So what exactly was the point of the IEA’s emergency stocks release? Alex Evans1

Oil prices rallied more than $3 a barrel on Wednesday, recovering all the losses triggered by last week’s decision by rich consuming nations to release strategic oil stocks.

Brent crude, the global benchmark, jumped to a peak of $112.48 a barrel, the highest since last Thursday, when the International Energy Agency announced its members would sell 60m barrels of oil, the third co-ordinated sale from the reserves in the organisation’s history.

Amid heavy selling in the days that followed the IEA’s move, Brent traded as low as $102.28. Since that level was reached on Monday, however, prices have rallied 10 per cent, or just over $10 a barrel. A reappraisal of the impact of the IEA’s intervention triggered the reversal. Traders have shifted their focus to an expected oil supply squeeze in the next few years instead of the prospect of an additional 2m barrels a day of oil for a month.

“The reality remains that the current market is still grappling with a structural change that has effectively resulted in the gain of some five years of oil demand in one year,” said Amrita Sen, oil analyst at Barclays Capital.

That’s Jack Farchy in the FT, today. I did wonder what the IEA thought was going to happen if the reason for high oil prices is structural rather than just a short term shock…

The IEA’s emergency stocks mechanism was built to respond to short-term, sudden-onset shocks. But if (as the FT’s Javier Blas argues), Libya’s oil production is “not going to recover any time soon”, and emerging economy demand for oil is proving notably robust, then that’s not a shock at all. It’s structural. And if it’s structural, then how does releasing stocks solve anything?

Global Dashboard post, 24 June

What happens in Palestine after the UNGA vote in September? Alex Evans3

Talking to a senior Middle East expert a few weeks back, I was struck by his blunt assessment that after the UN General Assembly vote on Palestinian statehood in September, he fully expected there to be a third intifada immediately afterwards – except that this time, it would be nonviolent. So it was interesting to see this little nugget in Haaretz today:

As September draws nearer, the Israel Defense Forces has been conducting drills in order to contend with the possibility of a mass civilian uprising in the West Bank in the wake of the Palestinian bid to seek unilateral recognition in the United Nations.

“A non-violent protest of 4,000 people or more, even if they only march to a checkpoint or a settlement, and especially if the Palestinian police does not deter them, will be unstoppable,” one IDF officer claims. “Such a great number of determined people cannot be stopped by tear gas and rubber bullets.”

Another high ranking IDF official serving in the territories claimed that “if we are to face protests similar to those in Egypt or Tunisia, we will not be able to do a thing.”

Why is there only one MDG on education but three on health? Alex Evans3

Did you ever wonder why it should be that there’s only one Millennium Development Goal on education, but no fewer than three on health (specifically, on child health, maternal health and HIV/AIDS)?

I found out the answer yesterday, while talking to some of the people involved in pulling together the MDGs a little over a decade ago. The reason, apparently, is because the UN system has three agencies leading on different parts of health – UNICEF on kids’ health, UNFPA on maternal health and UNAIDS on HIV – and they each wanted an MDG of their own. Bless. Hurrah for system coherence.

No honeymoon for Ban Ki-moon Richard Gowan2

As Colum Lynch notes,  Ban Ki-moon has been showered with “glowing plaudits” since he won a second term as UN Secretary-General last week. In a short memo to Ban published yesterday, Bruce Jones and I offer our own (slightly qualified) praise:

Dear Secretary-General,

Congratulations. You have not only won a second five-year term at the United Nations, but you also won with a minimum of fuss. In a month in which the Security Council has been rocked by disputes over Syria, all fifteen members backed you. Last week, the General Assembly gave you unanimous support.

You’ve had a lot of critics since you took office in 2007. They’ve called you a poor manager and an uninspiring public figure. Some will doubtless grumble that your success this month reflected your capacity to avoid controversies with all the major powers. But politics is politics and a win is a win. You have also taken a courageous and consistent stance in favor of the Arab Spring, belying your reputation for caution.

