Lawlessness: Dealing With the Past -- and Present

Cliff Levy at The New York Times has a long, well-written account of a local historican in the Siberian city of Tomsk. The historian -- Boris Trenin -- was rooting around in the earth in an area called Kashtak, and found two skulls with bullet holes. Others found human bones there. Trenin sought to investigate whether this meant that Kashtak was a site for a Stalin-era mass grave, but he cannot get access to state archives.

Trenin has encountered the tension between Russians who seek to air the past in order to make clear the values of the present, and those, such as Prime Minister Vladimir Putin, who think that such efforts can be abused by those wishing to beat up on the country. Levy quotes Putin at a meeting last year:

We do have bleak chapters in our history; just look at events starting from 1937. And we should not forget these moments in our past. But other countries have also known their bleak and terrible moments. In any event, we have never used nuclear weapons against civilians, and we have never dumped chemicals on thousands of kilometers of land or dropped more bombs on a tiny country than were dropped during the entire Second World War, as was the case in Vietnam.

What's missing from Levy's piece is a contextual, broadening paragraph on the same phenomenon elsewhere: It's common around the world for countries and peoples to have problems dealing with the nightmares of their past -- and present. This is not a Soviet story, but a global one.

In the must-read cover story of this month's Harper's magazine, New York lawyer Scott Horton continues his long, penetrating examination of America's own hestitation at self-examination (subscription required as of now. If anyone has seen the entire text on line, please let me know).

Horton, whom I met when I lived in Tashkent and have known for some 13 years, is no zealot. He is wholly fact-driven, with a penetrating intelligence and an impatience with those who use ideology to explain away abuse of power. In Horton's view, while prior periods of U.S. history have seen official criminality such as Richard Nixon's, "no prior administration has been so systematically or so brazenly lawless."

He argues that the Bush years must undergo legal examination. I asked him why. In an email exchange, he replied:

Americans have something of an aversion to the past. "Get over it" is the refrain. But as Orwell says, we are the prisoners of our past--both as individuals and collectively as a society. And Chekhov had the same idea in that amazing passage of act ii of the Cherry Orchard, "Ведь так ясно, чтобы начать жить в настоящем, надо сначала искупить наше прошлое, покончить с ним, а искупить его можно только страданием, только необычайным, непрерывным трудом." (For it’s so clear that in order to begin to live in the present we must first redeem the past, and that can only be done by suffering, by strenuous, uninterrupted labor.) So it may be painful, but if we want to move forward, we have to labor in that garden of the past, form attitudes, draw consequences. But it's about the future, ultimately.

For a recorded interview with Horton, here is Glenn Greenwald talking with him at Salon.

The Return of High Oil

In June, a couple of Dutch energy researchers released a fascinating, long-gestating report on high oil prices. At the time, oil was selling for about $130 a barrel, and the authors, neatly dissecting the market, argued that prices were only going to get worse. Just the next month, they did rise -- to $147 a barrel.

But, as O and G readers know, there was good reason to argue the other way at least in the short term – Ed Morse, now shifted from defunct Lehman over to LCM Commodities, asserted correctly that we were in for a considerable price correction.

So, with prices having gone strongly down, as Morse forecast, I made a phone call to the report’s lead author – Jan-Hein Jesse, whom I met last year at an OPEC meeting in Vienna – and asked whether he thinks his thesis still holds. I.E., is another price spike coming down the road?

The answer, Jesse replied, is probably yes. The ‘probably’ covers the event that we are headed into a long, deep depression, in which case all such previously composed economic analyses are off the table, and one must reassess the facts afresh.

But if in the next two or three years we come out of recession in fair economic shape, look for another steep rise in oil and gasoline prices.

Fatih Birol, chief economist at the International Energy Agency, has been arguing the same point while making the rounds last week and this week in Washington and elsewhere. He’s been explaining the IEA’s latest World Energy Outlook, which is just as bleak as Jesse’s paper. Jesse wrote the paper with Coby van der Linde.

In short, demand in China, India and elsewhere in the developing world is probably going to roar back and outstrip supply in 2011 or beyond.

That alone will push prices back up. I have a story in the new Business Week on how oil companies also are now responding to $50 oil by shelving oilfield development projects. So, as Jesse told me, “In 2010 or 2011, we will be in the same situation as [the high prices of] last year. Then we will start all over again [in an energy crisis], but it will be much more difficult.”

