Why is world not changing?

The world has changed a lot since my last post in 2008, especially the global oil and gas industry. The largest hydrocarbon importer of 2008 is now set to be an exporter. What a change of fortune?

However, the politics around it has not changed much. US is still present in Mideast and so are some other western countries. Also, it seems they are going to be in this region for a longer haul.

And again the story revolves around oil. Or at-least this is what it looks like. Who will not be interested in Iraq's large oil reserves? Both ISIS and US and its allies eye these for different reasons, not to undermine the local and regional Shia-Sunni political equation. Other regional players are equally feeling the heat.

Is this a worthy war  for US? Why does it get into this muddled water repeatedly? And pays heavy price each time. Will US ever learn?

For the region, issues have remained the same, probably got more complex with time. Unfortunately each workable solution has led to another problem, each time bigger than the previous one. No final solution in sight.

Events of past have just become memories for present and future. Not good memories though.

 

Oil bullying: Love me, love my dog

Oil bullying is not a new phenomenon, and has been part and parcel of oil politics for a long time. In a globe clearly divided into camps of ‘haves’ and ‘have-nots’ (in oil and gas perspective), the growing instances of latter being victimised by the former is quite natural. Earlier US, largely an oil-importing country, was the only original Big Bully doing anything it wished to do for its energy security. It used its oil-giants in bullying the suppliers, but those were the good old days. In the current scenario of growing global energy requirement and increasing price hike, there is resurgence of several oil bullies, notwithstanding US influence. Now the players have changed and so has their mission.

Presently, Russia, the largest exporter of gas and second largest exporter of crude oil, leads the pack. Under the Putinist rule, it made every effort to regain the super-power status, by making deliberate attempts to spread its tentacles all over the Europe and CIS. Europe’s thirst for gas made itself a very easy target. Even before Russia had started making inroads into Europe, it had tried to influence foreign-policies of several CIS partners. Russian refineries, which had subsidiaries in many of these countries, had stopped making supplies in guise of 'maintenance shut-down or commercial consideration', as and when a government of choice was not elected or a suitable bill was not passed in their parliaments. Ukraine, in 2005, suffered from its 'old ally'. Recently Russia stopped making oil supplies to another one time ally-Czech Republic- when the latter signed a missile treaty with US, it was merely a replay of the old game. Russia also tried to influence many countries to sell their natural gas companies to Gazprom, or face the consequence of ’No gas for you'.

The bad news for oil-importers' camp is that oil-bullying is a growing tribe, though sometimes in a very veiled manner, with many new and unruly players gaining prominence. Thanks to the growing demand of oil, some of these players even use their prominent clients (oil importers) to gain international recognition and thus continue the misrule, like Sudan and Myanmar did with help of China.

Certainly not good days ahead.

123: Staying Alive

Indian politicians never fail to give surprises, but the present U-turn by Samajwadi Party (SP) was cut above the rest, truly a masterpiece. A party which had made tormenting the ruling party, a part of its manifesto, was joining centre in the 'national interest'. This 'patriotic juice' had just started flowing in their veins, and thanks to this 'new found love' , the country may be saved from an early election.

Left did right by pulling out the support. After taking the central government on ransom for more than four years, it had already made full use of its 'support'. Left was poking nose into every economic policy in guise of 'interest of masses’. Had this 'right decision' been taken two years ago, it could have saved the Indian economy, especially the oil industry, from getting into this abyss. Elections or no elections then, by this time we could have seen the nuclear deal through (seeing the increasing energy need of India and rising oil prices) , assuming any party or alliance would see the real worth of this deal and not the politics alone.

The 123 agreement is a highly misunderstood document and I am pretty sure, none of these national leaders are supporting or opposing it for the merits or demerits of the deal. Left is opposing because the agreement finds its origin in a capitalist country, America (I wonder what would have been Left’s response, had Russia proposed this deal) . Bharatiya Janata Party (BJP) is opposing because its job is to oppose any thing that is tabled in the Parliament by the ruling alliance. Decisions of other smaller parties depend on their 'present' allegiance (and not ideological allgiance) to the two major national alliances-UPA and NDA.

The ruling party, on the other side, will be the real winner (after off-course, Indian civilian nuclear energy sector and many other companies who seem to benefit from this deal). If it sails through the deal, which seems more likely, it will take the credit of bringing India into the league of select nuclear countries, and rightly so. But unfortunately if it does not, then the ruling party will get into the election ring with a martyr's image, though making full use of this will depend a lot on their PR skills. In the entire story one disturbing factor that seems to mar the ideologies and national interests, is their (political parties') tendencies to cling to power, under any circumstance . Even the delayed courage shown by the Prime Minister looked like aggression of a dying snake. Sometimes, it does not work.

