When The Washington Post reported this week that CIA Director William Burns slipped into Afghanistan on Monday to meet with Taliban leader Abdul Ghani Baradar, it was described as the highest-level face-to-face encounter between the Taliban and the Biden Administration. WaPo cited anonymous sources for the information and the CIA offered no immediate comment on the reporting. If the reporting is accurate, it doesn’t answer any immediate questions about why the President would dispatch the CIA director for such a meeting.
What we do know, is that the unexpected advances of the Taliban that have dominated the headlines over the past week and a half were initially blamed on an intelligence failure by many. Early on, Cipher Brief Expert and former Acting Director of CIA John McLaughlin tweeted that “The ‘intelligence failure’ drumbeat is starting. People should be careful about the charge if they have not actually seen/read the intelligence…”
So, what intelligence did the US have that would have led to a different outcome in Kabul and throughout the country?
The New York Times reported last week that “classified assessments by American spy agencies over the summer painted an increasingly grim picture of the prospect of a Taliban takeover of Afghanistan and warned of the rapid collapse of the Afghan military, even as President Biden and his advisers said publicly that was unlikely to happen as quickly.” The paper cited current and former US government officials, saying, “By July, many intelligence reports grew pessimistic, questioning whether Afghan security forces would muster serious resistance and whether the government could hold on in Kabul, the capital.”
On August 15, The Wall Street Journal reported that administration officials said they knew that a “total capitulation of the Taliban was a possibility, and they planned their withdrawal efforts accordingly.” But they also cited an administration official, saying “it wasn’t so much a failure in intelligence in which the administration based its decision, but rather, a change in circumstances brought about by the swift U.S. withdrawal.”
But private sector analysts were watching as well. Here’s an inside look at what The Cipher Brief has been publishing since January with key outtakes from Cipher Brief Expert Tim Willasey-Wilsey:
“The Afghans themselves are also monitoring the Washington newsfeeds in forensic detail and will be encouraged by Sullivan’s statement. Recently, all too many conversations in Kabul have been about when to leave and which route to take. Some wealthier Afghans already have their money in Dubai and children in foreign universities. Some even have passports and property in the United States, UK or Germany. For those who are less fortunate, the discussions are about which route to take out. The Uzbekistan border is favoured because a visa costs just $30 and there is a variety of onward routes via Turkey or Russia to the West whereas the routes via Iran or Pakistan are more restrictive or liable to interference.”
“Saleh will advise Ghani not to take Taliban or Pakistani promises on trust. Instead, Ghani may decide to call Washington’s bluff. He may doubt that Washington is really willing to abandon Afghanistan on 1st May with the risk of a rapid Taliban victory jeopardising all the hard-won advances in areas such as women’s rights and counterterrorism over the past 20 years. The spectre of Al Qaida re-establishing camps in Afghanistan would surely be too much for Biden and Blinken.”
“Even if there were no helicopters from the US Embassy roof, the TV pictures of the Taliban entering Kabul, and of Afghan refugees fleeing their advance could evoke memories of Saigon in 1975. The reimposition of Taliban curbs on women would provoke international opprobrium. And subsequent reports of AQ training camps being re-established in Afghanistan would bring back recent and painful memories. After all the blood and treasure expended in Afghanistan that would be a disastrous outcome.”
“The Afghan government may be able to hold on to power for a few years as the Najibullah administration survived after the Soviet departure. However, there is a danger that there will be a sudden dam-burst in confidence with senior officials and politicians leaving en masse and hundreds of thousands of refugees fleeing westwards through Iran, Pakistan and the Central Asian Republics. As the Taliban re-enter Kabul, we could see disturbing scenes of retribution and, in time, the return of Al Qa’ida figures from their hiding-places in the tribal borderlands in Pakistan. Only then will people re-examine this decision and recognise that the Afghan deployments since 2014 have not been that onerous.”
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“According to my sources, the Taliban are convinced they can take Kabul “within days” of the NATO withdrawal and they believe the Afghan army is “in a shambles and demoralised”. Although the Taliban will not disrupt departing US troops (unless attacked) they are not willing to wait until September to continue their campaign against Kabul government forces.”
“But we should not take much comfort from the Najibullah example. The comparisons with today’s Afghanistan are misleading. Najibullah’s government was able to reach and supply all the major towns by military convoy. The Afghan army was deployed to protect towns and road communications. By contrast, in 2021, only the route between Kabul and Jalalabad is reasonably safe. Convoys cannot get through from Kabul to Kandahar, Kandahar to Herat, or Kabul to Mazar-e-Sharif. The Afghan army is spread across the country in piecemeal district centres (often surrounded by Taliban-controlled countryside) and have to be resupplied by air. This is not a sustainable model.”
