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  • Author: Richard Nephew
  • Publication Date: 03-2019
  • Content Type: Working Paper
  • Institution: Center on Global Energy Policy
  • Abstract: Though many commentators have suggested that the Trump administration’s approach with respect to sanctions threats against Europe is “unprecedented,” the relative comity in US-European sanctions policymaking in recent years may be the aberration. The United States and Europe have often disagreed about whether, when, and how to impose sanctions against even common adversaries and in order to resolve mutually recognized problems. One of the most serious examples of this occurred in 1982 when the United States and its European allies broke sharply over the US decision to impose sanctions on the Soviet Union over the crackdown on the Solidarity Movement in Poland. The crisis that emerged tested the NATO Alliance, European governments, and the Reagan administration. This paper reviews the 1982 example and then sets some lessons from it against the current US-European relationship. It offers an assessment not only of the changing political, economic, and social factors that have contributed to greater compliance with US sanctions dictates on the part of Europe over the last few years, but also the relatively brittle nature of this cooperation. It underscores that, though the United States may be in a relatively predominant economic position at present, this situation may not and likely will not persist indefinitely. From this perspective, it concludes with three recommendations for how to modify current US sanctions practice in order to help manage partner concerns and avoid future crises. Adopting a process more akin to the Federal Register notice procedure for new sanctions programs. There is a yawning need for more consultation in advance of US sanctions decisions that could have major market moving and alliance shaking potential. It is not necessary, nor would it be prudent, to have a process that required public scrutiny of individual or entity asset freeze scenarios, but for other, more broad sanctions initiatives, it would help to avoid unintended consequences and ensure a more comprehensive debate. Exceptions could also be made to this rule in the event of a legitimate emergency. Establishing an independent commission to evaluate US sanctions policies and challenges. Congress should set up an independent, bipartisan commission to examine the issue of US sanctions policy now and for the next twenty-five years. Its assignment would be to evaluate how sanctions have been used in the recent past, the international operating environment for sanctions now, and the dimensions of the sanctions policy challenge in the future. Improving congressional oversight of the sanctions process. Congress should also require evaluation reports for individual sanctions regimes as a standard part of the executive branch’s use of the International Emergency Economic Powers Act (IEEPA). Of course, similar requirements ought to be considered a standard part of congressionally mandated sanctions as well.
  • Topic: Foreign Policy, Sanctions, Global Political Economy
  • Political Geography: United States, Europe
  • Author: Richard Nephew
  • Publication Date: 10-2019
  • Content Type: Working Paper
  • Institution: Center on Global Energy Policy
  • Abstract: Though historically China has been a sanctions recipient, with only a few isolated incidents of using sanctions in return, this situation is likely going to change in the years to come. China’s global economic position — as well as its ambitions to serve as not only a global power, but also potentially the leading international power — will push it to consider means of exerting international leverage. The United States has shown vividly in the last 30 years that sanctions are one means to this end, and Chinese scholars are demonstrating increasing facility with sanctions doctrine. China’s increasing assertiveness in economic sanctions will allow it to not only hit back directly against the United States with retaliatory measures, but also to develop independent rationales to apply sanctions in pursuit of Chinese policy objectives. China may begin using sanctions as an affirmative instrument of policy. The United States is vulnerable to disruptions in U.S.-Chinese economic ties. The U.S. reliance on Chinese financing, especially for U.S. national debt, and Chinese economic growth in areas where the U.S. typically excels demonstrate China’s capacity to target the U.S. To combat this potential emerging threat, the United States should seek first to negotiate with China on ways to avoid conflict. But, given the likelihood of competition nonetheless, the United States should also add sanctions development to its crisis management process, and increase intelligence and analytical capabilities that focus directly on Chinese sanctions doctrine and practice.
