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  • Author: Edward L. Morse
  • Publication Date: 09-2009
  • Content Type: Journal Article
  • Journal: Foreign Affairs
  • Institution: Council on Foreign Relations
  • Abstract: After dropping from close to $150 in the summer of 2008 to under $34 last winter, the price of oil had more than doubled by the spring and was hovering around $60 in July. It is unlikely to rise to last summer's peak anytime soon. To the contrary, there are good reasons to believe that lower prices are here to stay for a while. Last year's high prices and the recession have severely damped demand, and the growth of new production capacity, especially in Saudi Arabia, is buoying supplies. The rapid fall and then rebound in oil prices over the past year surprised many people. But it was not unusual: commodities markets are cyclical by nature and have a history punctuated by sudden turning points. Although this generally makes it difficult to forecast prices, it is safe to say that commodities markets will remain lower over the next few years than they have been over the past five. In the oil industry, the most important new factor that accounts for low prices is the return of surplus production capacity among the members of the Organization of the Petroleum Exporting Countries (OPEC) for the first time since 2002-3. Most oil industry analysts expect high prices to return soon, along with economic recovery. This is probably a mistaken view; more likely, the prices for oil and other commodities will be range-bound again. This would be a happy development, as it would provide unusual opportunities to tame the volatility in prices. An extended period of low prices could reverse the trend toward resource nationalism, the tendency of producing countries to concentrate control over their resources in the hands of state-run entities, that has characterized energy politics for most of the last decade. It would also translate into new chances for constructive diplomacy with oil producers and set the stage for more balanced relationships between energy producers and their buyers.
  • Topic: Diplomacy
  • Political Geography: Saudi Arabia
  • Author: Deepak Malhotra
  • Publication Date: 09-2009
  • Content Type: Journal Article
  • Journal: Foreign Affairs
  • Institution: Council on Foreign Relations
  • Abstract: Diplomacy appears ready to make a comeback. The United States, after years of reluctance, is reconsidering the role of negotiation in confronting extremism and managing international conflict. India has resisted an aggressive response to the 2008 terrorist attacks in Mumbai and is open to diplomatic engagement with Pakistan over Kashmir. Participants in the six-party talks have been scrambling to decide whether, when, and how to engage North Korea since its nuclear test of May 2009. The generals in Afghanistan are busier today than they have been in recent years, but so are the diplomats. Certainly, not everyone has rushed to the bargaining table -- witness, for example, the military defeat of the Tamil Tigers in Sri Lanka. But governments around the world are asking themselves the same important question: When should they negotiate with their enemies? Determining the precise conditions for such talks is never easy. In the shadow of terrorism, the calculus is all the more complex. Not only can acts of belligerence or extremist violence strain or derail ongoing negotiations, but the persistence of violence is often the primary reason governments refuse to negotiate in the first place. This has long been the case in Israel, for example, where successive governments, especially those led by the conservative Likud Party, have refused to negotiate with Palestinian leaders until they bring the violence to a halt. The same dynamics influenced the peace process in Northern Ireland in the years leading up to the 1998 Good Friday Agreement. North Korea's recent provocations have elicited a similar response from hard-liners in Japan, South Korea, and the United States. The ability of extremists to derail negotiations through violence and belligerence presents policymakers with a high-stakes dilemma: Should the muzzling of extremism be set as a precondition to negotiations, or should negotiations be initiated in order to reduce support for extremism? Similar considerations have plagued peace efforts around the world, from Colombia, where the government has struggled for decades to determine when it should demand a cease-fire from FARC (the Revolutionary Armed Forces of Colombia), to Kashmir, where using violence to derail prospective talks has become a predictable tactic. In Afghanistan, Iraq, and Pakistan, surges in extremist violence are threatening to further destabilize already-weak governments.
  • Topic: Diplomacy
  • Political Geography: Pakistan, United States, Kashmir, Mumbai