Water in the 21st Century

Water is a common pool resource in the 21st Century

From the water wars and the pumping races in California in the 1950s to irrigation systems in Spain and mountain villages in Switzerland, all have demonstrated that people are able to draw up sensible rules for the use of common-pool resources like water. Water in the 21st century will increasingly need its own set of sensible rules to meet the new political, economic and environmental realities of the 21st century.

The Colorado River in the US

The Colorado River provides much of the water for many cities and farms in seven states in the US including Colorado, Wyoming, Utah, New Mexico, Nevada, Arizona and California before it reaches México. But flows of water on the Colorado River in the US have been forecast to decrease by up to 30pc by 2050. In the Northern States its water supports cattle empires. In the Southern States especially in California, the river irrigates deserts to produce much of the US' agricultural products, fruit and winter vegetables. And all along the way, aqueducts branch off to supply cities from Salt Lake City, Denver, Phoenix and Los Angeles. Interestingly, the Metropolis closest to Lake Mead, Las Vegas, gets 90pc of its water from this one source. 

Map of Colorado River in US West

Arguments over water tend to have four dimensions – physical, legal, political and cultural. For the physical the standard response is to summon the engineers. In the case of the Colorado River, engineers are already digging a new intake at 890 feet (lower than the current intakes as the water level in Lake Mead has decreased to ensure a guaranteed water supply to Las Vegas). Another response is to call in the lawyers. This was the preferred approach in the 20th century, in the era of the so called “water wars”. Starting with the the Colorado River Compact of 1922 and continuing with statutes, a treaty with México and case law until the 1960s, a truce was achieved. Called the Law of the River, the resulting regime determines who along the river has what right to how much water. 

At least, it does in theory. The problem is that the law took shape after two decades of record water flows, which became the basis for allocation. As a result it apportions more water than there is in the river. For decades that did not matter, since there was so few people. Then the cattle, fruit and people multiplied. The law's seniority rules theoretically mean that, for example, the taps to Las Vegas would be shut completely before agriculture in California were to loose a drop of water. This gives rise to the political dimension.

In the 21st century, cooperation has mostly replaced the old rivalries among agricultural and urban users among the seven river states. Nevada and Arizona have a water banking partnership and Arizona stores excess water in its aquifers to share with Nevada if needed. In California, the water utility of Los Angeles has bought water rights from some farmers. But inevitably arguments still persist. 

This leads into the final dimension which is the cultural dimension. The argument here is directly related to the culture of the US West. For example, does every middle-class household really need a lawn in a desert? In some cases, counties have begun paying their citizens to rip out their turf and opt for a desert landscape garden instead that can be just as chic. 

Egypt and Ethiopia are fighting for the Nile's water too

Most of the water that flows down the lower reaches of the Nile, the world's longest river, comes from the Ethiopian highlands. Up until recently the Ethiopian Government had been content to abide by a Nile River Water Treaty negotiated in 1959. The trouble is the current treaty has strongly favoured the biggest and most influential consumer of Nile water, Egypt. Ethiopia, which has recently overtaken Egypt as Africa's second-most populous nation has joined together with the other upstream Nile nations including Burundi, Congo, Kenya, Rwanda, Tanzania and Uganda to re-write the 1959 Nile River Water treaty taking advantage of the power vaccuum in Egypt's leadership after the Arab Spring. 

The combined population of the upstream countries along the Nile is 240m against Egypt (85m) and Sudan (30m) and South Sudan (14m). There are also plans afoot for Ethiopia to dam its bit of the Blue Nile and to build a large hydro-power capacity that would be the centrepiece of a plan to increase the country's electricity supply five fold over the next five years. These plans will undoubtedly have a big impact on other Nile countries downstream and have the potential to provoke cross-border water conflicts.

 And what about fracking and high water use it requires

In order to extract gas held in the hard shale rock, it is necessary to break up small sections by firing large quantities of water mixed with fine sand and fracking chemicals at a very high pressure to make the shale rock give up its gas. Water has been identified as a serious problem for mining shale gas mainly because of the quantities of it that are needed to successfully frack wells. But worse of all there have already been cases where local ground water aquifiers have been polluted by the harsh chemicals used in the fracking process. It is estimated that the average shale well uses around of 22m litres of water to extract the gas. If as predicted by many energy experts, shale gas extraction goes ahead at full speed, worldwide gas could make up around 25pc of primary energy by 2035 adding further pressure to the common pool resource of water.