National Interest. Bullshit!

Roma: Burden of history or People of Indian Origin (PIO)

Last week The Economist (dated Jun 19, 2008 ; link http://www.economist.com/world/europe/displaystory.cfm?story_id=11579339, Europe's Roma: Bottom of the heap,) came out with a detailed heart-wrenching report on pathetic condition of Roma, a nomadic tribe spread over several east European countries. Not only did it sent shivers down my spine, but also compelled me to think how this world, irrespective of race and ideology, treats or mistreats its marginalized communities.

Romas are believed to have migrated from the Indian state of Rajasthan around a thousand year back. Presently they are spread all over the Eastern Europe, with their major presence in Bulgaria, Romania, Czech and Slovak Republic, Italy, Serbia etc. Some of their brethren have even migrated to Western Europe, North and South America. Their Indian connection was known only in the nineteenth century after a thorough research of their language and rituals revealed linkage to Sanskrit language. Why they left India- is still a mystery, and though many theories are floating around, ascertaining the reason is very difficult in want of any written account of this tribe. They have remained nomads for centuries, but recently they have started settling down in certain parts of world. Their exotic looks (relatively dark skin and hair), rituals, language and life style have been the major reason for discrimination and abuse through the ages.

Numbering 10-12 million on this planet, Romas have suffered the worst form of genocide in human history, under all types of governance, that is, monarchy, communism, capitalism and so on. Despite that, they have not been able to garner support for change in their status, from big countries because of their spread and lack of unity. If US and UK can create a separate Israel state for Jews, can they not think on the similar lines for these victims? Even now they live away from the city and villages, in dilapidated houses under most inhuman conditions. A lot has been written about their condition, but not much has changed till date, and hence an honest relook from UN/UNDP is required to tackle this problem. They are stigmatized in their respective countries, often labeled as criminals, and always at the receiving end from the local population and police, alike.

India has long forgotten its earliest 'People of Indian Origin' or PIOs, as they are commonly known. I do not know whether Romas qualify as PIOs or not, and if they do, what advantages can they get. India's record, nonetheless, has been pathetic in saving their better known and proven brethren (in Fiji, Malaysia, Afghanistan etc) and hence not much should be expected even if they are recognized as PIOs. Nevertheless this will help developing a sense of belongingness and tracing the umbilical-cord connection with their country of origin. The Indian government can at least, grant loans or help respective governments in improving the condition of Romas by providing them with basic amenities and proper education. Honor, dignity and prosperity will certainly follow.

In the annals of history, those who fought for the country (ancestors of Romas were the first command of defense against the Ghazni attack) and got slaughtered, did not find anybody to support, when they looked back.

It is ironic, but true.

Is anybody listening?

Was Arun's appointment a ploy to enter Indian market?

Recently when Arun Sarin announced his stepping-down from the helm of British telecom giant, Vodafone, it was a story of mission accomplished. He had transformed a ‘British telecom company which ‘also-had-presence-in-some-other-countries’ to a global company whose roots are in Britain. In other words, a British company (or utmost an European company) was transformed into a global company. Also he directed the company from the low-growth or saturated markets to high growth and emerging markets. No wonder, his financial gains (as best paid executive in Europe) and then a handsome ‘golden goodbye’ of £25 million, were much discussed in many newspapers and news web-sites.

But this is not my topic of discussion.

I believe that Arun’s ascension to the top post after Christopher Gent or his stay even after the AT&T fiasco, was a well-devised ploy (or strategy, if it sounds better) to get into a booming and growing Indian telecom market. Vodafone did not want to get into the pain of building necessary retail telecom infrastructure over the years, and hence a buy-out (as it happened with Hutch) seemed to be a preferred route, though expensive. Such foreign buyouts do invite flak, especially from nationalists and competitors. An Indian at the top-post would certainly give the consumers and approving officials a feel of ‘our own boy’. The apprehensions of xenophobic diatribe, which can mar any entry-strategy, and its consequences on their plan, seem to direct their decision of keeping him at the post. Having said so, I do not intend to undermine Arun’s impeccable credentials, but my observation is based on the ‘timing’ of his ascension and (more on) stepping-down.