OK, that’s not exactly “whoop whoop, go Ban, yippe-aye-yea!” But as Bruce and I go on to point out, Ban has no time to rest on his laurels:

The top three immediate concerns are Libya, the wider Middle East and Sudan. If you fumble on any one of these, you’ll risk being written off as a lame-duck Secretary-General rather fast:

• Libya: the anti-Gaddafi coalition has asked you to plan for post-conflict recovery, and this is already underway. There’s a high chance that you’ll end up having to manage a very messy post-conflict situation, and while nobody wants to turn Libya into another Kosovo a fairly hefty peacekeeping force could be required to restore order. There are good models out there – think of the way the U.N. responded in southern Lebanon in summer 2006, mobilizing a serious force within a week. At a minimum, the U.N. may have to deploy a sizeable civilian political mission to oversee a transition to democracy as it did in Afghanistan. The U.N. is short of good Arabists and deep expertise on Libya. You’ll need to invest personally in ensuring that the U.N. deploys a credible mission.

• The wider Middle East: beyond Libya, there’s potentially huge demand for the U.N.’s services in mediation, electoral assistance and constitutional reforms across the wider Middle East. Six months from now there could be U.N. assistance missions in Yemen and Syria as well as Libya. But again the lack of qualified U.N. personnel is a problem. In most Arab countries, U.N. development officials worked hand-in-glove with the pre-revolutionary regimes. The sheer speed with which events are unfolding in the region is also difficult for the U.N. bureaucracy to keep up with (although it’s hardly unique in that). You need to think about restructuring the organization’s presence across the Middle East and North Africa, possibly under some sort of regional presence or a super-envoy mandated with ensuring that the U.N. can respond fast to requests for assistance.

• Sudan: at the start of the year, the U.N. oversaw a successful independence referendum in South Sudan, which will achieve statehood in July. But violence on the border between North and South Sudan has intensified, the North has launched a separate and vicious campaign against rebels in the Nuba Mountains and South Sudan’s infrastructure is in an appalling state. You can take a good chunk of the credit for the successful referendum. But you must now take responsibility for ensuring that the new South Sudanese state gets effective governance assistance and that U.N. troops are sufficiently well-armed to deter further violent flare-ups. It’s pretty hard to explain why the international community is spending almost $1,000,000,000 maintaining troops in Sudan if they can’t respond to even small flare-ups, let alone forestall another major round of violence. Sudan is also a test case for your proposed reforms on civilian staffing – seeing those implemented will require you to personally back your chosen SRSG in taking a creative, flexible approach. You can and should challenge the member states to support you on this.

Ban has lots of other issues to tackle over the next three years (climate change, the MDGs, food scarcity, you name it) but he needs to get a grip on these immediate crises if he is to have the credibility to tackle other problems.

How policy encourages the banks to fleece us Mark Weston3

Yesterday’s El País carried what to me was an extraordinary story about repossessions of Spanish homes. The recession has seen the number of repossessions in Spain rising to 100,000 per year, but far from suffering for making dumb loans, the country’s mortgage laws allow banks to profit from their clients’ failure to pay.

Repossession policy dictates that if a propert has to be handed over to a bank because its owner cannot keep up with mortgage payments, the bank must endeavour to sell it at auction, and use the proceeds to reduce the amount owed. In the current, stagnant environment, however, nobody is buying, even at repossession auctions, and much of what is on offer goes unsold. Such an eventuality does not perturb the banks, however – indeed, they are probably delighted not to sell – for in the event that a property fails to attract a buyer at auction, the bank gets to keep it for 50% of what it is adjudged to be worth.

Let us say, therefore, that someone has taken out a €100,000 mortgage on a house which at the time the bank judged to be worth €100,000 (many banks, of course, made 100% loans during the boom), and that after paying, say, €10,000 plus interest of that loan the debtor loses his job – not uncommon in a country with 23% unemployment – and can no longer make his monthly payments. The debtor now owes €90,000. The bank tries to sell the house at auction, with a reserve of €75,000 (the Bank of Spain says official house prices have fallen 17%, and the bank knocks off a bit extra to make it look like it is keen to sell). Nobody is interested. The house goes unsold. The bank acquires the house for €41,500 (50% of the official value of €83,000), and the debtor, who is now homeless and jobless, still owes it €48,500, plus interest.

