The Politics of Global Food and Energy Crisis

The soaring food prices and the global energy crisis that are glaring at us today have proved many optimists of the past wrong. Some of these optimists had said three decades ago that the world will never have to face the current scenario as had been predicted by some Malthusian thinkers then.
In 1972, the Club of Rome, a global think-tank that deals with various policy issues, published a report entitled "The Limits to Growth" on the predicament of mankind. The report that predicted a major resource crunch by the end of the 20th century drew flak from many capitalist economists at that time. The Club of Rome wrote 30 years ago that only "550 billion barrels of oil remained and that would run out by 1990". Today, as oil prices cross $139 a barrel, many economists fear that the production has now reached its geological limits, or the peak oil.
When the food prices went high, US President George W. Bush had said it was a result of the "growing prosperity" of India and some other economies like China. Whom will the US now blame for the energy crisis? The rest of the world is actually eager to listen to what the world's highest energy consumer - which unleashed a disastrous war in the oil-rich Middle East five years ago - has to say. High prices have sent alarm signals across the world. Indonesia announced that it would quit the Organization of the Petroleum Exporting Countries (OPEC) to protest the oil cartel's policies. Prime Minister Manmohan Singh has called for austerity and efficient energy use as one of the ways to address the crisis. French President Nicolas Sarkozy suggested more subsidies, as his country's fishermen staged protests at ports. British Prime Minster Gordon Brown asked oil exporters to raise production as lorry drivers blocked roads in London and Cardiff. Even the US, the apostle of free market policies, is also planning some gas-tax holidays to ease the consumer's burden.
What made the oil market so vulnerable?
"The price of oil was $51 in January 2007, it is now touching $138 a barrel. In the last six months it has risen by 42 percent and this situation is unlikely to change," R.S. Kalha, India's former ambassador to Iraq, told this writer. Many experts say the Bush presidency started the dangerous global fuel-game. Oil economist Mamdouh Salameh, an advisor to the World Bank, recently told Britain's The Independent newspaper that the oil price would now be no more than $40 a barrel had there not been the Iraq war. Before the 2003 war, Iraq pumped some 3.5 million barrels of oil a day, but this has now fallen to just two million barrels.
"Perhaps one of the few countries that has sufficient oil reserves and can easily meet the growing demand is Iraq. With reserves of 115 billion barrels, its present output is not even anywhere near the pre-invasion (2003) levels and is still less than pre-war (first Gulf war of 1990) times," Kalha, the author of the recently published book "The Ultimate Prize - Oil and Saddam's Iraq", said. "If political stability can be ensured and Iraqi oil begins to flow to the markets of the world, much of the present economic distress can easily be avoided and political convulsion contained," he added.
But will that happen in the near future?
The war tightened supplies, setting the stage for a steep rise in the prices. At just under 86 million barrels a day, global oil production has actually stagnated. Another reason, many economists say, for the high energy prices is speculation in the commodities markets. With the global slump in economies, speculators keep moving their funds from sector to sector in search of higher returns. Now, around $260 billion is invested in commodity funds, a 20-fold rise from 2003. The data released by the New York Mercantile Exchange (NYMEX), the world's biggest market for oil, show that the number of transactions involving oil futures on the NYMEX has almost tripled since 2004. Whatever reasons the economists have, one thing is clear - the world is leading to a major resource-crunch that will have disastrous political implications - and even food riots as seen in some countries. Food prices have already triggered civil unrest in many parts of the Caribbean and Africa. If energy prices continue to rise, the unrest will spill over to the developing economies like India and China, the experts warn.
The future is bleak. Global consultancy Goldman Sachs says that oil prices will cross $200 in 2009. Though the industry discovered some new oil reserves in Latin America recently, energy economists say it will take years to pump it out from these reserves because of technological reasons. If the situation remains, the oil producers will cut down exports to meet their domestic demand, throwing the international prices into orbit. How will the world survive such a situation? Iraq invasion, according to many, was the first "oil war" in human history. The post-war situation shows that it was just the beginning.

(John Stanly, written for IANS June 18, 2008)

Cracks begin to appear in the US-Pakistan alliance

The June 10 cross border attack by American F-15E fighter bombers on Pakistani paramilitary troops is the latest indication of the changing dynamics of the much discussed US-Pakistani alliance against terrorism.

The attack took place in Mohmand, a dangerous border area, part of Pakistan’s Federally Administered Tribal Areas (FATA). The US version of the story is simple. Taliban fighters from Mohmand crossed into the Afghan border and unleashed attacks on the coalition troops with rocket-propelled grenade fire. The international troops returned fire and drove the militants back into Pakistan. Then, three US fighter planes crossed the border and dropped about a dozen bombs. The US expressed regrets over the incident. State Department spokesman Gonzalo Gallegos told reporters in Washington that the incident was a reminder that “better cross border communications between forces is vital”.

Is that all? This is not the first time the US jets cross the border and bomb Pakistani people. In March, an American aircraft dropped bombs in South Waziristan, haven of the militants, killing nine people. Similar incidents had occurred in January also. The latest attack comes at a crucial time when the Pakistani government is negotiating a deal with the militants in the borderland, a move that irked the US and its European allies. The change in Islamabad’s counter terrorism strategy, according to many analysts, shook the foundations of the so-called anti-terror alliance between Pakistan and the US.

Islamabad’s response to the Mohmand attack underscored this perception. When Pakistani Prime Minister Yousaf Raza Gillani denounced the attack as an affront to the country’s “sovereignty, dignity and self-respect” the military’s response was more stunning. The US attack “hit at the very basis of co-operation and sacrifice with which Pakistani soldiers are supporting the coalition in the war against terror”, said a military spokesman. The act was “absolutely unprovoked and cowardly”, he added. The strong response of the Pakistan army makes one thing clear: army has completely moved away from President Pervez Musharraf’s grip. There’s a strong perception in Pakistan, even within its army, that the so-called anti-terror campaign in Waziristan and other border regions is being fought at the behest of the US.