So what does the future hold

The Geo-Trade Blog believes there is an increasing awareness of the need to act on the world’s impending water challenge in the 21st Century. Nevertheless growing global resource use highlights the complex interdependencies between water and energy, agriculture, industry, urban growth and ecosystems.

Governments and business need to prepare for long term water scarcity and to consider a framework to share the world's water - a common pool resource. Of particular importance are the challenges to addressing water issues at policy level nationally and internationally, to avoid cross-border water conflict. The Geo-Trade Blog believes that people do have the capacity to  draw up sensible rules for water use in the 21st Century but consideration needs to start now.

The Rise of Las Américas in the 21st Century

Panamá City Skyline in the 21st Century

The Decade of América Latina

The market orientated reforms of the 1980s and the 1990s combined with several years of commodity-driven prosperity have been transforming América Latina into a region of wealth and prosperity over the last decade. The commodity boom together with more progressive social policies has started to create more dynamic and less unequal societies across the region.

Thanks to the commodity boom and rising revenues, governments have presided over a time of rising incomes for the new emerging middle classes in many countries in América Latina. However the increase in wealth has been occurring against a background of an ideological battle between reformers (mostly liberals and social democrat politicians) and those such as Mr Chávez (Venezuela) and potentially President Christina Kirchner (Argentina) and others of the ALBA grouping who would rather return to the authoritarian and populist past. At present the reformers appear to be winning the debate. This is illustrated below in the Economist's Latinobarómetro published in October 2011. Even so there has been a slight fall in optimism over the last year. This chart clearly shows Panamá with the most ongoing optimistic outlook. 

Latinobarómetro Source: The Economist Oct. 2011

 

What of the northern neighbours – the US

The US, América Latina's northern neighbour on the same continent has so far failed to appreciate the rising importance of América Latina with its expanding market for the north's exports, its huge investment opportunities, its enormous reserves of energy and minerals and its continuing supply of needed labour. However at the same time and despite their recent growth and globalisation, the economies of América Latina still depend on the US for capital, know-how, technology and remittances.

If geography is destiny and the US and América Latina need one another so much, the obvious question is why are the two not pursuing a more joint approach to consolidate their relations in a meaningful way? The answer to this question turns on key policy differences on three main areas. Firstly, immigration, many in América Latina find the idea of building a wall between the México and the US particularly offensive. Secondly, the war on drugs, the North's war on drug trafficking serves mainly to spread corruption, increase criminal violence and generally undermine the rule of law. Finally, the embargo on Cuba imposed by the US is seen as counter-productive and likely to have prolonged the repressive rule of the Castro brothers rather than ending it. However none of these policy issues is easily resolved due to domestic US politics and less so in an election year. Immigration has been a particularly toxic issue in the Republican primaries. To make progress in the war on drugs, the US needs to curb demand for illegal narcotics at home, but US politicians are loathe broach the the idea of decriminalisation. And the Cuba policy is held hostage by the swing state of Florida and its residents of Cuban origen.

Panamá, the Singapore of the Americas

Panamá is the success story of the first decade of the 21st century. Business of all kinds continues to grow, in a land coveted in the late 17th century by the pirate Henry Morgan and occupied since the beginning of the 20th century by the US President Roosevelt, to build the Panamá canal and link the Pacific with the Atlantic on the narrow isthmus. During many decades, the country has served as a hiding place for multiple legal and illegal dealings, from drugs to weapons and political conspiracies and money laundering.

Nevertheless the Panamá of the 21^st century has many feathers to its bow: a chanel, an international banking center, the world's first merchant fleet, a free trade area which is one of the main bases for the collection and re-export of inland freight, an interoceanic railway, seven private ports and dozens of casinos and property developments (as the above picture shows). Panama in 2011 was placed at the head of economic growth in Las Américas, an increase of 10.6pc of GDP, against 9.2pc in 2010, according to the Statistics and Census Institute (INEC) of Panamá which likely explains the optimism in the Latinobarómetro above too. 