“Furthermore, a number of today’s Afghan leaders, officials and military officers have received offers to relocate to the United States, Germany and elsewhere. As the security situation continues to deteriorate, the gradual trickle of departures is likely to gather pace. In such circumstances, the government could implode quite suddenly.”
“To some, this may evoke images of the 1975 fall of Saigon with the big losers being the Afghans who remain, particularly the women, who face a future of uncertainty and anxiety. There could also be a migration crisis reminiscent of Syria in the last decade.”
“One key indicator is that Afghan security forces have begun to surrender to the Taliban. The procedure is quick and simple. Tribal elders are used to deliver a stark message to Afghan troops often holding positions in district centres. The message is often; “The non-believers are leaving Afghanistan. They are defeated. Your leaders are corrupt. You can surrender now, and we will protect you; or you can fight, and we will kill you.” Recently, the Taliban appear to have honoured their promise not to punish Afghan soldiers who surrender. News of this new-found leniency is likely to encourage other units to follow suit and lay down their arms. In several provinces, including in the north, the Taliban are tightening their grip on those cities which are still held by the government. The Taliban will soon be in a position to cut off food supplies and demand their surrender, possibly offering a similarly lenient dispensation to the population. Now that the Taliban possesses captured armoured vehicles and artillery, their ability to exert pressure on the cities is enhanced. In Kabul, a sense of panic has begun to grip the capital. There are desperate attempts to sell family homes but there are no buyers even when houses are on the market at one tenth of their previous value. Some families have departed to Tajikistan, conscious that several of the land border crossing-points with the Central Asian Republics have been captured by Taliban forces in recent weeks.”
The stars of the Harry Potter films will reunite for a 20-year anniversary special on HBO, minus author JK Rowling. Fans and commenters wondered if Rowling’s absence had anything to do with her views on transgender issues.
‘Harry Potter and the Sorcerer’s Stone’ premiered 20 years ago this week, catapulting actors Daniel Radcliffe, Rupert Grint, and Emma Watson to superstardom. Warner Bros announced on Tuesday that the three stars – as well as a whole range of supporting actors from the franchise – will travel back to Hogwarts for an “enchanting making-of story” airing on New Year’s Day, entitled ‘Harry Potter 20th Anniversary: Return to Hogwarts’.
Conspicuously absent from the production is author JK Rowling. A Warner Bros’ press release made no mention of Rowling, and a lengthy Instagram post by actress Emma Watson thanked fans and fellow cast members, but also made no mention of Rowling, whom other Harry Potter actors said they “owe everything” to.
Rowling’s PR team did not comment on the author’s absence, and the Hollywood Reporter claimed that the author will only appear in the show in archival footage.
Commentators online reckoned that Rowling had been canceled from the retrospective special due to her high-profile clashes with transgender activists. A self-described feminist, Rowling has spoken out against gender-neutral language, arguing that it “erases” the concept of sex and therefore the concept of womanhood. She has also stated that sex is a binary concept, and argued against gender-neutral bathrooms, claiming that by allowing men into women’s bathrooms, women are made less safe.
If I owed my entire career to 1 person, if I’d known her since I was 8, if I was worth $90m because of her, then not only would I defend her when maligned but I would refuse to take part in any reunion that excluded her. But that’s just me. #JKRowlinghttps://t.co/0ay5mhQ1FE
I can’t believe they’re actually shunning JK Rowling
“No you can’t participate in something celebrating the world you made because we are the new Amish but with more Puritan soul and no redeeming features”.
Rowling’s comments on gender issues generated intense backlash from LGBT organizations, and death and rape threats from the most zealous transgender ideologues online. Actors Daniel Radcliffe and Emma Watson also both spoke out against Rowling’s defense of biological sex last year, with Radcliffe declaring that “transgender women are women,” and apologizing to upset fans “for the pain [Rowling’s] comments have caused you.”
“Trans people are who they say they are and deserve to live their lives without being constantly questioned or told they aren’t who they say they are,” Watson chimed in.
Rowling has repeatedly stated that she is against anti-trans discrimination, but would not change her position on sex. “I refuse to bow down to a movement that I believe is doing demonstrable harm in seeking to erode ‘woman’ as a political and biological class and offering cover to predators like few before it,” she wrote last year.
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An American nonprofit behind the US-funded bat virus research in China has denied ever sending virus samples from Laos – a place where SARS-CoV-2 closest natural relative was found – to Wuhan in response to fresh allegations.
“No work was ever conducted in Laos as a part of this collaborative research project,” EcoHealth Alliance – a group that conducted experiments on coronaviruses while receiving funding from the National Institutes of Health (NIH) – said in a series of tweets on Sunday, responding to media reports alleging that the group might have transported a potentially dangerous virus from Laos to the laboratory in Wuhan.
