and South Africa are making an impact on the world stage, while quietly letting China continue to invest in their ‘home’ regions. But while China powers on, Russia is stalling and South Africa relatively inexperienced as the baby of the club.

It is up to Brazil and India to move the BRICS on from a second-class talking-shop to the most important international alliance. An Argentine writing his doctorate on Argentina and Brazil’s economies recently told me that “Brazil is big, very big – too big in fact” and the same could be said for India. They are outgrowing their respective Latin American and sub-continental origins and it is time that they give China a rest from pace-setting. They are certainly all building themselves up quickly and strongly and the West ignores them at its peril.

Hotting up on the Equator

Equatorial Guinea is one of the smallest countries in Africa but it has large, and questionable, ambitions.

Last week, this blog looked at the friendships and enmities between different Latin American countries and Colonel Gaddafi, (see ‘An Arab and his amigos‘– 05/04/11) but could help be on hand for Gaddafi from another Spanish-speaking source?

The tiny country of Equatorial Guinea sits snugly in the central western corner of Africa. The current head-of-state, Teodoro Obiang Nguema, came to power after deposing his uncle in a coup and then sentencing him to death by firing squad.

Gaddafi also came to prominence after overthrowing the establishment and there certainly seem to be many similarities between Equatorial Guinea and Libya:

1) Longevity of leaders

Teodoro Obiang Nguema has been the president since 1979; Gaddafi since 1969.

2) Political parties

Although a couple of opposition parties have been officially ‘legalised’ in Equatorial Guinea, they have only won a handful of seats during Obiang’s three decades of power. Gaddafi has long proclaimed that he is just a revolutionary leader, not a president, and there has been no formal government, let alone functional opposition, in Libya during those 41 years in power.

3) Protest marches demanding social and political reform

Any attempt by Equatoguinean opposition movements (Popular Union, Convergence for Social Democracy, Progressive Democratic Alliance) to show their united condemnation of the repressive regime is stamped out quickly. All reporting of the uprisings in North Africa and the Middle East is banned. All protests are quashed by the police. Juan Tomas Avila Laurel is a writer from Equatorial Guinea and he went on a hunger strike in February calling for democratic and social reform and in protest at the corruption, malpractice and maltreatment of which he accuses President Obiang’s government. He had to flee to Spain soon after he started his fast. The current situation in Libya shows why leaders such as Obiang fear the consequences (civil war, foreign intervention) of mass demonstrations.

4) Oil

Equatorial Guinea has huge reserves and its wealth is rocketing, with a GDP far in excess of its neighbours, although it seems that the cash is simply heading straight into the government’s bank account. However, the situation is changing in Libya, where most of the oil is now in rebel-held land.

5) African Union

Obiang is the present Chair of the AU and has used his position to support the Gaddafi regime. Last month, Obiang praised what he called Gaddafi’s ‘readiness’ for ‘political reforms.’ He also ensured that the AU denounced ‘any form of foreign military intervention’ including a no-fly zone. Gaddafi was head of the AU in 2009-10.

As we have seen with Ivory Coast, (Jose dos Santos of Angola, another repressive, long-term president, sending aid to condemned Laurent Gbagbo), the strongmen club of Africa starts to worry when one of their own is in trouble and has no shame in letting it be known where their loyalties lie. Obiang is leader of the AU at the moment and cannot demonstrate worthy, multi-national leadership unless he shows a willingness to sort out his own, impoverished country first.

A new nation for Central Africa?

On Sunday 9 January, the Sudanese autonomous region of Southern Sudan will hold a referendum on independence. Millions of voters are expected to approve separation from the North.

But leaving the north and becoming Africa’s newest independent state will be fraught with difficulty. Sudan is split many ways: there is an ongoing civil war in Darfur; the Eastern Front region is making separatist noises; and the division between north and south is clear. Ethnically, the North is majority-Arab, it is Muslim and Arabic-speaking and comparatively well-developed, with a modern capital in Khartoum, a commercial hub in Omurdan and has long enjoyed the riches from oilfields which would straddle the new border with the south.

The South has many independent goals, the main one of which is to be able to reap more of the rewards from the oil which is deposited on its side. But in education, literacy, life expectancy, business skills, infrastructure, national development the newly-independent south would lag behind the north and it is desperate to catch up.

Sudan would no longer be Africa’s largest country with Algeria assuming that position. But the Sudanese president, Omar al-Bashir, has said that he will help the South adjust to independence and aid the nation-building programme that will be started if Sunday’s vote turns out as predicted.

But despite this diplomatic olive-branch from al-Bashir, the South may turn its back on aid from Khartoum and look to employ its oilfields for its own, independent gain by fraternising more with the countries to its south. Animism and Christianity are the prevalent religions in the South,as opposed the the Islam in the North of Sudan, and the politics in the South are more tribal, a similarity with countries like Kenya.  These particular religious affiliations may endear themselves more to the development of political links with nations such as Uganda and Tanzania.

Geopolitically, the South sits on the frontier between the Muslim and Arabic-speaking deserts of North Africa and the Swahili and English-speaking Christian forests and savannahs of Central East Africa. The East African Community (EAC) is a powerful regional bloc consisting of Kenya, Tanzania, Uganda, Rwanda and Burundi and has well-developed trade and business links. There are even ideas to launch a common currency for the area, although the group is split over the proposal. This could be the direction in which Salva Kiir Mayardit, the would-be Southern president, may want to take his new nation and over the coming months, Sudanese, African and international delegates galore will flood the area to help out as Africa’s newest nation takes her first steps as an independent state.