But the Elephant in the room is still... la droga

US President Nixon declared the war on drugs 40 years ago, interestingly the front that he opened in 1971 has survived all his successors up until now.

The Presidents of Brazil, Colombia and Mexico were the first to speak out on the failure of the war on drugs, Fernando Henrique Cardoso, Cesar Gaviria and Ernesto Zedillo respectively. Recently, the current president of Guatemala, Otto Perez, and the former President of Colombia, Juan Manuel Santos, have also spoken out to demand the opening of a debate on the decriminalization of drugs using the legitimacy granted to countries suffering the most tragic consequences of victims of the war on drugs. Honduras topped the global homicide rate, with 82.1 homicides per 100,000 population, followed by El Salvador. México has also been immersed in the drug war for the last six years, with almost 50,000 people dead and the homicide rate has increased by 65% since 2005 according to UN data.
 

The legitimacy of key leaders of América Latina speaking out, coupled with the figures of the dead has forced the US president, Barack Obama, to finally address the issue. In the US in April 2012 Obama said "We recognize our responsibility in this matter and I think it is entirely legitimate to engage in a discussion about whether the laws now in force are laws that perhaps are causing more harm than good in some areas." When Obama spoke, everyone understood: it is time to talk about drugs. The issue that is a constant drag on América Latina has finally reached the international agenda, a further sign of the América Latina's rise. 

 

Markets and the Power Shift to the Emerging Economies

The weight of economic activity is shifting from the US & Europe to Asia & Iberoamérica

Energy squeeze – higher prices

The longer-term energy story is complex. The developed world is now barely increasing its use of energy and energy demand is projected to remain stable for the forseeable future, at least for the next couple of decades. Energy use in the emerging world, by contrast, continues to grow relentlessly every year.

The emerging world now uses more energy than the old developed world. This is what you would expect to happen, for as the weight of economic activity shifts from the US and Europe to Asia and Iberoamérica, so too will demand for energy. But it means the price paid by the developed world will be increasingly determined by the emerging world. The so called “West” (the US and Europe) has never been in this position since industrialisation. There is a weak parallel with the rise of Opec in the 1970s when the oil producers cut supply and quadrupled the price. At that time, the US and Europe found other sources of oil and reduced their dependence on Opec. But this time the squeeze comes from the demand side, not the supply, and there is not much the US and Europe can do about it.

And what next for the commodities markets 

The Chart below provides an overview contrasting developed countries with emerging economies' share of GDP and their world share of some of the most important commodity markets and other indicators:

Source: The Economist Daily Charts

Many analysts believe that the long-running boom in commodity prices (for some of the world's most important raw materials) has been driven up by financial speculation as much as physical need. Hence the commodities market may be heading for a massive crash on the scale of sub-prime. The commodity boom has not reached the excess so evident in the subprime era but it is pretty big nevertheless. Recently, some analysts have speculated that the gigantic merger between the mining company Xstrata and the commodity trading house Glencore is a signal of the prospect of a looming crash in the commodities markets. Just before the subprime crash, many massive subprime acquisitions came at the end of a massive boom in the securities markets and those doing the deals appeared to have sensed that the party was coming to an end and that they had to do something spectacular to be able to reap the super profits to be had in the final stages of the blowout. The Geo-Trade Blog believes it is possible that this deal may be the signal that the commodity markets are today where debt markets were on the eve of the credit crunch.

Printing Money and Bubbles in Markets

In the immediate aftermath of the subprime crash, printing money or quantitative easing (QE) as it is also known helped a wide variety of financial institutions to avoid facing up to their losses, covertly recapitalising US and European banks that were, to all intents and purposes, insolvent. Over the last few years protests from countries including Thailand, Australia, South Africa and China have been heard complaining that the US' unprecedented monetary expansion was responsible for causing dangerous bubbles in commodity markets going way beyond US equities. The US government also knows, although it denies it, that the more money it prints, the more speculative pressures push up global food prices. 