It won’t have escaped your notice that this is a remarkably good deal for the bank. First, it received €10,000 plus plenty of interest – let’s estimate a further €10,000 – from the hapless debtor before he lost his job. Second, it is still owed nearly €50,000 plus interest. And third, it has acquired a house worth perhaps €60,000 (if we ignore the overoptimistic official figures) for just over $40,000. Even if the debtor now does the sensible thing and tells the bank where it can put the rest of the debt, therefore, the bank will have lost just 20% of the loan. Most debtors, however, will not be so bold, and will attempt to pay back the rest of the loan for fear of losing their hard-won creditworthiness. In the latter cases, the bank will have made a profit on the original €100,000 loan of €20,000 plus several additional tens of thousands in interest, so unless significantly more than half of debtors tell the bank where to go it cannot lose on these deals.

Of course, the above example is theoretical and the actual figures are likely to vary somewhat – the bank might sell the house for €70,000, adding another ten grand to its haul, and there are costs of selling to account for too. But unless I have miscalculated it does not seem too far-fetched. Under the current policy, banks benefit by making bad loans. Since most people will try to pay back the loan even though they no longer own their property, banks can easily withstand a few bad debtors, and it is not surprising in an industry where profit rules that their vetting policy is less than rigorous. A couple of commentators in the El País article recommend raising the 50% of the value at which the bank acquires the property to 70% – this would seem a bare minimum to avoid the moral hazard created by the current law. The protesters in the 15-M movement rightly blame the banks for causing the housing crisis, but where policy puts them in a no-lose situation it is inevitable that many will take advantage.

Jeffrey Sachs pens a love letter to Ban Ki-moon Richard Gowan1

Development guru Jeffrey Sachs really, really likes Ban Ki-moon:

The world can breathe easier with the reelection this month of United Nations Secretary-General Ban Ki-moon to a second term in office. In a fractious world, global unity is especially vital. During the past five years, Ban Ki-moon has embodied that unity, both in his unique personal diplomacy and in his role as head of this indispensable global organization.

That’s not, let’s be honest, a universally-held view. Here’s Jim Traub of the NYT, interviewed by the BBC:

“Kofi Annan, by virtue of who he was and what he said, was able to make the UN a more important-feeling place,” says Mr Traub, “and I think people around the UN would say that Ban, by who he is and what he says, has made the UN a less important-feeling place.”

That’s not how Jeffrey feels:

During a recent trip with Ban to Egypt and Tunisia, I watched in awe as he deftly backed the democratic changes underway in those two countries while simultaneously dealing with many other upheavals in the region. Ban generously and inspiringly offered his support to the brave youth leaders in both countries who are at the forefront of the political changes set in motion this year.

Feel the love.

Kazakhs cross about crossword Richard Gowan1

And this week’s prize for healthy democratic debate goes to… Kazakhstan!

A Kazakh weekly newspaper is facing calls for its closure over a crossword clue critics say was insulting to the Kazakh nation, RFE/RL’s Kazakh Service reports.

The row is over a crossword in the May 26 issue of the Russian-language “Stepnoi Mayak” (Steppe Lighthouse) newspaper in the northern city of Kokshetau.

The offending clue asked, “Name the house of a Kazakh street bum.” The answer was given as “yurt,” the traditional home of the nomadic peoples of Eurasia, including Kazakhs.

The crossword sparked a series of protests in Kokshetau and other Kazakh cities.

The chairman of the Bolashaq (Future) movement, Dauren Babamurat, told RFE/RL that the newspaper should be closed as it compared Kazakhs with street bums. Babamurat added that such a harsh punishment would be a lesson for other newspapers in Russian in Kazakhstan.

Does the IEA’s release of emergency oil stocks make sense? Alex Evans1

Javier Blas is interesting this morning on why the International Energy Agency took its surprise decision yesterday to release emergency oil stocks – only the second done it’s done so in its history (the first two being the 1991 Gulf War and Hurricane Katrina). He reckons that:

Conspiracy theorists are having a field day, but I think that the release is ground of simpler facts: the loss of Libya production for longer than anticipated, the surprising robustness of oil demand growth in China, India and Saudi Arabia, and, yes, the evident impact of high oil prices on economic growth in developed countries.

Add to that a new view in Washington and at the IEA’s headquarters in Paris of the strategic reserve as a smart bomb, to be used in the event of small oil output disruptions, rather than a nuclear option, to be used only as last resort, and the release makes sense.