However, we considered it a higher priority to continue our focus on China, and no work was ever conducted in Laos as a part of this collaborative research project.
The group’s name surfaced in October when the NIH principal deputy director, Lawrence Tabak, revealed EcoHealth Alliance did experiment on the viruses with the agency’s financial help. At that time, White House Medical Advisor Dr. Anthony Fauci stated that the viruses studied as part of the project “were distant enough molecularly that no matter what you did to them, they could never, ever become SARS-CoV-2.”
EcoHealth has come under renewed scrutiny after its emails, obtained through a Freedom of Information request, appeared to suggest that the group was discussing the prospect of collecting viral samples from bats in Laos and sending them to the Wuhan Institute of Virology. The emails were initially obtained by the White Coat Waste Project and sparked a flurry of reports over the weekend, including in the Spectator by British science writer Matt Ridley.
The emails shared between EcoHealth Alliance and its US government funders reportedly reveal that the scientists discussed collecting viral samples from bats in eight countries, including in Laos, between 2016 and 2019, and toyed with the idea of transporting them to Wuhan, ostensibly, to avoid red tape. One email from 2016 cited by the Spectator reportedly reads: “All samples collected would be tested at the Wuhan Institute of Virology.”
Laos is the birthplace of at least one virus that seems to be very close to SARS-Cov-2. A bat viral strain called Banal-52 discovered in Laos in September shares 96.8 percent of its genome with the virus behind the Covid-19 pandemic
On Sunday, EcoHealth Alliance claimed that the emails cited by Ridley “do not show…that we were sampling bats in Laos and sending the results to Wuhan.”
The group acknowledged, however, that it requested NIH permission to work in Southeast Asian countries, including in Laos, and that this permission was granted.
However, the nonprofit claimed it ended focusing on China instead.
The response failed to satisfy Ridley, who is also a co-author of a book on Covid’s origin, who demanded “evidence” proving that his report was not “fully accurate.”
Behind the Headlines brings you expert perspectives on today’s headlines by telling you more than what happened, but also what it means. You can also listen to The Cipher Brief’s Daily Open-Source Collection Podcast wherever you listen to podcasts.
Jack Devine, Former Acting Director, National Clandestine Service, CIA
Cipher Brief Expert Jack Devine, a 32-year CIA veteran. Devine served as both Acting Director and Associate Director of CIA’s operations from 1993-1995. He is a founding partner and President of The Arkin Group, which specializes in international crisis management, strategic intelligence and investigative research. Devine is the author ofSpymaster’s Prism: The Fight Against Russian Aggression.
Russia’s multi-pronged support of Myanmar is a microcosm of its strategy in Southeast Asia.
In the months since Myanmar’s February military coup, Russia and China have been the junta’s most powerful allies, but Russia has exploited regional instability to position itself as a third path between China and the West. While China was closer with the former Myanmar government than the military, it was also concerned about the government’s ties with the West and potential interference in its development efforts, particularly its Belt and Road Initiative. Russia, on the other hand, doesn’t depend on stability in Southeast Asia to the same degree as China and can instead take advantage of warring factions. Last month, on his first trip outside of the immediate region since February, Myanmar’s junta leader Min Aung Hlaing went to Moscow to meet with high-level Russian defense officials instead of heading to Beijing. Hlaing has reportedly visited Russia seven times within the past decade and previously stated that over 6,000 Myanmar officers have studied at Russian military academies. According to data from the Stockholm International Peace Research Institute (SIPRI), Russia was responsible for almost 40% of arms sales to Myanmar from 1999-2018, second only to China. SIPRI data further indicates that Russia has been Southeast Asia’s largest arms supplier over the past two decades, counting Vietnam and Laos as top customers. But Russia is offering the region more than arms and has promised Myanmar two million Covid-19 vaccines and assistance in the nation’s own vaccine production efforts. Russia has also been trying to expand free trade agreements between its Eurasian Economic Union (EAEU) and Southeast Asian countries, most recently getting Indonesia to sign on to the deal. Stepping even further into soft power efforts, last week Russia’s foreign minister met with his Bangladeshi counterpart and agreed to encourage Myanmar to engage in dialogue with Bangladesh on the Rohingya crisis.
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Leftist, former schoolteacher Pedro Castillo is declared President of a divided Peru, projected economic growth could play in his favor.
