Energy Politics

Chapter 2. Foreign Policy

Chapter 2 Foreign Policy Energy is both a factor that influences a state’s foreign policy outcomes and a potential tool of foreign policy. Enhancing energy supply security is part of the national security agenda of energy-importing states, while the goal of assuring stable markets is on the policy agenda of exporting states. Stable access to oil, including during war time, is a component of military planning and national security policies, and lack of access creates a diminished military capacity. During periods of tight international energy market conditions, energy tends to become a more prominent factor and tool in states’ foreign policies and a higher priority on their policy agenda. At these times, energy needs affect the foreign policies of importers as well as exporters. One of the major developments of the early twenty-first century is the dramatic expansion of physical ties between states through energy infrastructure , mainly because of the increasing use of natural gas. This development fosters long-term linkages and at times dependencies between suppliers and consumers, and thus more room for politics. Stable political relations between producers and consumers are also a prerequisite in most cases to long-term pipeline linkages. Moreover, assessments of long-term political stability in concerned countries and in the relations between suppliers and consumers is an important consideration when investors assess a proposed infrastructure project. The state of the world energy market affects broader international relations and vice versa. Oil use affects the structure of the international system itself: it creates an element of interdependency in the international system. Since oil is a global commodity, each country’s demand affects the price and supply availability of oil for all consumers. In addition , instability and conflict in any major oil producer often affects oil prices worldwide. Energy creates an additional link between a state’s domestic and foreign policies. The impact of hydrocarbon use on climate change, rising Foreign Policy 29 energy prices, and concerns about energy supply availability have transformed domestic energy consumption habits and policies into a matter of international political interest. This internationalization can also be a source of conflict as states attempt to coerce others to change domestic energy taxation policies, adopt energy and fuel efficiency standards, and join international regimes that entail limitation of hydrocarbon use. Politics is also playing an increasingly important role on the supply side with greater state involvement in the energy arena. More than 75 percent of the proven oil and gas reserves in the world are in the hands of national oil and gas companies. The state, directly or through the national companies, is often a major investor in production and export projects. Moreover, the state is often the regulator of these same projects and uses that function to promote its commercial and political interests. Russia, for example, has pointed to environmental considerations to justify pushing out foreign competitors in favor of Gazprom and Russian oil companies. Energy supplies are frequently viewed by suppliers, consumers, and transit states as a potential tool to promote foreign policy and security goals. With rising European dependence on natural gas supplies from Russia, and a string of energy disputes between Russia and many of its former Soviet neighbors in 2005–2006, there has been considerable commentary warning about the danger of the ‘‘oil weapon’’ and the ‘‘gas weapon.’’ For example, U.S. senator Richard Lugar (R-Ind.), a leading U.S. lawmaker on foreign policy issues, has stated that ‘‘the use of energy as an overt weapon is not a theoretical threat of the future; it is happening now.’’1 Energy importers have attempted to formulate policies to reduce their vulnerability to these perceived threats. Yet, despite the rhetoric of policymakers and pundits in both supply and consumer states, intended major oil and gas supply disruptions have been few, and in most cases initiated not by suppliers or consumers, but by transit states. A number of issues about the relationship between states’ energy and foreign policies need to be examined. They include increased international interest in regime stability in key energy producers and transit states; resource nationalism; windfall profits and foreign policies of energy exporters; energy weapons and embargos; and relations between gas importers and exporters. The New Focus on Political Developments in Energy Exporters Tight oil market conditions lead to increased internationalization of domestic political developments in oil producers and key transit states. Domestic political turmoil in an oil-producing country—or its involve- [3.142.174.55...