Does it make sense, though? The IEA’s emergency stocks mechanism was built to respond to short-term, sudden-onset shocks. But if (as Javier argues), Libya’s oil production is “not going to recover any time soon”, and emerging economy demand for oil is proving notably robust, then that’s not a shock at all. It’s structural.

And if it’s structural, then how does releasing stocks solve anything? As the Economist’s US politics blog notes this morning, the entire US Strategic Petroleum Reserve (from which half the IEA release is being sourced) is only 727m barrels: 38 days’ supply for the US, or 9 days for the whole world. You could use the whole lot, but you’re still not affecting the basic supply and demand balance.

To be sure, the emergency release will make life a bit easier in the short-term for politicians in oil-importing countries. But if that’s all there is to it, then how is this any different from all the other perverse subsidies for oil consumption even as oil is becoming more scarce – and how does it square with the G20 commitment to eliminate such subsidies?

The UN’s slithery Swazi snake sorrows Richard Gowan1

A new threat to the United Nations is reported in Swaziland:

A United Nations Development Programme (UNDP) worker was terribly shaken and emotionally moved when her boyfriend gifted her with snakes in a beautiful present wrapper.

The hair-raising incident took place at the UNDP offices in Mbabane sometime last week. The lover of the UNDP worker came to present his girlfriend with two snakes and a lizard. The gentleman went to the offices and left the present to her lover. The man is alleged to have quickly delivered the gift and departed soon.

Jubilantly and eagerly, the lady opened the gift bag only to find two dead snakes and a lizard. The lady was too shocked and threw the gift down and screamed. Other UNDP workers quickly responded to find out what was the matter. They were also astonished to find the ‘gift’ snakes.

Senior staff members are said to have intervened. The security took away the snakes. According to sources, a well-dressed decent man arrived at the offices looking for his girlfriend, who work in the company. The innocent-looking man was carryinga beautiful gift wrapper. The security allowed him to enter, our sources revealed.

Yikes. On the plus side, this sounds like an excellent basis for a low-budget sequel to that 2006 Samuel L. Jackson classic “Snakes on a Plane”, featuring the immortal line “Enough is enough! I have had it with these motherfucking snakes on this motherfucking plane!” Come on, just say it out loud: “I have had it with these motherfucking snakes in this motherfucking UNDP office!”  Movie gold.

Is the ‘mobile phone revolution’ in Africa really for everybody? Claire Melamed7

photo credit: Kiwanja.net

On Monday I gave a talk at ‘Africa Gathering’ - a great event full of serious mobile communications geeks (in a good way).  I’m as much of a technological optimist as the next starry-eyed iphone user (an ODI paper suggests, for example, that every extra 10% of mobile phone penetration increases economic growth by just under 1%), but I thought that there’d be enough of that around so I decided to present a few of the ‘yes, but’ arguments about mobiles in Africa.  Mainly these are about who gets access to the technology, and whether there’s a new ‘digital divide’ opening up in front of our eyes (screens?).   In true policy wonk style, I had three points:

1. The geographical divide.  This website gives live maps of mobile phone coverage of most African countries, and it’s a similar pattern in most (I tried to download some to paste in here but I couldn’t - oh the irony).  The areas where most people live are covered, but large swathes of every country, so a signficant number of the most excluded, remote communities, still don’t have a signal.  Expanding coverage is going to be expensive, and the most remote areas are going to be the most expensive. But it’s got to happen if we’re interested in equitable access to the huge benefits that mobile communications can bring.  Governments have a role of course, in providing incentives for the private sector to make those investments. 

2. The literacy divide.  I’ve blogged here before about the fact that slowly growing rates of literacy and rapidly growing rates of mobile internet access might mean that inability to read, rather than lack of access to the technology,will soon become the key barrier to accessing the internet.  There’s lots of great examples of how mobile communications can be used to promote literacy, but the point still stands.  And again, it’s largely up to governments to make sure that literacy expands fast enough to keep up.