Peru, like many of its neighbors, has been battling the triple and interwoven threat of Covid-19, social unrest, and severe economic downturn. But for the past several years Peru has also been challenged by sharp divisions between its executive and legislative powers. Last November, Peru’s unicameral legislature voted to impeach then-President Martín Vizcarra, citing mismanagement of the pandemic and corruption, in a move that outraged thousands. The June presidential elections were likewise fraught. Castillo’s right-wing rival Keiko Fujimori, who is also under investigation for corruption, alleged electoral fraud and the Peruvians initiated a six-week long investigation, eventually finding Castillo the rightful victor. The EU, U.S. and 14 electoral missions deemed the elections legitimate, and the U.S. called the election a “model of democracy” for the region. Castillo, who previously worked as an elementary school teacher and has never held public office, will be greeted by a political establishment that is almost entirely against him. Peruvian citizens are also deeply divided, and many urban elites reportedly moved their money overseas out of fear for Castillo’s economic policies. But Castillo’s Peru Libre party holds fewer than 40 of 130 seats in the legislature and Castillo has already recruited several moderate advisors. Further, he has backed away from talk of nationalizing Peru’s lucrative multinational mining, oil, gas, and hydrocarbon companies, instead pledging to raise taxes on mining firms. Prices of copper and gold, two of Peru’s most critical exports, remain high and Covid-related trade obstacles are expected to ease over the coming months. While it is uncertain how effective Castillo will be, or where he will ultimately fall on his policies, positive projections for Peru’s export-based economy will likely play in his favor.
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Enjin becomes first blockchain platform to gain acceptance into the United Nations Global Compact, signaling widespread range of corporate sustainability efforts.
On Tuesday, Enjin, an innovative blockchain technology company focused on non-fungible tokens (NFTs), became the first such company to join the United Nations Global Compact. Upon admission, Enjin stated that it hopes to use NFTs to promote sustainability and equality in line with the UN pact that encourages businesses and firms worldwide to adopt more environmentally friendly and socially responsible practices. NFTs have surged in popularity in the past two years, and during the first quarter of 2021 NFT sales reportedly exceeded US $2 billion. In essence, an NFT is a way to prove ownership of a unique virtual item. It’s a unit of data that’s stored on a blockchain, or digital ledger, that certifies exclusive ownership of digital files ranging from photos to sports trading cards. Enjin, which is headquartered in Singapore, has focused its NFT efforts on games and apps and is reportedly able to operate with a lower carbon footprint than Bitcoin due to a slimmed-down verification model that requires less energy. This week, the UN Global Compact not only included Enjin as a member, but gave the company its highest membership rank, sending a signal that it’s interested in promoting such an environmental effort by crypto and blockchain entrepreneurs. For its part, Enjin has stated that it wants to employ the technology in carbon capture companies, fighting climate change in the process. The Head of the UN AI and Robotics Center remarked that during the global struggle to recover from the pandemic we should take advantage of new technologies like AI and blockchain to better equip ourselves for the future.
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Colder weather is settling in around much of the globe and after a year and a half of managing a global pandemic, energy markets are more complicated than ever. The U.S. petroleum inventory is at its lowest level since 2015, the UK is experiencing a severe energy crisis, Russia continues to push Germany on the Nordstream II pipeline and winter has already come to China, which has experienced weeks of rolling blackouts. What does all of this mean as both state and non-state cyber actors continue to take aim at energy infrastructure?
The Cipher Brief spoke with energy expert Norm Roule, a top adviser on energy issues, to get a sense of where we’re headed.
Norman T. Roule served for 34-years in the Central Intelligence Agency, managing numerous programs relating to Iran and the Middle East. He served as the National Intelligence Manager for Iran (NIM-I) at the Office of the Director of National Intelligence from November 2008 until September 2017. As NIM-I, he was the principal Intelligence Community (IC) official responsible for overseeing all aspects of national intelligence policy and activities related to Iran, to include IC engagement on Iran issues with senior policy makers in the National Security Council and the Department of State.
The Cipher Brief: Give us a brief snapshot of the global energy market today and what you think we will see in the coming months.
Roule: The energy market is working through what will hopefully be the final phase of a perfect storm of market distortions ignited by the pandemic and influenced by shifts in capital markets and climate change initiatives. I say the final phase because most countries are returning to growth and pre-pandemic energy consumption. Most of the drivers of this final phase will likely push prices upward in the near term. A few involve long-known issues that are now coming into play. A few remain unpredictable. Ancillary industries that rely on oil, gas, or distillates as significant feedstocks will either raise prices or shift production to areas with less exposure to hydrocarbons. In short, in the coming weeks, consumers should expend to not only pay more at the gas pump but at the supermarket and mall. We are likely to see relief in the Spring as the pandemic and supply chain distortions wane, seasonal demands on oil and gas pass, and energy producers ramp up operations to exploit high prices. China’s economy also shows signs of slowing, and financial packages meant to jump-start global economies will run their course.