When the Hutchison buy was declared, the media flashed his photographs everywhere in India, giving a sense of ‘one of our own India-bred boy’. His tour itinerary was well publicized and his meetings with ministries and top officials well covered in print and television media. The necessary regulatory clearance was his biggest problem, not to forget the following legal and tax hassles, some of which are still pending. For any Brit or European, who is not aware of this work-environ and red-tapism, this could have been a nerve-breaking experience, but Arun’s roots and connections (also at personal level) made the job easier. He had his share of worries during this entire transaction, but his understanding of local market (again because of his Indian connections) came handy.

And within months (or weeks) after the deal started stabilizing, Arun made-up his mind to step down as CEO, sensing the job (of getting entry into the market) was almost over. Apart from the tax issue, other problems have been amicably solved, without much brouhaha. And in this ‘win-win-win’ game, Vodafone got a readymade Indian market, Li Ka-shing (owner of Hutch stake) got the money he asked for, and Arun got a job (and money as well) where his success will be remembered for years to come.

Was it is a mere coincidence that once that Hutchison deal was complete, he thought of stepping down? Or Vodafone wanted him to continue only till the deal sails through and entry into Indian market is complete?

If the latter is true, and if there are many subscribers (transnational companies) of this idea, can we see many of ‘our own India-bred boys’ take over control of global companies and attempt entry into Indian market?

If it was really a ploy, let this work for India and Indians’ benefit.

Oil: Is there any light in sight?

Oil-price hike is most probably the hottest topic today. Ask anyone about the issue and chances are, he will surely have some view-point. Viewpoints depend a lot on on whom you are talking to and this makes the understanding of the problem even more difficult. OECD members blame the growing demand from emerging countries like China and India, exporting countries put the blame on weakening dollar, importing counties but the blame on oil producing countries and so on. The prices are certainly complex function of all the above and lot more. Since more than 80% of the global population is bearing the brunt, I am trying to make a layman understand the complexities involved, through this post.


Logically price is a function of demand and supply but in current context, the price is really not following strictly the laws of economics.Geo-politics, increasing fear of depleting oil and peak-oil theory (and not having any alternative of oil even after 130 years), increasing demand by China and India (the growing demand centres) and lastly a weak dollar (mode of transaction of more than 95% of oil trade) seem to be the main contributors of this problem.

After a stable or depleting North Sea (Europe) and Gulf coast (N America)oil-fields, Mid-east, Africa, Russia and S. America are feeding the global crude oil requirement.Unfortunately all these regions are politically unstable. US-Iraq, US-Iran, Israel-Mideast, Nigerian attacks are affecting the price, creating panic amongst the buyers.

Off late, China and India has started showing their presence in the energy market. Emergence of manufacturing sector, growing numbers of vehicles and domestic consumption have been the main factors. The demand in these countries is increasing at a much higher rate than global average, whereas OECD consumption growth is negative. Without doing much number crunching, a quick glance over the energy-globe will give a fair idea. Increasing presence in Africa (where many oil producing countries are situated) as investor and buyer is a testimony of their growing demand. And none of the present studies show any decline in consumption in a five-year time frame, to say the least.

On the other hand the supplies is dwindling. Oil is a depleting resource .Peak oil theory endorses that the oil production is decreasing and within a span of 60-70 years (this figure is highly debatable) oil may start showing disappearing signs. The major oil-fields are already seeing decline (Africa is a likely exception) in production and not many new finds are substituting them.Growing demand and declining supplies are deadly combination for further price hikes. With no clear commercially exploitable alternative in sight replacing crude oil, a bleak and black future awaits oil importing countries.

Weakening dollar is also doing its bit.Crude transactions are mostly in dollars and a weak dollar certainly does not help. Weak dollar reduces the value of crude for producers (when the buyers' currency is not dollar) and hence in return the price increases to offset the same. Though Iran is the first major oil-producing country ( though Iraq was also supposed to have done it in the past) to convert to euro, the decision is more politically motivated. Moreover euro cannot be seen as a threat to dollar at present, because of difference in magnitude of transactions done in both currencies. This leaves a strong dollar only bet for oil importing countries.

All said and done,it is very difficult to finally single-out one reason for this price hike. It is a complex function of above and much more. High corruption in many oil-producing countries, ongoing civil wars etc add on the speculation and keep the prices abnormally high. Prices of US$ 200 per barrel, which at present seem to be highly speculative (and it is so) can become reality in few months, as it happened with price-forecasts of US$ 100 and US$ 125 per barrel.

Till then read this blog and enjoy.