International Affairs Forum Interview: Meir Javedanfar

International Affairs Forum: What is the Beyond Oil Project and how was it started?

Mr. Meir Javedanfar: The Beyond Oil Project came to fruition after doing research about the Middle East and seeing the unpreparedness of many of the oil producing countries. Moreover, the potential impact when oil runs out in terms of political instability, economic instability, and also the impact it could have on security in the region and worldwide.

When I joined the tt30 Club of Rome think tank, we decided to do it on a global scale, not just concentrate on the Middle East. So the Beyond Oil Project was born to survey the readiness of oil producing countries at a time when oil is no longer providing them with a major source of income. For some countries this is predicted to be forty years from now, for some countries even ten years time. We looked all the countries in the world where oil represents more than twenty-five percent of GDP and developed our study to create a table that ranks countries that are most prepared for a time when oil runs out as a major source of income to the ones that are least prepared.


IA-Forum: There has been considerable debate about oil shortages and when peaks will occur. What sources were used in the study to gather these estimates and how were the rankings determined?

Mr. Javedanfar: We used the United States Energy Information Administration (EIA), and OPEC to determine how much declared resources a country has in gas and oil. In most cases the two sources were similar. For countries that are not members of OPEC, we used the EIA as the most credible source of information.

In terms of assessing a country’s preparedness for the time when oil runs out, we looked at roughly thirty indices for each country. We looked at things such as the UN levels of health in countries, education, freedom of the press, World Bank Ease of Doing Business Index, World Economic Form Competitiveness Index, and Transparency International Corruption Index, and then we developed the ranking. We took the indices and then using our formula, we would give them weightings. For example, we gave more weight to investments in health and education or we gave more weight to investments in biotech and high tech more than tourism.

We’ve received very positive feedback about the results and it has raised alarms about the problems that are going to face the world when a lot of these countries run out of oil as a main source of income.


IA-Forum: Did the group identify any commonalities within the good performing countries? The poor performing countries?

Mr. Javedanfar: A lot of the good performers have low corruption, are very business friendly and most importantly, they have government backing for the Beyond Oil industries. For these countries, the government has a vision to move the country away from being a major source of income and back non-oil industries through tax credits and create an investment environment for non-oil. They also have good infrastructures in terms of roads, telecommunication, and education and training. Political stability is very important and democracy is an important factor in many of the countries. The top countries Canada, Norway, the U.S., and the UK have efficient democratic governments in charge where the level of corruption is very low.

The biggest common factor in the countries that are not prepared is corruption. Corruption affects everything, preventing a fair distribution of wealth and, for many of these governments, they are not inclined to planning for the foreseeable future. A lot of the people involved don’t invest in other parts of the economy because they are more concerned about personal or political benefits of their status at the present.


IA-Forum: Did you find any surprises during the course of the study?

Mr. Javedanfar: One of the things that surprised me is in terms of where we are going. There will be energy have and have nots. If not addressed properly, this could wreck havoc in terms of the international balance of power and stability in many regions, especially in the Middle East. In a lot of these countries like Iran, Syria, Iraq, or Yemen, they have no efficient plan whatsoever to replace fossil fuels as a primary source of energy for themselves. We are very pessimisti, as they’re not going to have alternatives to oil not only as income sources but also as sources for energy.

On the other hand, there were surprising factors about other countries that have no oil at the moment. Some countries in central Africa such as Niger, Chad and even parts of Sudan and Algeria are involved in a proposition where the European Union would build massive solar power farms there. This energy would then be transferred to Europe. This could create huge shift in power. A lot of countries in the Middle East who use oil to boost their standings on the international stage are going to see their power dissipated while countries in Africa could replace them. It could create not only an interesting redistribution of power but also upset the standing of many Middle Eastern countries and could even create instability in the region.


IA-Forum: Have there been any regional studies, agreements, or anything from OPEC that addresses issues tied to the Beyond Oil situation?