While the causes behind the Arab Spring unrest in 2011 are complex, it must be noted that it was surging food price that provided the spark. Hence the large emerging economies view "quantitative easing" as a developed country policy aberration, dressed up as a "legitimate technical solution" that they do not agree with at all. Brazil's finance minister has described it as "throwing dollars out of a helicopter and the Russian PM has described it as "economic hooliganism". The emerging economies clearly perceive the current trials and tribulations of the developed countries very differently to the conventional wisdom that underpins the policy decisions and assumptions that justify QE in the developed world. Emerging Economies are aghast that the US is now shouldering declared federal liabilities of $9,100bn - making it by a long way the world's largest debtor. Furthermore US Government debt is set to reach 42pc of GDP by 2015 according to official estimates. And more and more interest is being shown in the fact that the US' total sovereign liabilities including off-balance sheet items such as Medicare and Mediaid amount to $75,000bn - no less than five times annual GDP.

 

Nuclear powered aircrafts, could they become a reality?

Artist's impression of a nuclear powered aircraft

A recent work by Cranfield University's Bhupendra Khandelwal on an air transport model that combines nuclear-powered cruisers with chemical-powered short-range transports considers this possibility. As these long-range cruisers continually fly looping tracks that cross oceans and take them over major population centres, shorter-range aircraft would bring up passengers and cargo that would ride on the cruiser until they reach their destinations, where they would transfer to other short-range aircraft and fly down to land.

He has developed an air transport model (below) that combines nuclear-powered cruisers with chemical-powered short-range aircraft.

Graphic courtesy of Cranfield University Study, UK.

Taking off from conventional airports, flying to and landing on the cruiser, the chemical-powered transport would be optimised for take-off, climb and landing, with no need to cruise. This would reduce emissions, says Khandelwal, as the nuclear-powered transport would carry the aircraft to its destination, where it would detach from the cruiser to descend and land normally.

The cruiser, meanwhile, would have taken off from a remote site. This and its extreme endurance, which significantly reduces the number of take-offs and landings, would minimise the risk of a crash leading to a nuclear incident. Also the cruiser would be unmanned, he says, improving safety and avoiding the risk to a crew of prolonged radiation exposure during the cruiser's extended voyage. For further safety, the cruiser would have back-up chemical propulsion.

Khandelwal calculates this air-transport model could produce a fuel saving over conventional point-to-point flights of 40% for a 1,000km mission, rising to 85-90% for a 10,000km mission, where the chemical-fuelled flights to and from the cruiser would be a smaller fraction of the total.

Nuclear propulsion could be either direct or indirect cycle. In direct cycle, air flows through the compressor, into the reactor where it is heated, and out through the turbine. The risk here is radiation in the exhaust gases. In an indirect cycle a heat exchanger transfers energy from the reactor to the airflow. The radiation risk is reduced, but so too is thrust. 

Khandelwal's work provides much food for thought on new models of air travel in the 21st Century. The Geo-Trade Blog will continue to follow new innovative models for air transport with the potential to reshape travel and trade.

Heat Energy– is solar power the missing link in renewable energy?



Solar Power Tower in Spain



Heat dominates industrial energy consumption. In the UK alone 76 pc of industrial energy consumption is heat. Few things can be manufactured without heat. The importance of heat in total energy consumption sharply contrasts efforts to green the energy infrastructure. European and US policy is largely aimed at renewable electricity production using wind turbines and solar panels. But while it may be fine to convert electricity into heat for domestic use, such as electric heaters or electric cookers, it is also very inefficient to do so.

It is often assumed that our energy problems are solved when renewables reach 'grid parity' - the point at which they can generate electricity for the same price as fossil fuels. But to truly compete with fossil fuels, renewable energy must also reach thermal (heat) parity. The missing element in European and US sustainable energy policy is a renewable source of thermal energy.

Solar Heat Energy

Most solar technologies were developed in the late 19th century early 20th century. For example, solar power towers were invented in 1878. Solar concentrator technology is based on a combination of solar power towers and parabolic dish systems (as pictured above). Solar furnaces can produce temperatures of up to 3,500°C enough to manufacture hydrogen and all metals. The production of steel takes place at 1,800°C and aluminum at 2,000°C. These temperatures can be achieved in just a few seconds as demonstrated in the video below of a solar furnace melting steel:

The problem is that this technology is mostly used for the wrong purpose. In the 21st century, solar energy collected from solar thermal plants is still being converted into steam (via a steam boiler), which is then converted into electricity (via a steam turbine that drives an electric generator). The process is as inefficient as converting electricity into heat: two-thirds of energy gets lost when converted from steam to electricity.