  • Topic: Diplomacy, Sanctions, Global Political Economy
  • Political Geography: United States, China, Asia, North America
  • Author: Ilan Goldenberg, Jessica Schwed, Kaleigh Thomas
  • Publication Date: 11-2019
  • Content Type: Working Paper
  • Institution: Center on Global Energy Policy
  • Abstract: In recent months, Iran has responded to rising tensions with the United States—particularly the US launch of the “maximum pressure” campaign against Iran—by attacking oil tankers and infrastructure in the Persian Gulf region around the Strait of Hormuz (the Strait). These actions have been designed to signal to the United States, the Gulf states, and the international community that the American strategy of strangling Iran economically will not be cost-free, and to Saudi Arabia in particular that it is highly vulnerable to Iranian retaliation. As the Strait of Hormuz is one of the world’s most critical energy chokepoints, the implications of Iran’s efforts merit close scrutiny and analysis. This study was designed to examine three scenarios for military conflict between Iran and the United States and assess the potential impacts on global oil prices—as one specific representation of the immediate economic impact of conflict—as well as broader strategic implications. The three scenarios are: Increasing US-Iran tensions that ultimately lead to a new “Tanker War” scenario similar to the conflict of the 1980s, in which Iran attacks potentially hundreds of ships in the Persian Gulf and Gulf of Oman over a prolonged period while also launching missiles at Gulf oil infrastructure. An escalation of tensions between Iran and the United States in which Iran significantly increases the scope and severity of missile attacks directed at major oil and energy infrastructure in Saudi Arabia and the UAE. A major conflict between Iran and the United States that includes damage to Gulf oil infrastructure and a temporary closure of the Strait of Hormuz. Its main conclusions are: The risk of a major military confrontation between the United States and Iran has increased in recent months but still remains relatively low, as neither the United States nor Iran wants war. That said, the September 14, 2019, attack on the Abqaiq and Khurais facilities was a strategic game changer and shows that the biggest risk is a prolonged, low-intensity military conflict. The fact that Iran was willing to conduct such an attack was a surprise to most analysts and to the US government and its Gulf partners. The level of accuracy it showed in the strike demonstrated a technical proficiency the US government and outside analysts did not believe Iran had. In the more moderate and likely conflict scenarios, increasing tensions between the United States and Iran are unlikely to dramatically affect global oil prices. The most profound costs in the more likely scenarios are not energy-related but security-related. Even in the less escalatory scenarios, the United States would be forced into long-term deployments of a large number of air and naval assets that would need to remain in the Middle East for years at a cost of billions of dollars. Such deployments would take away resources that would otherwise be dedicated to managing great power competition with China and Russia. In the more extreme conflict scenarios, major loss of life and an even bigger and longer-term American military deployment would be expected. In the lower likelihood scenario of a major military confrontation between the United States and Iran, global oil prices would be dramatically affected, though price impacts would not be prolonged. All assumptions about the potential impacts on oil prices are based on the supposition that the United States protects global shipping lanes, but that theory deserves further scrutiny. For more than a generation, the United States has viewed securing global shipping lanes that are critical for commerce and energy as a core vital interest. But given the isolationist tendencies in the United States and President Donald Trump’s attitude that America should stop underwriting the defense of its allies, it is conceivable he may choose not to respond in the types of scenarios described in this paper or demand that countries most dependent on oil trade from the Gulf—most notably China—step up instead. Another wild card for oil prices in a major crisis scenario would be President Trump’s unpredictable policies regarding the Strategic Petroleum Reserve. Typically, an administration would be expected to coordinate an international response with the International Energy Agency (IEA) to release the SPR of a number of countries, but this cannot be assumed in the current administration. Though these conclusions are to some extent comforting, the authors acknowledge that a key issue with any analysis of this situation is the unpredictability of the United States. In the present moment, neither US adversaries nor partners know quite what to expect—and, for that matter, neither does the US government or its observers.
  • Topic: Foreign Policy, Energy Policy, Oil, Global Political Economy
  • Political Geography: United States, China, Iran, Middle East, Asia
  • Author: Richard Nephew
  • Publication Date: 07-2018
  • Content Type: Commentary and Analysis
  • Institution: Center on Global Energy Policy
  • Abstract: The president’s recent statement that OPEC should reduce their prices may merely be an attempt to assign blame for rising gasoline prices in the midst of the US driving season or an even more cynical attempt to rally his political base in opposition to globalism. Or, it may have something to do with the president’s own decision to create a crisis with Iran. While attention is duly paid to how much Americans have to pay at the pump, a more subtle and complicated story will soon play out with respect to Iran and the reapplication of US sanctions ordered by Trump on May 8, 2018. In fact, unless oil prices are contained, the primary result of the president’s action may be to ensure that Iran profits from the oil market risks that sanctions have created.
  • Topic: Energy Policy, Geopolitics, Global Political Economy
  • Political Geography: America, Iran, Global Focus