The Cipher Brief: Energy markets seem more complicated than ever. What are the primary variables at play?
Roule: Global oil consumption is now back to 100 million barrels per day, a statistic last seen when the pandemic hit. Production is up, but the most crucial trend in recent months has been the deep draw on the glut of oil stocks during the pandemic. Producers – especially OPEC – have constrained production to reflect their cautious approach to market stability and their desire to reduce the stockpiles accumulated during the pandemic. As a result, stocks are now lower than before the pandemic. If you exclude the strategic petroleum reserve, the U.S. petroleum inventory is at a level not seen since 2014-2015. Stockpiles at Cushing are at a similar level. U.S. gasoline stocks are around five million barrels below pre-pandemic seasonal averages.
U.S. producers have consolidated, and the industry prioritizes return on equity over expansion, particularly in a political environment that is increasingly hostile to hydrocarbon production. As a result, U.S. oil production is still about 1.7 million barrels a day below pre-pandemic levels. Add to this the push to reduce carbon emissions, gas supply cuts, and some supply chain distortions, and you get a surge in gas prices and a need for oil (and coal) to replace gas in electricity production, as we see in China.
The Cipher Brief: The administration seems to be blaming OPEC plus for high oil prices. What’s happening within the cartel? How does the cartel see the current energy market?
Roule: OPEC’s role in oil markets remains deeply significant. The cartel produces 40 percent of the world’s oil, but 60 percent of the world’s total traded exports. That inevitably gives it an important voice. It is also clear that OPEC+ leaders remain confident in their strategy to maintain market stability and benefit from prices that are not so high that they ignite demand destruction. OPEC discipline during this turbulent period has been quite good, especially given that it is far from a monolith of views and capabilities. For example, the UAE would likely support additional production. Moscow makes positive noises about its willingness to increase production, but it follows Riyadh’s lead for the revenue and political advantage it derives from the current market.
Riyadh remains the architect of OPEC’s approach. Kuwait and Baghdad seem comfortable with this strategy. Production restraint is made easier because about half of OPEC’s members reportedly are unable to meet production quotas due to technical problems, mismanagement, or a lack of capital investment. This list includes Angola, Gabon, Equatorial Guinea, Nigeria, Libya, and Venezuela.
OPEC decision-making likely rests on a handful of variables, some predictable, others not. The cartel has done well in its assessments of global recovery and pandemic impact. But questions remain on aviation recovery. Likewise, even their best analysts have a tough time predicting the impact of speculators, weather trends, and the future of sanctions on Iran and Venezuela. Riyadh and Abu Dhabi will do what they can to avoid the financial and political consequences of inflation and any energy-instigated recession.
The strains in US-Saudi relations appear to have undermined Riyadh’s sympathy for Washington’s challenges. The Saudis are tired of being a political target within the U.S. They also seem to believe that while the U.S. touts itself as being interested in only renewable energy sources, it has no problem criticizing the Kingdom when high gas prices become a political issue. Last, we should recall that it was only in May 2020 that a group of Republican Senators publicly called on Saudi Arabia, demanding that it stabilize the energy market. From Riyadh’s perspective, it has done precisely that.
The Cipher Brief: Are the Gulf oil producers serious about renewable energy?
Roule: Absolutely. Regional leaders certainly understand the consequences of climate change for their people. In recent years, the region has experienced some of the highest temperatures on record, causing concern that, if unchecked, the trend could make portions of the Middle East unlivable.
But their approach is different from ours and as we all know, Gulf economies rely heavily on revenues from hydrocarbons. To varying degrees, all the Gulf states are trying to diversify their economies. But they also want to avoid a situation in which they are stuck with stranded strategic assets. In the West, our climate narrative tends to focus on ending the use of hydrocarbons. As with Norway, Gulf producers claim that they will use the resources from their oil revenues to fund the transition to a new energy economy.
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Their focus tends to be a balance between a reduction of emissions and reduction of hydrocarbon use. Recent weeks have seen multiple significant events in the Gulf in which they tried to highlight their decision to expend resources and political bandwidth on green technologies, hydrogen production, and carbon capture solutions. We will also see increasing efforts to plant trees and to rely on natural gas instead of oil for power generation. They also claim they will try to end gas flaring and reduce methane emissions. I don’t think these efforts will satisfy Western environmental activists who demand an end to oil use, but the trend is undeniable.
The Cipher Brief: What is happening with U.S. oil and gas producers? How are they responding to changing conditions?