Mr. Javedanfar: In terms of OPEC taking effective action, I don’t think they are doing this. Their focus is on petroleum and they are not helping oil producing countries diversify away from it. In some ways, OPEC is not responsible. They could provide guidance and a helping hand but this all really depends on the governments of each of these countries There are members of OPEC such as the United Arab Emirates, Kuwait, Saudi Arabia, and Qatar that are doing a sterling job of diversifying their economies away from oil but there other OPEC countries are not because of their governments.

On the international scene, we already see the impact of energy on security with the current problem between Georgia and Russia. One of the motivations for Russia to bring such a heavy-handed response to Georgia is because the Russians are very concerned about the Baku-Tbilisi-Ceyhan (BTC) pipeline that bypasses Russian territory and is a very important energy source. The fact that energy is one of the factors behind the conflict; the fact that neither Georgia nor Russia have an effective plan to replace oil, shows that some countries are panicking, it can be a security factor, and armed conflict may be involved. What’s really important about the Georgian-Russian conflict is that it’s a warning of what could follow in the economic international scene if we don’t address the Beyond Oil issues. Once oil runs out and these countries don’t have oil as a major source of income, there could be conflicts over other issues between them and also possibly conflicts over areas where oil is suspected to be there. If we address the issue of Beyond Oil and diversify economies of countries away from oil and encourage them to invest in alternative energy, then we could avoid a lot of instability. The United Nations should take the lead on this. It’s very important to share alternative energy technology with poorer countries that are going to run out of oil. United States should also start investing heavily in alternative energy. If the U.S., with its massive economy, starts becoming more involved, it could lead the way; higher demand would bring the prices down of alternative energy sources, and that could benefit everybody.


IA-Forum: China has become a crucial global energy consumer. What did your findings reveal about them?

Mr. Javedanfar: China is close to the lower half of the table. At the moment they are not investing in alternative energies and their non-oil sector is very primitive at moment. Also, China does not a have a very high technology sector and the level of health is also lower than many countries in our index. The issue of corruption is another issue that affects China’s performance in the study. China has emerged as a global superpower but one of the reasons they are constrained from fulfilling their potential is dependence on other countries for energy.


IA-Forum: Are there any particularly progressive programs under way to address the Beyond Oil issue?

Mr. Javedanfar: The Persian Gulf States have a number of progressive programs. Bahrain has a very impressive one to reduce the amount of income they have from oil. Oman has a program called Vision 2020 whose main goal is to reduce their dependency on oil to less than fifty percent. While it’s a small country and doesn’t have a lot of exports apart from oil, they are taking big steps and are taking this very seriously in order to bring foreign investment in the country and encourage development in the technology sector and improve the education sector. Saudi Arabia has just invested ten billion dollars in the scientific based King Abdullah Economic City. They are investing heavily in the development of the technology sector because they, like a lot of these countries, are waking up to the fact that oil is going to run out one day and they’re worried about the internal repercussions this could have.

The way they’re implementing their Beyond Oil program can be a role model for other countries like Venezuela, but there President Chavez’s obsession with reducing what he sees as U.S. hegemony and nationalizing industries has actually taken focus away from investing in the country’s future. If anything, it makes Venezuela more dependent on oil because of the lavish expenditure policies of President Chavez. The same thing can be said about President Ahmadinejad. Iran’s budget is growing at a pace of fifteen percent a year -oil for oil money - but it’s not being invested in the Beyond Oil industries. If and when Iran runs out of oil, the Iranian economy will be in serious danger


IA-Forum: What’s next for the Beyond Oil study group?

Mr. Javedanfar: This is an ongoing project so we just update the table every year. This project serves as a traffic light to the oil exporting countries and show which ones are in the green zone and which ones are in the danger zone. The more we develop this and the more we use this project to the oil producing countries realize they problems they have and work to avoid it, I think we can help to create a more balanced political security environment on the global scale. If we don’t address the energy problem, I think our problems will become very severe and they could have a very grave impact on the security of the globalized economic system that we live in.