One interesting observation of Jesse’s is that price no longer works as a stimulant in the other direction – high prices don’t necessarily motivate oil producers to flood the market with supply, and thus tamp down the upward motion of prices. That’s because almost all the available new oilfields are controlled by national oil companies like Saudi Aramco, Russia’s Gazprom and Venezuela’s PDVSA. Unlike oil companies such as Exxon and BP, which if they can are driven to maximize profit by producing more oil when prices are high, these national companies earn what they need from the higher prices, and let the rest of the oil sit in the ground.

In order to meet rising demand starting in 2011 and beyond, Jesse wrote, these producers – the companies and countries – will have to bring twice as much newly found oil onto the market in the next 22 years than what they did in the last 22 years. Meaning they will have to find and deliver 70 million barrels a day of new supply to the market. Almost no one thinks that is possible.

Jesse’s ultimate forecast is that the West – the U.S. and Europe – are going to have to use a lot less oil in order to make way for rising demand in China, India and elsewhere. If they don’t, he says, look for geopolitical tension, and another possible deep and prolonged recession. The coming energy shortages are bound to produce “sometimes confrontational relationships” between the world’s main oil consumers and the petro-states, the authors write.

Jesse and the IEA come to the same conclusion – the current global energy model isn’t sustainable. In order to avoid “the nasty side of oil scarcity,” Jesse and his co-author write, OPEC and other petro-states need to produce more oil, and the West needs to purse efficiency and the development of alternative energy.

The Blithe Pirates

The unflappable pirates of Somalia are daunted neither by Western warships, nor the threats of the otherwise influential Islamic militants in their midst. And, according to the Central Intelligence Agency's former supervisor for the region, there really isn't much anyone can do to stop them.

The AP's Mohamed Olad Hassan has a piece today describing how, when the fiercest Islamic group in Somalia threatened local pirates who are holding a gigantic oil tanker, the men simply moved the ship from the Somali port of Harardhere out to sea.

Somali pirates have now hijacked forty ships this year. The Nov. 15th oil tanker seizure was the most audacious. The pirates somehow found and seized the Saudi-owned Sirius Star some 500 miles out to sea, even though it's the size of an aircraft carrier and carryies some 2 million barrels of oil. The pirates may be asking for $25 million in ransom.

Mel Gamble, the CIA's former Chief of Africa Division and Deputy Chief of the European Division, says that he and his former colleagues sometimes attempted to track the pirates at sea. But Somalia's coast is so long, and there are so many hidden inlets, that "we tended to lose them once they moved inland," Gamble says.

Gamble spoke today over a conference call with institutional investors organized by a New York brokerage called Wall Street Access. Since retiring from the CIA earlier this year, Gamble has become an adviser to a New York business intelligence firm called Veracity.

The pirates only began venturing out so far into the sea, Gamble said, because Somali warlords crowded them out of the criminal action within the ports themselves. The size of the sea at their feet is enormous, and specifically how the pirates find their targets isn't certain. However, Gamble said he wouldn't be surprised if they get tip-offs from acquaintances at ports-of-call where the ships or tankers stop along the way.

Can the area be effectively patrolled by the U.S., European and other navies now present in the area? "No," Gamble said. "But the military can conduct deterrent operations."

Also on the phone call was John Blaney, former U.S. ambassador to Liberia, and before that the State Department's director for a ten-country region in southern Africa. Bret Stephens over at The Wall Street Journal today fretted over what to do with pirates -- hang them, like in the old days, or mete out modern justice. But Blaney warned against anything approaching the former. For one thing, he said, some of the pirates are now arming themselves with "shape charges," ultra-powerful armor-piercing warheads. Such warheads could pierce an oil tanker's hull. "What are you going to do if three or four pirate boats approach an oil tanker and have seven or eight of these shape charges that can penetrate the cargo?" Blaney asked. "The answer is you surrender the boat."

Some captains are now equipped with diversionary tactics, such as taking a meandering 'S' route until help arrives. Many ships are avoiding the area entirely through a long route around the southern tip of Africa.

Ultimately, Blaney says, the answer may lie in finding a way to work with Somalia to reduce criminality.

The Prize Factory

This week in Business Week, I take a look at the multi-million-dollar X Prizes, the innovation contest run by Peter Diamandis out of Playa Vista, California.

Recall that, after many years of struggle, Diamandis made his name with the $10 million Ansari space prize, which put a private space ship into sub-orbit back in 2004. Now backed by illuminaries of technology like celebrity physicist Stephen Hawking and Google's Larry Page, Diamandis is trying to extend his franchise into fast genome-splitting, lunar flight, and clean energy.