3. The money divide.  Using a mobile phone costs money.  In parts of Kenya making a money transaction using the MPESA mobile banking service costs the same as a bag of maize.  Costs have to come down to bring this technology within reach.  ODI has done some research (pdf) on how competition can bring costs down – again, governments have a role in promoting competition and if necessary regulating prices directly, if digital equity is a goal that they are serious about. 

My conclusion: the mobile revolution might have been driven by the private sector, but governments have to get involved and start seeing mobile communications as a service like any other, with the same issues of equity, coverage and affordability, to prevent new inequalities from emerging. Or in other words: the usual public policy problem updated for the mobile age.

Why closer union can’t save the Eurozone Alex Evans1

Gideon Rachman’s FT column today is an absolute must-read for anyone interested in the outlook for the Eurozone.

Right now, the conventional wisdom is that Eurozone policymakers face a choice: either the Eurozone will gradually fall apart, or they need to get their act together and pool more sovereignty. It was always illusory to suppose that you could have a currency union in which monetary policy was centralised but fiscal policy was not, so the argument goes – so if policymakers want to avert disintegration, then they need to go further and deeper on unifying Europe, through even greater institutional centralisation.

But Rachman’s having none of it:

Those who argue that “political union” is the solution to the current crisis seem to believe that Europe’s problem is institutional … This is a profound misdiagnosis of the crisis. The real problem is political and cultural. There is not a strong enough common political identity in Europe to support the single currency. That is why German, Dutch and Finnish voters are revolting against the idea of bailing out Greece again – while Greeks riot against what they see as a new colonialism imposed from Brussels and Frankfurt.

To argue that even deeper political integration is the solution to this mess, is like recommending that a man with alcohol poisoning should treat himself with a more powerful brand of vodka.

And while he observes that Joschka Fischer was unrepentant at a recent seminar about policy elites having driven the European project (“it’s called leadership”), he notes that

Such leadership is all very well, if it is vindicated by events. However, if elite decisions go wrong, they create a backlash – which is exactly what is happening in Europe now. German voters were told repeatedly that the euro would be a stable currency and that they would not have to bail out southern Europe. They now feel betrayed and angry. Greek, Irish, Spanish and Portuguese voters were told repeatedly that the euro was the route to wealth on a par with that of northern Europe. They now associate the single currency with lost jobs, falling wages and slashed pensions. They too feel betrayed and angry.

And so, he concludes, “a single currency that was meant to bring Europeans together is instead driving them apart”. Fiscal redistribution is hard enough even within long-established nation states, he observes (think of northern and southern Italy) – for a quasi-state that isn’t a nation, forget it. So what happens now? One of two things, he reckons. Eurozone leaders might manage to patch things up (and I struggle to see how, without the institutional integration that he opposes). Or weaker members of the Eurozone could start to leave. That’s what Martin Wolf reckoned at INET, too.

Norwegian diplomacy will hurt your ears Richard Gowan2

The versatility of modern diplomats never ceases to amaze…

Following a reported global rise in interest in black metal, the Norwegian Foreign Ministry has begun providing diplomats on foreign service missions with an introduction to the genre – specifically ‘True Norwegian Black Metal’, to give it its official term.

Louder Than War reports that Kjersti Sommerset, head of the Foreign Ministry’s Centre Of Excellence, told newspaper Dagens Næringsliv: “We now have 106 foreign service missions and they get many enquiries from people who want information about Norwegian black metal as a phenomenon. In the training program, we have a large cultural programme in order to give the trainees a good understanding of Norwegian culture and the cultural industry. Black metal is clearly a part of this ‘global awakening’”.

I am not sure if the gentleman pictured above, from a series of pictures of Norwegian black metal artistes, has considered a career in diplomacy. But if the screaming and Satanism wears thin, his Mum will be glad to know he’s got a Plan B.

Tea Party Summer Camp David Steven2

A Tea Party group is running a summer camp that will use ‘fun, hands-on activities’ to teach kids what the United States is really about. Here’s one of the sessions:

Starting in an austere room where they are made to sit quietly, symbolizing Europe, the children will pass through an obstacle course to arrive at a brightly decorated party room (the New World).

Red-white-and-blue confetti will be thrown. But afterward the kids will have to clean up the confetti, learning that with freedom comes responsibility.

This is not from the Onion.

