Friday, February 12, 2016

Tricky Situation for Syria -- and larger context of politics of oil

Tricky situation for Syria

This past month there has been so much gross incompetence on display in some of the debates in the US that other nations... have mixed views of the relevance of the US... to the point where they too risk making mistakes due to overconfidence and neglect of crucial details.

For the situation in Syria, Iraq and Turkey, for example,  I have found it very very useful to monitor France24 and even RT (which was once less useful), for some of the basic facts of life which I wish our candidates knew about. I especially remember seeing McCain protest very loudly about our “loyal friends” being bombed by the Russians – loyal friends who turned out to be al Nusrah, a branch of Al Qaeda! It reminds me of how certain folks in the US gave Osama bin Laden his start, with weapons and training. And it reminds me of how folks like Morgenthau and the UK foreign policy old guard would shake their heads at the wild impulsive self-righteous actions the US could fall into when we do not even attempt a bit of strategic thinking of any kind.

Though in fact there HAS been a lot of strategic thinking playing games in the Middle East... which I am warned not to outline in too much detail. (No, not by any intelligence agency. By stuff more like privacy rights, spiritual principles, and a little self-preservation.)

But... it is very disappointing today to hear that peace talks on Syria have not gone as well as the US, Russia and EU really need them to go. It is a serious matter. Kerry is being unusually clear and effective for a US representative, and the spokesman I see on TV today and yesterday is also unusually clear and reassuring. But... yes... balance is tricky. I can even hear Trump saying: “Hey, you still need the art of the deal here. Look at..” Well, maybe. I have never compared Trump’s Art of the Deal with Raiffa’s work on negotiation... but in any case, it is now a time and place where the dialogue
has real potential but has been hung up. And this IS one of the unusual times (much exaggerated by most Republicans) when the problem actually is in large part lack of respect for EU and US by Russian folks involved.

In essence, key people in Russia seem to think: “The US has proved itself to be totally idiotic in what it did, the whole world can now see that, and so we can now go back to simply winding this up and going back to Assad.” But it’s not so simple.  My response has been: “We in the West really do owe Russia a whole lot of respect and gratitude for all the blood and money it has shelled out to prevent a Sunni sharia extremist takeover of Syria, and we do need to learn to understand how tough rules of engagement are needed at times with that crowd, but Russia cannot afford unlimited flows of blood and money forever.” (I think of a great cat we once had, beloved both of my Russian Romanov type wife and my equally tough son... a cat who got himself killed in an all-out fight to the death with a coyote he tried to keep off our territory. I really would not want the great cat of Russia itself to kill itself that way! Really, seriously!). Folks need to understand the need to try to move to a more sustainable situation.

“What do you folks want anyway?”

Well, it’s not as if the West wants to dictate terms to Russia. That would be stupid. But there is some real analytical intelligence in parts of the US, Russia and intellectual centers in the EU. Surely we could analyze this in a cooperative dialogue, and come up with something a bit more sustainable (less risky and less expensive) than just wasting more blood and money ...

Not being a diplomat, I could even invoke the ultimate insult and ask whether Putin wants to be like George Bush and win in Syria the way Bush won in Iraq. “Oh, no, we don’t have such pride, and we will get out soon.” Yes, and the US got out soon too... we thought. And in all fairness, pride is something we all have to work to overcome.

“Well, do you have any specifics here of things you want other than some kind of support for Assad?”  

“Well... that should be mainly for the official dialogues. But there is one thing for sure. At a minimum, we really need strong safe zones for nonMoslem cosmopolitans, the kind of people who wanted a free Arab spring, with rights and at least some local autonomy. Secure regions. (Even Palestinians have some safe zones in the region controlled by Israel! Zones whihc would be safer if they truly agreed to not attack the others, as I hope the cosmopolitans would agree to here... but here we could agree to international checks. A better and safer use for your troops than the other stuff...)”

“Huh? Who cares about safe zones?”

“Well, David Cameron, for one?”

“Who the hell cares about him? He’s not even a real spokesman for the EU.”