If solar thermal plants were used to generate heat instead of converting the heat collected into electricity, the technology could deliver much cheaper energy than it currently does. The crucial difference between solar thermal energy and other renewables producing electricity is that solar thermal energy actually starts with heat energy. Hence, in contrast with other renewables, the cost of heat energy is far lower than the cost of electricity, and so it may be able to compete with burning fossil fuels at the thermal level. The Geo-Trade Blog believes that policy makers in the US, Europe and Emerging Economies should explore further how solar heat energy could be applied directly to industry, without the intermediate step of generating electricity.

Turkey, the 'European BRIC'– a new regional power in 21st century

An aerial view of Istanbul - the Bosphorus

At the beginning of the 21st century Turkey is once again rising to become an economic and political power, both in its region and in the world. The rise of Turkey is one of the last decade’s most important stories. Last year it grew faster than any other big economy except China and India. As the world’s 17th-biggest economy, Turkey has become a leading member of the G20 club. It has NATO’s largest army after the US.

The reach of Turkish companies is also spreading. They operate not just across the region but around the globe. Many construction projects in the Middle East involve Turkish firms and workers. Turkish Airlines, has turned into a global force as Istanbul, now Europe’s biggest city by far (at around 15m), has become an aviation hub.

A new canal linking the Black Sea and the Sea of Marmara

Map showing where the proposed new Canal Istanbul
will be built by 2023

In the run up to the latest Turkish elections, the ruling AK party which won a new mandate on 12 June 2011, pleged to build another bridge across the Bosphorus and more spectacularly a new canal linking the Black Sea and the Sea of Marmara that would be a match for the Panama Canal. This project was first proposed by Sultan Suleiman the Magnificent in the 16th century.

The new canal will be called 'Canal Istanbul', it will link the Black Sea to the Sea of Marmara, which leads to the Aegean Sea. The new waterway will be located on the European side of the Bosphorus. Its main purpose is to reduce the heavily congested tanker traffic through the Bosphorus Strait and to minimise the risk of accidents. The proposed Canal will have a length of around 48km with a depth of 25m, a width of 150m on the surface and 120m at the canal bed. This will allow the largest vessels to pass.

The project is intended to be completed in time for the 100th anniversary of the Turkish Republic in 2023.

A new regional player

Turkey's location between Europe and the Middle East lends it huge geo-trade significance, not least as an energy and pipeline corridor. Over the last decade, it has developed closer relations with Georgia and with Iran, Iraq, Syria and other Middle Eastern countries, to the consternation of its traditional allies, the US and Israel.

Azerbaijan provides Turkey with access to the energy-rich Caspian Sea states of Kazakhstan, Turkmenistan and Uzbekistan. Turkey is also a strong supporter of the 1,768km Baku-Tbilisi-Ceyhan pipeline that runs from Baku to its Mediterrenean port of Ceyhan.

The EU accounts for 75pc of foreign investment in Turkey and roughly half its exports and inward tourism. Turkey is Europe’s third-biggest producer of televisions. Likewise, Europe's energy security depends on the transit of oil and gas from Central Asia and the Middle East through Turkey.

Europe and Istanbul relations

Europe in its history has had an uneasy relationship with Istanbul during the Ottoman Empire, in fact, some might say that Europe has been almost defined, through the centuries, by a tension between Christian and Islamic boundaries and by Muslim encroachment in Europe from the East and the South. To some extent, in some European countries, this view still pervades policy makers today when considering Turkey's accession to the EU.

Today the EU needs to ensure that it does not turn inwards and become fixated on internal questions. There is a real danger that Islamic identity is defined as 'the other' and while this debate ensues, Europe misses the bigger picture of what is happening in the world in the 21st century. The EU – with 330m people alone in the Euro-zone area has a key role to play in the 21st century. But it needs to remain outward-looking to understand the changes taking place in emerging economies and in the greater world in Asia-Pacific to become an active global player.