Roule: Much has changed in the last two years. First, the sector underwent significant consolidation. The larger publicly-held companies must satisfy investors and financial institutions with a steady return on equity over the growth. Washington has cooled on its support for the industry. The decision to kill the Keystone Pipeline and limit drilling on federal property has contributed to industry reluctance on expansion. Last, some investors are pushing for companies to devote more attention to renewable energy sources. During the pandemic, this reduced capital investment to about half of average expenditure, thus producing our current limited production capacity. U.S. rig count has significantly improved over the past year, but not on a scale that would return U.S. production to pre-pandemic levels. In the near term, smaller privately-held firms are likely to spend the resources to expand production with public firms following once they get a sense of what 2022 will bring.
The results speak for themselves. At the beginning of the pandemic, the U.S. produced around 12.8 million barrels of oil per day (BPD). By May 2020, production declined to 9.7 million BPD, and with recovery is now approximately 11.3 million BPD. We are once again a net importer, bringing in about 1.3 million BPD in October.
We have seen a broader recovery in gas production, particularly in Texas. But a lack of production, low stockpiles, and unprecedented demand from abroad means consumers will face high bills if winter is severe or the risk of short supplies. Beyond heating, gas-fired power plants produce more than 50% of New England’s electricity, for example, so that any price spike will play out elsewhere in the economy.
The Cipher Brief: Is there a policy response to this situation?
Roule: I think policymakers globally are praying for a mild winter. But beyond this, policy options are few in the near term. A release from the strategic petroleum reserve (SPR) is conceivable. Still, we should remember the SPR was established for national emergencies and not a piggy bank to manage gas prices in an election year. Domestic producers will take a while to ramp up production, but policymakers will find this tough to seek in the current political environment. The administration could ban oil and gas exports or allow Congress to pass legislation enabling the federal government to sue OPEC for its cartel activities. Either step would invite predictable and unwelcome diplomatic consequences.
Although the American public demands cheap energy, it isn’t enthusiastic about supporting the infrastructure needed to achieve this, even if the power is produced elsewhere. Let me cite a couple of recent examples:
• Maine voters just rejected the construction of a billion-dollar electric line that would have delivered Canadian hydro-power electricity to New England.
• The administration is wrestling with a decision as to whether it should shut a pipeline that carries crude oil from Canada to refineries across Wisconsin, Michigan, and the Great Lakes region.
If the administration hopes to convince OPEC members to increase production, it will improve relations with Gulf Arabs. It might be possible to convince Saudi Arabia, Kuwait, and the UAE to lift production to cover the exports of OPEC members unable to meet their production quotas. In an extreme situation, the administration might consider a temporary oil export waiver to Iran as a sign of goodwill. I think the political blowback on the latter rules it out, but the possibility is there.
The Cipher Brief:The United Kingdom seems to be working its way through a severe energy crisis. How did this happen, and what are its policymakers doing in response?
Roule: The United Kingdom’s energy challenge is significant. As with other countries, it faces consequences of production limitation and the need to turn to more climate-friendly energy sources.
A few basics. Gas produces about 40% of the country’s electricity and heats many of its homes. Once London could rely on the North Sea for its gas; it now imports about half of its gas requirements. Norway is its primary gas source, but it also depends on gas producers in the U.S., Russia, Qatar, Belgium, and the Netherlands. To add to its woes, the U.K.’s storage capacity would survive only a short period of peak consumption. In 2017, London closed a massive Rough, which accounted for 70% of the country’s entire gas storage system. At the time, London believed it could rely on the global LNG market for reliable and cheap gas. Unfortunately, most LNG tankers head to Asia, a trend that can only increase as power-hungry Asian countries wean themselves from coal and oil.
The exploitation of new energy sources in the U.K. is no less contentious than in the U.S. A good illustration of this would be the tussle over the development of the Cambo oil and gas field in the waters near Scotland. Opposed by environmentalists who cite the inevitable carbon emissions the project and its oil would produce, the project offers to ease London’s energy woes and provide around a thousand jobs. The Johnson government has yet to indicate whether it will approve the project.
London’s options are few and leaving the country reliant on market conditions means risking shortages. For this reason, it has reportedly asked Qatar to agree to become the “supplier of last resort” in case global suppliers are unavailable.
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The Cipher Brief:What’s the Russian angle to the energy story?
Roule: Upfront, I think we should worry whether Russia will perceive the energy crisis as offering an opportunity for aggression. What if Moscow decides its gas hold over Europe allows it to invade Ukraine without penalty? Or as a means of pushing German regulators to accelerate their approval of the Nordstream II pipeline?
Moscow insists that it is meeting contractual obligations and that its exports have increased in the past year. At the same time, there are routine reports that Russia’s gas supplies to Europe have not only not met requirements, but that gas flow reversed in the Yamal-Europe pipeline. Russia also maintains eight gas storage sites in Europe to help manage supply during high-demand periods. Gas levels at these sites are currently low. Critics claim Gazprom diverted production to Russian domestic storage and that exports in October fell to the lowest level since 2014. When pressed, Moscow explains shortages saying that it must fill its winter supply stocks and expects to send Europe additional gas this week.