“David Cameron is really crucial here as a peacemaker in the EU. Have you been watching what’s happening in the EU lately? With Merkel versus folks who could really bring us back to full-up Nazism? Do you want THAT to happen, for God’s sake? Cameron has been pushing for safe zones to meet the needs of Syrian refugees, as completely and sustainably as posisble, WITHIN the territory of Syria. There are lots of reasons why we both should be working as hard as we can to make his “third way” really work...:

Well, maybe. It is a tricky time.

By the way, the political prospects in the EU would be a whole lot better if they had any economist capable of understanding more than the hoary old 7-equation models in his or her gut. (The proposal at is written in ordinary language, without economics jargon, but reflects the policy optimization implications of a more complete multisectoral analysis.) Schroder might be able to catch on... but he is now employed by folks who get money from oil, and it is harder for people to see the long-term picture when they are overwhelmed by short-term constraints.

To wind this up, I append a couple of postings to a US energy discussion list relevant to the context of these conflicts,
supporting Obama’s proposal for a $10/barrel oil import surcharge:

================================================================= Later post:
Another key issue with this tax... is the possibility that today's low world oil price represents a market failure (at least so far as economics is concerned). More precisely: at a conference in Azerbaijan a couple of years ago, I agreed with the majority that the present low price is basically due to the Saudis exerting market power to keep the price low, for reasons beyond what market economics envisions, effectively amounting to their giving a subsidy to the rest of the world economy (in which they have large investments). I argued that it would be a win-win Pareto optimal solution BOTH to move gently to a much higher price AND to push harder the kind of technology development which would allow the world to WITHSTAND higher oil prices without the kind of collapse we saw in 2008.

In other words... if the OECD+China economy (OECDC?) could afford to pay twice as much for oil, without endangering the investments of the Saudis (and a few other financial folks)... the Saudis could cut back production and raise prices, and save more oil for the future, when it will deserve/command a higher price (as true Islamic finance really demands), while we could avoid economic depression and be better prepared to survive in the long term (with more security). 
According to Scheuer ("Anonymous"), overrrapid exploitation of Saudi oil is one of Al Qaeda's three top reasons for attacking the West, and maybe that is the kind of grievance we could "make a deal" on (to quote Trump). 

But part of me is amused... that as soon as I advocated for a higher world oil price, folks took such strong steps to achieve the opposite!!

Well, there are also external variables, like money seriously leaking from Saudi to seriously bad politics. But Obama's suggestion is a great example of what economists call "the theory of the second best": if we can't get our economic Pareto optimum, for whatever reason, and if worldoil is underpriced, we CAN at least get the US oil price a little closer to the true market value of the oil, thereby both helping the US with its budget/debt issues and giving better signals on a level playing field  to activities within the US, which include activities ranging from fracking to hybrid cars. 
(Some theorize that Saudis were not protecting the world economy, but trying to bankrupt oil fracking, where they have in fact had a huge impact. Either way, Obama's action, second-best, makes sense.)

================ Earlier:

Someone asked:  'At these low gas prices'. Cheap is a pretty poor rational for taxation. And to what end? My question is: Can anyone show that such a tax would really reduce the threat of climate change? That is something I'm concerned about.

My reply:

What do REAL economists say about this? I am amused that this question comes after I lectured some family members about Walras, Paul Samuelson, Ken Arrow and Joan Robinson -- real foundations for what we understand about market economics, unlike the growing PR blather which confuses so much of the local discussions lately.

From an economist's viewpoint, I might rephrase Rosemarie's question as: are the externalities here (the additional costs not paid by the person who buys the oil) large enough to justify a price as high as $10 per barrel?

In a way, I might ask Mike to run the numbers. If the social cost of carbon (SCC) is, say, $30 per ton of CO2 (i.e. $90 per ton of carbon as such in CO2), as Mike once estimated, what does that give per barrel? I could calculate that myself, but:

(1) Is that the real SCC? I once thought $30/barrel was reasonable, but now see damage from climate change as far more serious that I once believed:
Naturally, many folks do not have time to look at the logic and think for themselves, and ask: "Why don't we see this in Nature or Science?" Several reasons. When last I discussed this with a friend who publishes regularly in SCience, he said that "It's even worse than YOU think... we all know this... but the political forces repressing it all have grown worse and worse... and we simply give up. I have a nice house on the beach." On the other hand, the problem is nonlinear, and simple externality payments may or may not be enough to give us much hope anyway.
Lately, I am starting to hope that the H2S stink from the smaller problem in the Arctic might wake people up enough to give us some hope of acting in time before the huger fatal problems from the Antarctic kick in (starting in waters off of California, Japan and China). 