In the 21^st century, Turkey is the closest thing Europe has to a BRIC. The EU must find ways to enhance its relations with this important new emerging regional power. Perhaps through a Special Economic Zone to provide access to the EU internal market, the EU's greatest success to date. Then maybe with the option for Turkey to join the Euro too if it meets the fiscal criteria. Turkey could also be invited to join the Schengen agreement to enable free movement of persons through the Schengen Member States. Europe needs badly to embrace Turkey, it needs the fresh perspective and energy of the Turk people and to harness the economic firepower of an important emerging economy on its dooorstep.

The InterOceanic Highway between Brazil and Perú connecting the Atlantic and Pacific Oceans

InterOceanic Highway between Perú and Brazil that connects the Atlantic
and Pacific Oceans



The InterOceanic Highway (Carretera Interoceánica is the official Spanish name and Estrada do Pacífico is the Brasilian name) will have a total distance by road of 5440kms from the Atlantic to the Pacific.

The road is one of the biggest construction projects ever undertaken in América Latina. The highest point is 4850m or 42m higher than Mont Blanc, Europe's highest mountain. Twenty two bridges are being built including a spectacular new bridge of 722m across the Madre de Dios River at Puerto Maldonado in Perú.



 The InterOceanic Highway got off the ground due to the support from three Presidents Lula da Silva (Brazil), Alan García (Perú) and Evo Morales (Bolivia). All were key supporters of the project through which they sought the further integration and development of the three countries: Brazil – the giant of América Latina with its huge area of the Amazon, Perú with its Pacific coast and also with more than half its land area in the Amazon and the land-locked Bolivia with massive energy resources in need of infrastructure to transport them to the sea ports.

Over 4650km are complete and fully asphalt covered. Work is progressing on the final section 736kms from the Amazon basin and over the Andes mountains. The cost has been budgeted at 1.3 billion dollars.

The InterOceanic Highway will open up the Pacific Ocean to Brazil and Bolivia. It will connect América Latina's biggest mega-city São Paulo with Perú's three ports on the Pacific Coast; San Juan, Mataraní and Ilo. América Latina has benefited from the boom in the world price for mineral resources. Perú is the world’s largest silver producer, second largest producer in copper and zinc and sixth in gold.

Peru has advanced considerably over the last five years. Since 2006 growth has accelerated, averaging 7% despite the world recession. The share of Peruvians living in poverty has fallen from 49% in 2004 to 35% in 2009. Social indicators have improved immensely - between 2005 and 2010 Perú climbed 24 places in the United Nations Human Development Report.

Much of the Pacific coast, where farmers export asparagus, grapes and other products enjoys almost full employment in 2011. Though many parts of the Andean highlands remain poor, the arrival of the InterOceanic Highway has cut journey times meaning that many farmers there too have joined the export boom. Much of this succes is due to the vision of outgoing Peruvian President Alan García and his predecessor Alejandro Toledo. Both pursued policies of price stability, fiscal rigour, foreign investment, open trade and investment in major civil works infrastructure.

Perhaps Alan García's vision for Perú and América Latina is best summed up in his own words:

"We will be a first-world country soon, but we need to keep the goal in sight, and the goal is work, effort, execution of public works. We don’t live on words, we don’t live on promises, we live on concrete works.”

Unfortunately Alan García was not able to choose a sucessor in the same way that Brazil’s Luiz Inácio Lula da Silva and Colombia’s Álvaro Uribe had managed to do in 2010. His party, did not even have a candiate in the first round of presidential elections held in April 2011. None of the three centrist moderate candidates made it to the second round of voting on 5 June 2011. Instead the Peruvian electorate was presented with Ollanta Humala, an ex-army officer with affiliatons with Hugo Chavéz and Keiko Fujimori, the daughter of the former president now serving a 25 year prison term for human rights abuses. Ollanta Humala, prevailed by a narrow 3% margen with a manifesto programme that looks unlikely to deliver the growth rates needed to continue to lift peruvians out of poverty and at best reads like a recipe of missed opportunities for the next five years.