But if the current energy dynamic seems to be in Russia’s interest, Moscow’s long-term prospects are dim. A global shift to renewable energy sources forces Moscow to reckon with the prospect of holding a massive oil infrastructure of little commercial value. If so, future historians may look at the recent Glasgow climate summit as a significant step in accelerating Russia’s decline, possibly a new era of aggression as it seeks to accumulate power ahead of this decline or a more competitive race for market share against OPEC members.
The Cipher Brief: What about China?
Roule: No major country has endured such energy problems in recent months as China. After weeks of rolling blackouts, China looks well on its way to solving its coal problems that partially contributed to this situation. That won’t delight environmentalists, but it should ease China’s electricity problems and ensure its citizens stay warm this winter. Winter arrived early, and Beijing is about to see its first snow of the season. China’s efforts will be put to the test in a winter that many expect to be colder than 2020.
Longer-term, China still must work through the causes of this crisis. If the global economy continues to surge demand for Chinese products, its energy requirements will grow. Weather problems cut wind production; floods shut mines. We shouldn’t be surprised if such problems continue. Inevitably, China can only meet its climate goals by shifting from coal to natural gas, raising prices for other consumers.
The Cipher Brief: Let’s shift to North Africa. Algeria recently closed a long-established pipeline that transited Morocco to deliver gas to Spain. Will this impact Europe’s already tight gas situation? What’s the story here?
Roule: Over the past year, Algerian relations with Morocco have steadily deteriorated. In addition to their traditional disagreement over the status of Western Sahara and the Polisario, Algiers criticized Morocco’s renewed ties with Israel and accused Rabat of supporting an opposition group that Algeria claims ignited forest fires. Algiers closed its airspace to Moroccan flights and accused Morocco of killing several Algerian citizens in the Sahara region.
Here’s how it touches the energy picture. On 31 October, Algiers closed an 800-mile pipeline that carried Algerian gas to Spain via Morocco and the Strait of Gibraltar. The closure cost Morocco a portion of the gas it used from the pipeline. Morocco used this gas to produce about a tenth of its electricity. Rabat claims it can use other energy sources for this purpose. However, Spain has little gas and derives a significant portion of its electricity from that which it must import. Algiers claims it will make up the loss through a secondary pipeline, but the loss of gas will compound the energy problems of Spain and Europe in general.
The Cipher Brief: Any other issues on the horizon we should consider?
Roule: A growing number of aging refineries in the West will be closed in the coming years. However, Asia is the new center for refinery construction. This expansion will draw even more crude to the region for processing with the inherent impact on local economies and global consumers.
The Cipher Brief: Last, let’s touch on wild cards. What are the grey swans that might impact markets in 2022?
Roule: With low stockpiles and supplies, the energy topography is ill-prepared to sudden shocks to its production or distribution architecture. Yet, it faces three threats that have grown in the last decade.
First, we have climate change issues. Increasingly harsh weather events have shut down large portions of the production and refinery sectors in the United States and Mexico, sometimes taking weeks to restore normal production. Second, we have the universe of cyber threats. State and non-state cyber actors routinely probe or attack every aspect of the energy industry. Last, we have new geopolitical pressures. Tensions are rising with China as well as Iran and its proxies. Three of the world’s six most significant shipping channels are in the Middle East and a fourth in Asia.
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The Chinese foreign ministry has lashed out at Lithuania after the small Baltic Sea nation approved the opening of the Taiwan Representative Office in Vilnius. Beijing says it undermines its One China policy.
Beijing was disappointed that Lithuania had proceeded to grant Taiwan permission to open its ‘representative office’ in Vilnius despite “China’s strong opposition and repeated persuasion,” Chinese foreign ministry spokesman Zhao Lijian said at a press briefing on Friday. Taiwan had opened its mission in Vilnius the previous day.
Zhao called the move a violation of the One China principle, which he said is undermining China’s sovereignty and territorial integrity, while grossly interfering in its internal affairs. The spokesman reminded Lithuania that Taiwan is an inalienable part of China’s territory and the Beijing government has sole legal authority.
As to what necessary measures China will take, you may wait and see. The Lithuanian side shall reap what it sows.
In a “stern warning” to the Taiwanese authorities, Zhao then added that “seeking ‘Taiwan independence’ by soliciting foreign support is a totally misguided attempt that is doomed to fail.”
In August, Lithuania announced that the diplomatic outpost would be named the “Taiwan Representative Office,” angering China. Taiwan’s diplomatic branches – in countries that have de facto relations with the island’s authorities – are normally called “Taipei Economic and Cultural Offices.”