How should Europe play the Kyoto question at the Durban climate summit? Alex Evans3

Poor old Europe. Once upon a time it led the global charge on climate change – but these days, it looks rather isolated, what with its public humiliation at Copenhagen (it wasn’t even in the room for the top-level bargaining between Obama and emerging economy leaders) and the fact that it’s pretty much the only developed economy that still wants to see Kyoto extended for another 5 year commitment period.

So how should it play the Durban climate summit at the end of this year? That’s the subject of a new E3G briefing published yesterday, which is worth a read. As Nick Mabey observes in it, the outlook for the summit isn’t altogether encouraging: there’s no political space for a comprehensive, binding deal to limit warming to 2° Celsius; most major emitters will see leadership transitions next year, so no serious debate on raising ambition can start before 2013; and “Europe is characteristically dithering over the choices involved, and is therefore failing to shape the global political and policy environment”.

Europe’s central decision, Nick argues, is whether or not to sign up for Kyoto 2.0 despite the fact that it would be ploughing a lonely furrow in doing so. He makes a persuasive case for it to bite the bullet and do so, arguing that:

- Doing so wouldn’t require Europe to make any additional emissions reductions to those it’s already committed to with its domestic 2020 target (and in any case high global oil prices do a lot of the heavy lifting on emissions reductions even before policymakers lift a finger);

- If Europe did drop Kyoto, it would be seen as the “final climate betrayal” by the developing world; would mean that the EU had wasted €40bn buying international carbon credits; and would leave OPEC and US climate sceptics “sitting in quiet satisfaction at the irony of seeing Europe take the blame for destroying the only legally binding set of global climate rules”; and above all, because

Europe needs Kyoto because it defines the type of climate regime that can actually deliver European security. Europe needs Kyoto because it provides the core around which we can build a coalition of countries to support an effective 2°C climate regime. Europe needs Kyoto because otherwise it walks naked into the negotiating chamber, having thrown away its best levers to bring the US and China into line

Kyoto contains the critical architecture needed to for an effective global climate regime. Kyoto contains all the necessary elements for monitoring, compliance, finance, technical cooperation and economic efficiency. There is no magic institutional structure waiting to be discovered that isn’t already contained inside – or is compatible with – a reformed version of the Kyoto Protocol. The Kyoto architecture took years to negotiate, refine and ratify. There is no time left to start from scratch again. Whatever the often shrill rhetoric from across the Atlantic, the problem many countries have with Kyoto is not because it is flawed, but because it holds them to account in delivering real greenhouse gas emissions reductions.

The only way to constrain global temperatures to around 2°C is through the type of “top down“ structure agreed at Kyoto, where governments negotiate against an overall ambition of emissions reductions and apportion effort to meet a global goal. 

I think Nick is a hundred per cent right in this analysis (even though he and I differ about what should happen beyond Kyoto). A top-down approach is essential on climate policy - Nick also notes that “even an optimistic reading of the Copenhagen pledges gives an even chance of exceeding 3.5-4° C by the middle of the century” - and it would be catastrophic if the EU backed away from it now.

The only part of Nick’s argument I’m hesitant about is his suggestion that,

Europe must make its recommitment to Kyoto conditional on participation by key developed countries such as Australia. Major developing countries must signal that they are committed to an evolving regime that eventually binds everyone. If Europe cannot get all of this at Durban it should make its participation in a second commitment period conditional, for example, on a parallel comprehensive agreement being in place by 2015.

In order for that conditionality to be credible, though, other countries must really believe that Europe will be willing to walk if its conditions aren’t met. I wonder whether other countries will judge that Europe has the balls to do that, though: it has never shown such a steely edge in the past, on climate or any other foreign policy issue. And as Nick argues so persuasively in the first part of his paper, Europe needs Kyoto. That’s a point that won’t be lost on other major emitters looking to free ride.

As ever, though, I think it’s shocks – climate impacts, oil and food spikes and others besides – that will change the game and open up political space (see this post on five theories of change on global climate politics). In that sense, it’s essential that at least one major emitter is ready to make use of those shocks when they arise, and say: if the world is now serious about climate change, then this is what it will take to solve it. So even if Europe’s conditionality threat isn’t altogether credible, Nick’s argument is still the right one.