The Arctic in the 21st Century - a New Polar Frontier

Arctic Ocean Ice Breaker

In April 2010 Russian President Medvedev paid a state visit to Norway. The highlight of this visit was a surprise announcement – after 40 years of negotiations – an agreement on the division of a disputed zone in the Arctic Ocean into roughly equal parts for Russia and Norway. A newly agreed Arctic maritime delimitation line was announced accompanied by treaty provisions for new rules and procedures to ensure responsible management of natural resources. The disputed territory measured 175,000 sq km which is equivalent to about half of the land territory of Norway.

Map of Arctic Region Boundaries

Experts believe that the oil potential of the formerly disputed parts of the Arctic Ocean could be more than 5 bn metric tonnes of oil – 10-times Saudi Arabia's production potential and still larger gas reserves 10,000 bn cubic metres of natural gas – five times Norway's proven reserves. But experts argue the high cost and inaccessibility of these resources mean large-scale development of these resources could be years away.

Russian interests in the Arctic

Russia has long held an interest in the Arctic. Indeed, Russia underlined the importance of the Arctic by declaring its plans to make the Arctic Region its primary resource base by 2020 in its 2009 Arctic Strategy. PM Putin visited Russia's Arctic territory shortly after President Medvedec's visit to Norway last year, where he proclaimed the Arctic's importance was in “Russia's deepest geopolitical interests”. Russia sees itself along with Norway as the two “principle Arctic countries” although it reluctantly acknowledges the need for cooperation with the other Arctic countries: US, Canada and Denmark.

However Russia's political ambitions are not reflected by its technical and financial reality. Russia badly needs international technical expertise to implement cutting-edge projects in such difficult acreage, and money to begin exploration in the offshore Russian Arctic. Hence the recently announced deal in January this year between the British company BP and the Russian company Rosneft to work together to extract oil from above Russia's Arctic Circle. The deal recognises the importance of BP's geological know-how with BP swapping a 5pc stake in itself for a 9.5pc share of Rosenef.

Chinese interests in the Arctic

China is not an Arctic state. Nor does it have an official Arctic Strategy yet. Nevertheless it is increasingly active and vocal on the international stage on issues concerning the region.

In recent years China has been trying to bolster its position in the Arctic by seeking observer status on the Arctic Council (which was denied). China has also emphasized the rule of law in the Arctic. In an article in the Asia Times, in February 2011, Rear Admiral Yin Zhin was quoted saying:

“The United Nations Convention on the Law of the Sea, the North Pole and surrounding areas are the commonwealth of the world’s people and do not belong to any one country… China must play an indispensable role in Arctic exploration as we have one-fifth of the world’s population.”

Chinese oil companies are not yet in a position where they can offer technical expertise. But in the near future, it is highly possible that China could become a major player in the Arctic by financing Russian activities in the region.

Environmentally Sensitive Arctic

It is estimated that the Arctic region holds 25pc of the world’s oil and 9pc of the world’s coal and it is one of the last remaining regions that has not been mined for resources.

Many believe the sensitive Arctic environment is the last place that should be drilled for oil because the risks just aren't worth it. In July 2010, Environmental NGOs called for moratorium on new offshore drilling in the environmentally sensitive Arctic. The calls for a moratorium echo growing concerns across the Arctic that industry needs to prove Arctic oil development will not cause catastrophic damage to the Arctic environment. A US environmental NGO, the Pew Foundation, recently published this video about the risks of Arctic exploration:

What is the future for the Arctic?

In the 21^st century, the Arctic is fast becoming a new Geo-strategic region in natural energy resources, as competition for its massive untapped reserves of oil, gas and coal heats up.

The presence of natural resources has increased the incentives for Arctic countries to settle old maritime territorial claims, largely because no private company will invest without them. But the process of deciding who owns what is aided by international law but often not fully resolved. As a consequence, we should expect much competition and jostling in the foreseeable future among the 5 Arctic countries and their investors as they stake their claims to the Arctic's wealth of natural resources.

But it is also worthwhile remembering that resources are not always mined because they are there but rather because the price is right or because the politics are right (preferably both). The key issue in large parts of the Arctic will be to understand the political risks and whether the necessary long-term investments in infrastructure are made in this previously unexploited polar region.

The Turkic Peoples – who are they?