Some folks say: "The price is oil is low, so why should we worry?" Well, there are some of us who believe that the future of the Middle East is not something we should ASSUME will be sweetness and light, and who also believe that fracking for oil will not last forever either.
Is the ability of the US to survive so much as 20 or 30 years in the future of any significance to any of us today? That's a really fundamental ethical question. In economics, it relates to the very serious debates about the right real interest rate to use in making long-term decisions,
and to the question of what to do in nonconvex or "crossroads" situations. I could say a lot more about that... but in the end, my claim is that competent technical economics is capable of living up to the obvious idea that maybe we would prefer our nations and our descendants to live, rather than die. Politics involving the Middle East really are a matter of life or death, in the most literal sense, for all of humanity,
and there really are very substantial externalities there!

At the end of the day, I do not see the $10-per-barrel import fee (similar to things in Japan and EU) as anything like a complete answer to the climate or security challenges, but do see it as fully justified in terms of the externalities.  GIven a choice between that and nothing, I would choose that. But at the same time... I would really hope that the next elections could be won by folks more serious about a more complete strategy to address both challenges (e.g. per the addendum below, probably close to the white paper approved recently by IEEE
and on the site of, the world's largest engineering society, which manages the most complete and credible technical peer review system in the world).


My final reply to an offline question:

The Transportation Addendum to the National Energy Policy Recommendations (NEPR) basically elaborates on a section of the brief recommendations in IEEE's National Energy Policy Recommendations (NEPR). The organization felt that the recommendations were specific enough for formal purposes -- but planned to encourage things like face-to-face discussions of specific ways to implement them.

Time has passed... but I seem to recall that one of the recommendations looked a lot like support for some kind of Open Fuel Standard bill, and the Addendum certainly substantiates that kind of thing. In broad terms, I still see it all as consistent with the much more specific legislative proposals, still as timely as in 2009, posted at

For myself -- if the folks in Washington really tried to balance competing goals in a Pareto optimal way... I would be especially interested in getting folks to consider RATIONALIZING Bush's renewable fuel standard (RFS) rather than perpetuating or abolishing it, as purists of the left or the right assume are the only choices; one section of Specter's bill, posted at, could be easily adapted to be brief standalone bill to accomplish just that -- substantially improving national security (as "w" envisioned when he pushed all that) while substantially increasing flexibility and reducing cost (the most important legitimate concerns of the industry here). Instead of a war between national security and the energy industry, why can't we go for a Pareto optimum of the two? I really wish someone knew a workable way forward on this... because there is ever so much at stake...


Added later:

OK, I'm not a diplomat. Comparing Putin to George Bush on any basis whatsoever was not
a kosher thing to do. (But maybe Trump would say that being a good diplomat is not always the same as being diplomatic?). The analogy between what Russia is doing in Syria, even just giving a total green light to Assad (the guy whose recent statements really drive the West up a tree), and George Bush's invasion of Iraq, is the kind of comparison no one wants to think about, Just as no one wants to think about H2S poisoning everyone on earth. We humans really do have limits, and we do have to manage our limits. Just as Putin might not want to think about that comparison, and its unpleasant implications requiring all kinds of complex thought and sticky stuff... I guess I have my limits too. It is equally hard for ME to think about how it is the Erdogan Turks, not the Russians, attacking safe zones for Kurds!!! What do we do about THAT? What an incredible mess. But I have the excuse that
it's not even remotely my job, and I do have two nontrivial personal commitments coming up (for nontrivial talks, one a week away and one about three weeks).....

One friend has even said: "Hey, NOTHING is your job now. Denial is an important defense mechanism for folks who can't do anything anyway."

Yes, but:

(1) I keep remember what Hannah Arendt once said, "All that is required for the triumph of evil is for good people to do nothing"... not to mention Wiesel's poem "there was no one left to come for me"... aptly mirroring the recent transformation of the US executive branch;

(2) George Valliant's study shows quite directly and forcibly that there are OTHER defense mechanisms besides denial, ones which work better,

Giving up would be ever so justifiable and natural... but logic keeps pushing in another direction.

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