Meir Javedanfar is a Middle East Analyst, he is a Project Manager with the Beyond Oil Project and the Director of the Middle East Economic and Political Analysis Company (meepas). His areas of professional focus lies in the analysis of the politics and economy of Middle Eastern countries, with special focus placed on Iran.

The full interview can be viewed at: http://www.ia-forum.org/Content/ViewInternalDocument.cfm?ContentID=6386

War in Georgia and Impact on Beyond Oil Economies

By: Meir Javedanfar

16/08/2008

The recent conflict between Russia and Georgia, is likely to have a notable impact on their Beyond Oil futures.

Until today, Georgia has been an interesting case. The country does not have oil resources of its own. However it earns a major part of its income by allowing energy pipelines to transit through its territory. One of the most notable projects has been the Ceyhan-Baku-Tbilisi pipeline. One of the advantages of this western backed pipeline was that it avoided Russian territory, thus reducing Russia's existing dominance over the energy market in the Caucus. However, with the recent conflict, and the instability which has been brought as a result of it, Georgia may lose part of its attractiveness as a suitable transit point.

This point becomes evident after reports that one of the main reasons behind Russia's overwhelming use of power, which included attacking pipelines in Georgia, was in order to hurt Tbilisi's standing in the energy markets.

On the other hand Russia who is also an energy producer, in the long run, may also lose customers. This is because after its muscle flexing in Georgia, and the start of what seems to be difficult times between Washington and Moscow, less countries may wish to become dependent on Kremlin as an energy resource.

However one bright spot in all this may be that it may spur under countries, especially the US, to invest more into their renewable sources of energy, despite the serious challenges ahead in the Congress. One hopes that this could have been a serious wake up call for them. Until then, the Beyond Oil future of a number of oil producing countries, and even more oil consuming countries, will be at the mercy of unstable regions and even more unstable political situations.

End of Analysis

Meir Javedanfar, alongside Gordon Wollgam, is Project Manager and founder of the Beyond Oil project (http://beyondoil.net)

Beyond Oil Economies and The Education Challenge

By: Meir Javedanfar

02/07/2008

The Obama camp, is already promising close to $150 billion investment in clean energy technology. This is more than the McCain camp, many of whom seem less willing or motivated to reduce America's dependence on oil.

However what many don't see as forthcoming, is end of America's massive tax breaks offered to oil companies. To many Americans, this is simply unfair. How can trillion dollar oil companies, making record profits, get tax breaks, and yet health and education gets far less government assistance?

Despite the fact that the United States is one of the biggest consumers of oil, its leadership in the development of renewable sources of energy is absolutely essential. As the world's biggest economy, if and when the US develops such sources in an economically viable model, which can replace oil, then the world will follow suit and purchase the technology. This will dive down the price of renewable energy technology, as economies of scale kick in. For now, all that clean energy enthusiasts can hope for, is that Obama gets elected.

Whether this happens or not, one factor which is and will be affecting the economy of Beyond Oil and non Beyond Oil countries is the falling levels of investment in education. This can be felt almost everywhere. A prime example are the Persian Gulf countries. Fueled by a massive boom in oil income, many of them are struggling to find the suitable people needed to run their newly created companies and ventures.

The situation is much worse in developing Beyond Oil countries. In Libya, Muammar Ghaddafi's massive increases in infrastructure projects have left out the country's higher education system. Many talented Libyans who can afford to study abroad, do. Many of those who have to stay are unable to find suitable jobs due to sufficient lack of skills or that the job market is not ready for them.

It is very unlikely that there is going to be a major push at international level to get developing Beyond Oil countries to increase their investment in education. This makes their predicament even more worrisome as many are also failing to invest in their source of non oil energy.

This is a problem which the UN and many other NGOs can not solve on their own. Perhaps one effective way to remedy this situation,is to use market forces. Many countries take their credit rating very seriously. Should sovereign rating companies give more weight to investment in education and in renewable energy, with emphasis on the former especially, many governments could very well feel compelled to tackle this important issue. Otherwise, the situation will get from bad to worst.