The civilian government appears to hold this view. It says many of the tribal leaders now support the Taliban because of the relentless military raids in the borderland. The government thinks a peace deal with the militants would help it limit their influence within the border districts. However, this policy shift comes at the expense of the US’ interests in South Asia. Holding talks with militants is an anti-thesis to the so-called Bush doctrine, which calls for “eradicating” terror cells through military campaigns. Besides, it undermined Bush’s plan to make headway in its anti-terror campaign in the tribal area before he leaves office by the end of this year.

The frustration was visible as the US many times went public against the Pakistan government in the past three months. NATO, citing figures, stated that there were more cross-border attacks against the coalition troops in Afghanistan in May 2008 comparing to the year-ago period. It added that the peace talks and Pakistani government’s plan to downsize troops in the border region would backfire as the militants were regrouping themselves. The US has also complained that it does not get any military support from Pakistan to continue the fight against Taliban. The Mohmand attack took place against this background. Given the recent developments in the bilateral ties, the bombing is expected to make things more complicated for both sides.

When the Damadola missile attack took place Oct 29, 2006, the Pakistani army suddenly took the responsibility of the attack and actively resisted any attempt to link the US with the incident. The attack on Damadola religious seminary, which killed 82 people, incidentally took place on the same day the provincial government was supposed to sign the Bajour Accord with the local tribes. Many reports at that time claimed that the US, which was opposed to the deal, was behind the attack. But now the scene is different. Both the federal government and army are unlikely to defend the US if any such incident occurs. But, at the same time, many Pakistan-watchers think the US may go to any extend to stop a possible deal with the militants.
It is not yet clear whether the peace talks would bring in any result. Even the Pakistani government’s counter terror strategy looks vague. But, Islamabad seems to be determined to honour its pledges to break with the Musharraf regime. Of course, a bad news for the Americans.

(John Stanly)

Bush is Right - but Equally Wrong: The Global Food Debate

Is there anything common between US President George W. Bush and the 18th century British political economist Thomas Malthus? Most unlikely. But Bush's "discovery" that the growing "prosperity" of India has shot up global demand for food brings back the 'Malthusian Catastrophe' to the centre of the global food debate. The British economist warned the world way back in 1798 that population growth would outpace agricultural production in the future resulting in the "premature death" of the human race.

Many economists would contest the Malthusian fears. But not many would disagree that the current food crisis is a result of the mismatch between surging demand and resource crunch. The UN World Food Programme's Josette Sheeran recently called the food crisis a "silent tsunami".According to UN Food and Agriculture Organisation (FAO), wheat and rice prices soared 77 percent and 16 percent respectively last year. This year, the scene was worse with rice prices soaring 141 percent and wheat 25 percent till April. Hunger has triggered food riots in many parts of the world and even sent Haiti's prime minister packing. Countries like Cameroon, Egypt, Bangladesh and Philippines are already under stress.India has also adopted a slew of measures to counter the soaring prices.

According to a report by the New Delhi-based Centre for Science of Environment, low support prices, private players and a drought in wheat exporting countries like Canada, the US and Australia triggered panic in the Indian wheat market. The report added that India would have to import three million tonnes of wheat in the current fiscal to shore up its stocks.According to the FAO, global grain stockpiles are at their lowest level in 25 years. The world has consumed more than it produced for the last seven years. World Bank President Robert Zoellick has already warned that 100 million people could be pushed deeper into poverty due to the current crisis.The situation is grave. According to The Economist, around 1 billion people who live on $1-a-day, are cutting back on wheat, vegetables and one or two meals. Those who live on 50-cent-a-day face a total disaster, the magazine warns.

Bush's statement came in such a situation when most of the poor nations were struggling to deal with the crisis. His remarks have come in for sharp criticism from almost all political parties in the country.However, according to many economists what Bush said was true, but it is only the tip of the iceberg. According to British environmentalist and writer Mark Lynas, the rapid economic growth in India and China has created a new middle class that demands more food - thereby increasing the quantity of grain required for livestock production. But he emphasise that the global resource war initiated by the advanced industrialised world is the major reason for the crisis.Similar to the food price jump of 1973, following the Yom Kippur War between Israel and Egypt, today's crisis is also more or less related to energy. The shift towards biofuel is seen as the major factor that pushed up food prices. Both in South and North America, more and more land is being diverted to produce biofuel and maize, widely used as cattle feed in the West and being used for production of ethanol.As the rich Indian and Chinese middle class, along with their European and Middle Eastern counterparts demand Western style diets high in meat and diary products, demand for such products obviously goes up. The cattle farmers in many countries replace wheat with maize as cattle feed. This eventually shoots up the prices of grains in international markets.Along with this, economists list out other reasons like drought in North America because of climatic changes, the fertilizer crunch that affects agricultural productivity, the futures trade and the unbridled consumption promoted by the profit-driven market capitalism. All these factors are directly or indirectly related with the economic policies of the US. China with more than 1 billion people consumes 7.9 million barrels of oil a day.

The US with less than one quarter as many people, consumes 20.7 million barrels. This energy greed is now making the world, as Nobel Laureate Joseph E. Stiglitz warns, an "unviable place".The US, instead of blaming the developing world, should first admit its faults and come forward to work with other major countries to ease the crisis. Otherwise, Malthusian fears may revisit mankind.

(John Stanly, written for IANS, May 18, 2008)