China demanded that Lithuania recall its ambassador from China, which it did. Beijing then withdrew its envoy to the Baltic state.
Chinese officials have repeatedly called on Western nations, notably the UK and US, to stop interfering in Beijing’s internal affairs, stressing that they consider Taiwan to be part of China.
Austria will introduce a full lockdown that could last for three weeks on Monday in an attempt to tackle a new wave of Covid-19 infections. The government has also ordered the entire population to get vaccinated from February 1.
On Friday, conservative Chancellor Alexander Schallenberg told a news conference that a complete lockdown of the nation would begin on Monday and last for an initial 10 days.
He stated that the restrictions could be extended if infection rates did not start to fall, but he insisted the lockdown would not exceed 20 days.
The measures concern the entire Austrian population. The government has already imposed a partial lockdown on the unvaccinated in an effort to reduce hospitalization rates amid a surge in Covid-19 cases.
When the full lockdown ends, restrictions will remain in place for the unvaccinated.
Schallenberg’s announcement came after a meeting of nine state governors, two of whom had already vowed to introduce full lockdowns in their regions on Monday, in the western province of Tyrol.
The chancellor also announced that vaccinations would be mandatory from February 1. “We haven’t been able to convince enough people to vaccinate. For too long, I and others have assumed that you can convince people to get vaccinated,” he added, giving his rationale for the mandate.
Schallenberg said he lamented the political forces, radical opposition, and fake news fighting against vaccination.
Austria has one of the lowest vaccination rates in western Europe, with only 65% inoculated against the deadly virus according to data from Johns Hopkins university.
Infection rates are almost among the highest on the continent. The seven-day incidence rate stands at 971.5 per 100,000 people.
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China has accused the Philippines of breaching its territory, saying two supply ships were blocked by Beijing’s coast guard as they approached a disputed shoal. Manila protested over the run-in, citing its own claim to the area.
The two Philippines vessels “trespassed” into waters near the Nansha island chain – also known as the Spratly Islands – on November 16, Foreign Ministry spokesman Zhao Lijan told reporters on Friday, noting that they entered the area “without China’s consent.”
“Chinese coast guard vessels performed official duties in accordance with law and upheld China’s territorial sovereignty and maritime order,” Zhao said, adding that the area is now “generally tranquil” and that the two countries are in communication about the encounter.
The comments from Beijing come just one day after Manila first publicized the incident, with the Philippines Foreign Affairs Secretary Teodoro Locsin claiming Chinese vessels fired water cannon on the two supply boats and forced them to abandon their mission near a disputed shoal in the Spratlys. He called on China to “back off” and “take heed” of Philippines claims to the region.
While both countries regard the Ayungin shoal – alternatively referred to as the Second Thomas or Renai Jiao shoal – as their own territory, The Hague’s Permanent Court of Arbitration settled the dispute in the Philippines’ favor in 2016. However, despite that ruling, as well as the fact that Manila has maintained a presence on the shoal since 1999, Beijing has not abandoned its claims to the area.
The International Criminal Court has halted an investigation into alleged rights abuses carried out by Philippines authorities as part of a harsh crackdown on the drug trade, saying it is reviewing a deferral request from Manila.
The ICC’s chief prosecutor Karim Khan said the probe was suspended after the Philippines government filed a request to defer the case earlier this month, according to court documents cited by Reuters on Friday.
“The prosecution has temporarily suspended its investigative activities while it assesses the scope and effect of the deferral request,” he wrote, adding that the court is seeking more information from the government in Manila.
Based in The Hague, the ICC allows states to ask for postponements if they conduct their own investigations into the charges in question. President Rodrigo Duterte’s administration filed its deferral request on November 10, while the country’s Justice Ministry announced its own investigation into the alleged abuses late last month.
The court initially opened the probe in September over allegations that Philippines police had carried out thousands of extrajudicial executions and used other brutal tactics against suspected drug dealers, and that Duterte gave implicit backing to those actions. Activists have accused authorities of killing innocent people, including children, though the police insist they only use violence in self-defense.
While Duterte has declined to cooperate with the ICC probe, saying it has no authority on the island nation, and even pulled the Philippines out of the international body in 2019, the court has jurisdiction to investigate alleged violations committed by the country while it was still a member.
The president’s chief legal counsel, Salvador Panelo, confirmed the deferral request in brief comments to Reuters, saying “There is no inconsistency with the request for suspension of action,” though he did not elaborate.
Since its founding some 20 years ago, the ICC has successfully convicted just five people of war crimes or crimes against humanity – all leaders of armed movements in Africa, including in Mali, Uganda and the Democratic Republic of the Congo.
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