End of Analysis

Meir Javedanfar, alongside Gordon Wollgam, is Project Manager and founder of the Beyond Oil project (http://beyondoil.net)

Beyond Oil and The $45 Trillion Challenge

Meir Javedanfar

07/06/2008

The new report from the International Energy Agency (IEA) does not mince its words. Released on Thursday 5^th of June, its major finding is that $45 trillion is needed for investment in non oil sources of energy in order to reduce carbon dioxide emissions by 50% by the year 2050.

As well as stating figures, the report gives an example of the infrastructure needed to achieve this goal. Amongst other thing, 32 new nuclear power stations will need to be built every year, for the next four decades.

The report also suggests that 215 million square meters of solar panels needing to be installed across the globe. A billion electric or hybrid cars will also be required.

To reach this goal, governments around the world will need to invest just over $1trillion every year. According to the London Times, this sum is equivalent to the gross domestic product of Italy.

This is a mammoth task, both financially and technically. Currently, the maximum number of nuclear plants built in the whole world per year, stands at 10. A huge increase in number of engineers will also be needed. They will need to be trained in Universities around the world to reach the required capacity to meet this goal.

There is also the question of proliferation. An increase in the use of nuclear energy will need a stronger mandate and inspection regime given to the International Atomic Energy Agency (IAEA) to ensure that such skills are not diverted for military use.

The same applies to the huge demands made from the solar power and car industry. Although both are taking strides in making non carbon emission sources of transportation and energy; it will take a long time and huge investments. For one thing, increase in demand for food means more land will be required for agriculture, thus making it difficult to find the massive amount of land required to implant the solar panels needed.

Price of failure, spelled out by the report is very simple. “Failure to act would lead to a doubling of energy demand and a 130 percent increase in carbon dioxide emissions by 2050”. This means even an increase of more than 50% in demand for oil, at a time when oil resources are depleting and prices reaching new highs.

Many of the Beyond Oil countries who are at the top of the “ Beyond Oil Index”, have better financial and governmental capacity to take the recommended path. It won't be easy and it won't be cheap. However with less corruption, more efficient markets and well established education systems, they are more prepared to meet the challenges ahead.

However the news for countries at the middle, to lower end of the chart is not good. While many of them are earning more income from oil, due to the current high prices, at the same time they have had to use their income to pay for higher food prices. This is in addition to new demands made from them (and the rest of the world) to spend significant amounts in their agriculture sector, to meet food demands for the future.

Therefore many such countries are likely to encounter an increase in demand for energy while their own sources are running out, together with increase in demand for food, without having the resources to produce sufficient amounts to produce locally or to import.

The foundation for this pessimistic prognosis is not based on lack of capability. It is more based on lack of willingness by the leadership of Beyond Oil countries which are run by corrupt officials and institutions. The only way they will be able to meet even half of the requirements for food and energy is through a massive spike in investment from outside of their own borders. The UN, other NGOs, nor donor countries simply do not have anywhere near the amounts required to provide as aid.

Investment companies will simply not be willing to risk their money in perilous environments. With the world facing a energy and food crisis, the focus should shift on the areas where it is legitimate to demand change, and that is corruption. This is the only chance we have to meet some of the institutional changes needed to meet the challenges ahead.

Without it, the instability which will be produced will not only create problems inside the countries whose leadership is corrupt. Such instability could very well spill inside their neighboring countries. Even for selfish reasons, Western countries should not allow this to happen. The first necessary steps towards the required solution are difficult, yet necessary. Just as the international community, especially Western countries are obsessed with Weapons of Mass Destruction (WMD) and countries on the path to acquiring them, they should start treating corruption and leaders who perpetuate them with the same attitude.

Meir Javedanfar, alongside Gordon Wollgam, is Project Manager and founder of the Beyond Oil project (http://beyondoil.net)

Weak Dollar Hurting Beyond Oil Economies

The weak dollar is good news for those who are planning to go on a shopping trip to the United States. It is also good news for US exporters.