That's easier said than done. One thing that struck me during two days of meetings with Diamandis and his colleagues last month was the complexity of framing and executing a prize that stirs up both serious contestants and the public interest that makes sponsors want to finance big payouts. Several serious scientists, particularly in genomics, told me that the X Prize is interesting, but that it won't produce the most important advances in DNA research.

One successful new prize is sponsored by Netflix, the mail-order movie rental company, which is offering $1 million for helping it better understand what films will be popular. The prize is profiled by Clive Thompson in yesterday's New York Times Magazine.

Yet other contests that seem they should be winners fall short. Consider the Clear Prize.

Travelers around the world gripe about delays getting through airports. So last February, Clear, a New York company with contracts to run security lines at U.S. airports, launched its prize contest. A $500,000 purse would go to the first person to devise a way to screen passengers faster without having to remove their shoes.

More than a dozen entrants quickly wrote up plans, says Jason Slibeck, Clear's chief technology officer. Yet none has submitted a working model, and interest in the contest now seems dead.

Why? Slibeck reckons that would-be entrants were put off by the hassle of getting their ideas approved by government regulabors. Would more money do the trick? Slibeck doesn't think so. "I think prizes can be a great incentive," he told me, "but some problems are more intractable than others."

Pirates and Oil

The news just became worse for oil companies and petrostates alike: Somali pirates -- the scourge of cargo handlers on Africa's east coast -- have seized an aircraft-carrier size oil tanker steaming 500 miles out to sea.

It's not known publicly how much oil was aboard, but the Saudi-owned carrier has a capacity of 2 million barrels.

The Somalis have menaced shipping along the coast for some time, forcing pilots to go all the way around the southern tip of Africa instead of the Suez Canal. But bringing down an oil tanker 500 miles out to sea is a wholly different affair.

Is it possible simply to seize such a large ship unaided by the crew? (Here is a decent YouTube item on the pirates and their home base.) The U.S. and French navies are reportedly stepping up patrols. But the latest news shows that the pirates just widened their playing field.

Georgia: (Not Yet) All the Facts

Last week, Russia got a big p.r. boost when Chris Chivers and Ellen Barry wrote a detailed page-one piece in The New York Times backing up its version of how the five-day August war in Georgia began. In a nutshell, the piece concluded that the Georgians started it.

The war was momentous in a number of ways -- it all-but shut off the possibility that Georgia will get into NATO; it put a cloud of doubt over U.S. influence in the Caucasus and Central Asia; it may have accelerated the flight of western capital from Russia; and it turned the heaviest dose of western invective on Russia since the 2006 polonium murder of Alexander Litvinenko.

But now RFE-RL says it's more complicated than that. The Georgians may have fired before Russian troops arrived, according to a report today by Eka Tsamalashvili and Brian Whitmore, but their assault came days after South Ossetians began to shell local Georgian villages. The report says it's based on dozens of eye-witness accounts by RFE-RL reporters.

Both reports are worth reading. Together, they mean that, not surprisingly, there's much in the way of indignant showmanship to the claims by both sides. I haven't seen a definitive report as yet.

Summit, What Summit?

Russia is devaluing the ruble. The Nasdaq has fallen to its lowest level in more than five years. And Brazil's shares and currency plunged after Hank Paulson officially announced that the U.S. actually won't be buying up what are popularly called "toxic assets," the exotic bonds that have triggered the global economic turmoil.

Which, if you listen to the largely skeptical analysts in Washington, means it's time for twenty fractious global leaders to gather in Washington, issue a statement saying they'll meet again in a few months, then go home as the news gets worse.

That was the basic message of a good briefing today on this weekend's meeting of the G-20 nations. The briefing was held at the Center for Strategic and International Studies.

"Nothing positive can come out of this meeting, only bad," said Charles Freeman, who works on China issues at CSIS. He added that that's probably one reason why President-elect Barack Obama will stay in Chicago and clear of the G-20. "He doesn't want his fingerprints anywhere on this. There is only one president and he's glad it's not him." Freeman said.

"Obama is voting 'present,'" quipped Grant Aldonas, a international trade specialist at the center.

Other takeaways: Though Brazil, the U.S. and perhaps others would like to resurrect the Doha global trade accord, it's still too disputatious to go nowhere. ("We'll be selling 'Doha is Dead' t-shirts in the lobby," said Andrew Schwartz, the center's spokesman, summarizing the group's conclusion.). And stimulus money being distributed around the world should be precisely targeted for productivity growth, and not simply given out. "You don't want to just poor water in the sand," said Steven Schrage, who formerly advised Mitt Romney on trade and economics, and now coordinates the study of international commerce at CSIS.

Lastly: Any fundamental reforming of the international financial system is going to be years, not days or months, away.