The changing global energy landscape has dealt the United States a new set of cards, offering it a choice of whether to wield its power as a stick, as Russia has attempted, or as a tool to foster a more stable international order, according to a new report by the Brookings Institution.
Bruce Jones, who directs Brookings’ Project on International Order and Strategy, collaborated with David Steven and Emily O’Brien on “Fueling a New Order? The New Geopolitical and Security Consequences of Energy,” published Wednesday. The trio’s report examined the impacts of the domestic energy revolution to international energy markets, a topic being studied by a host of analysts.
Natural gas and oil stockpiles are “rapidly strengthening America’s global hand,” said the authors. “Among the consequences is an accelerating shift in Middle Eastern oil, away from the United States and toward Asia,” which helps explain fractures in late 2013 between the United States and Saudi Arabia. “It has never been the easiest of alliances, and is now troubled by many other strains, notably dissatisfaction with each other’s policy toward Egypt and Syria.”
However, under the surface is a more deep-seated anxiety because the “oil for security” bargain reached in 1945 by President Roosevelt and Saudi royalty “is breaking down” as negotiations between the United States and Iran threaten regional leadership.
“The royal family is feeling dangerously exposed,” wrote Jones and his colleagues. “The current rift would likely not be as wide or as public if oil patterns weren’t changing. Saudi Arabia may still be America’s No. 2 source of imports after Canada, but the future direction of Middle East supplies is becoming clear. They’re heading to Asia.”
This transformation has resulted in a “risk pivot” to Asia. It’s not only U.S. foreign policy that’s pivoting, “with the shift in energy flows has come a shift in risk exposure.” The United States long has been exposed to the geopolitical risks of energy production and transportation, “but now, increasingly, so too are the Asian powers. There are price risks, political risks and — not least — significant risks associated with pollution. Chinese and Indian policymakers are scrambling to understand these risks and to work out how to manage them.”
Strategists in the United States may be tempted to encourage Chinese fears and use energy to pressure its “most significant rival,” said the authors. Others may see the opportunity to disengage from the Middle East.
“While beguiling, these are false choices. Asia’s risks remain, to a very large degree, global risks. China may be a geostrategic competitor, but it is a critical economic partner, and the United States has a powerful interest in seeing India — in 20 years, a country of 1.5 billion people — continue to tread the difficult path toward widespread prosperity. Nor is it conceivable that the United States can disengage itself from trouble in the Middle East any time soon.”
A U.S. global presence and allied structures in the region will be in place for a long time, even if military deployments receded from post-9/11 highs, the report said.
The United States and its core allies remain exposed to natural gas and oil price risks. While more domestic production may help hedge the risks, U.S. industry and consumers “will still feel the pain when energy costs are high.. And Saudi Arabia will continue to have an outsized influence on prices of oil, irrespective of where its oil is destined.”
The energy transformation is in its infancy, the authors noted. It may be another decade before the market, political, geopolitical and climate implications fully manifest themselves. However, the basic contours have begun to take shape.
“Global institutions are not yet well configured to help. Despite a recent proliferation of institutions, crucial gaps remain, and they fall short of an effective system for global energy governance. A combination of American leadership, overlapping interests with the emerging Asian powers and G-20 creativity are the most likely channels for knitting a more effective system for energy and climate governance. But tense geopolitical issues remain an obstacle.”
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