However, for many Beyond Oil countries, it is bringing bad economic news.

One the one hand, the weak dollar is pushing the price of oil to new highs. While this brings more income, it is also putting more emphasis and importance on alternative energy. The problem for many Beyond Oil economies is that such investments will motivate more and more consumer countries to wean themselves away from oil, sooner rather than later.

The other problem is that many of the current Beyond Oil countries themselves are not investing enough in alternative energy resources. With the exception of Canada, Norway, US and UK, other oil producing countries are still way behind the goal of improving their alternative energy infrastructure.

As well as being unprepared for the supply of energy resources when oil runs out, the problem which this poses for such countries is that they will have no replacement for growing domestic energy needs. This means that they will have to use more and more of their own oil resources instead, thus missing out on the opportunity to export oil.

There is the problem of inflation. Many oil producing countries in the Persian Gulf region have their local currencies pegged to the dollar. This means that they also have to follow US financial policies, which currently involves cutting interest rates, in order to avoid recession. This works against the interest of Persian Gulf countries, as currently they are awash with oil money. Cutting interest rates has pushed in more money into their economies, thus increasing inflation. Some analysts have called for such countries to unpeg their currency from the dollar. For now, this seems unlikely, due to the close political and security relations between them and Washington.

So far, OPEC countries have refused to cut production, because as far as they are concerned, it is the weak dollar which is pushing up the price of oil, and not oil supplies. This illustrates short sightedness on their behalf. The reason behind the weak dollar is that the US economy is nearing recession.

If OPEC does not try to work with the US to avert this crisis, it could be losing valuable business from one of its biggest customers. This will not only have economic repercussions for OPEC countries themselves, it could have political ones too. With elections looming, recession could put many US plans in jeopardy, including possible withdrawal from Iraq.

End of Analysis

Kurdish prime minister says new South Korean energy deal constitutional

By: Meir Javedanfar

14/02/2008

Post war Iraq is not short of problems. The US invasion of 2003 created a huge split between the Kurds, Shiites and Sunnis.

Between all the different factions, the Kurds seem to have maintained order and security more than any one else. There is good reason for that. The Iraqi Kurds have wanted independence for many years, and now that they have the opportunity, they are trying to prove to the international community, especially the US, that they deserve it.

However, it seems that they may have gone a step too far. The recent signing of an oil agreement in the Kurdish region with a South Korean company has united the Shiites and the Sunnis against them.

The reason: the Kurdish authorities signed the agreement without the approval of the Iraqi oil ministry and the Iraqi parliament.

In other words, the Kurds are already acting as an independent country. This is against all promises made by the US that the 2003 invasion was not meant to split the country up.

For now, the Iraqi government has suspended the oil agreement. Iraq's President, Jalal Talebani, who himself is a Kurd must be very careful how he handles this issue.

Although Iraq's Kurds have good offices in the US, they are marginalized elsewhere, especially in the Middle East. With Turkey attacking Kurdish rebels in the north, it is possible that if Kurds split ranks, other regional countries may sit back and allow Turkey to continue with the attacks.

Furthermore, in Iraq's factionalized parliament, coalition building is very important. Should the isolation of Kurdish parties continue, it could mean that they may miss out on some important decision making opportunities, as well as positions in the government.

With infighting over oil causing so many problems, one wonders what Iraq's Beyond Oil future looks like, as the country has not taken any concrete action to resolve this issue. With its chronic security and economic problems, there is room for sympathy. However, the Iraqi authorities must make sure that the sympathy does not turn into long term procrastination.

Welcome to Beyond Oil Analytics website

This site is dedicated to analyzing the economic, environmental, and political factors which impact the preparedness of oil exporting countries for the beyond oil age.

Beyond Oil Analytics is part of www.beyondoil.net ; a comprehensive study which looks at the preparedness of the world's oil producing economies for the beyond oil age.

We will shortly be posting articles and we welcome any comments which you may have.

On behalf of the Beyond Oil Team

Meir Javedanfar