The mountain ranges of Central Asia with tribal horsemen

When the Soviet Union collapsed in 1991 a broad buffer zone where Europe meets Asia, mostly straddled by Turkic populations was re-discovered. Turkic-populated lands have not drawn intense Western interest since the rivalries of 19th century empires.

Five hundred years ago, Turkic people ruled much of Eurasia. The Turkic dynasties held sway over India, Persia, North Africa, the Balkans, Russia and parts of China. Arab caliphs hired tough Turkic fighters as mercenaries for the armies of Islam from the 7th century onwards, and soon afterwards Turkic warriors became the military backbone of the Muslim world. From the tenth through the fourteenth centuries, Turco-Mongolian horseback fighters and their families spread westwards across the Middle East under conquerors such as the Genghis Khan.

Khazak Nomadic family tents in 21^st century

The Turkic people account for around 140 million people worldwide. Their several nations constitute one of the ten largest language groups in the world, and their biggest state, Turkey, has the largest economy and army between Europe and India. Turkey and the five new mainly-Turkic states of Eurasia - Azerbaijan, Turkmenistan, Uzbekistan, Kazakhstan and the Kyrgyz Republic are becoming increasingly important again in the 21^st century.

During the 19^th and 20^th centuries Turkic ascendancy ended but the Turkic people remained. Turkic customs, language and identity has remained throughout these lands despite Soviet rule. The Turkish language and its dialects is still a rite of passage for the traveller who wishes to trade along the ancient Silk Road from Iran to the Western provinces of China.

A new 21^st Century Power Game in Central Asia

Central Asia has become an area of increasing strategic competition to secure access to the region's oil and energy resources. China, Russia, US, India, Pakistan, Iran and Turkey are locked in a tightly contested competition.

China has been building new security relationships to match its growing economic ties with the Central Asian countries through the Shanghai Cooperation Organisation, a six-member group founded in 2001 that includes Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. China has committed itself for the first time to a regional collective security agreement focused on enforcement of borders. Beijing has already conducted joint military maneuvers with Kyrgyzstan.

The United States has not been absent from this competition, having acquired a military base, known as Camp Stronghold Freedom, in Uzbekistan, as well as a presence in Afghanistan.

Trade between China and Kazakhstan has increased substantially as China's economy has become more dominant regionally, but Russia still remains a significant trading partner too. The Russians are trying to set up an OPEC-like cartel to tie down gas in Central Asia.

China has been seeking to increase its influence in a part of the world long dominated by its historic rival, Russia. Uzbekistan and Turkmenistan have followed the Kazakh example in looking toward China, rather than to Western-dominated international financial institutions, for development funding and economic thinking. China's politics and central planning policies have a strong appeal for many of the former Soviet republics of the region.

Government in Central Asian Republics

The Central Asian Republics are largely ruled by autocrats and strong men to varying degrees. The regimes generally restrict the freedom of speech, put down any opposition fiercely and fix elections. Uzbekistan, the most populous has been ruled by Islam Karimov, Nursultan Nazarbayev has ruled Kazakhstan, both since 1989. Emomali Rakhmon has run Tajikstan since 1992. Turkmenistan had a colourful dictator known as Turkmenbashi (Head of the Turkmans) until 1996. Only Kyrgyzstan has the region's first experiment in parliamentary democracy since last year.

There has also been conflict in recent years in China's most far-western province, Xinjiang between the Uighur people and the Chinese Government. The Uighur people whose Turkic language and Islamic faith draw them toward kinsmen in Kazakhstan and other Central Asian Republics have been seeking a Turkic leader and their independence from China.

It is unclear if the Turkic peoples will re-assert themselves to play a leading role, again, in the 21^st century, although what is clear is that they are a large group of people, 140 million people worldwide, not to be underestimated, that will form an important part in shaping the region that lies between Europe and Asia, the lands they have inhabited for centuries.

Africa's Newest Country – South Sudan is due to be born in July 2011

 

Khartoum, a thriving African metropolis where the

Blue Nile meets the White Nile in 2011

On 9 July 2011, South Sudan is due to be born as a new African country. The Sudanese recently voted in a UN referendum to separate into two different countries. Sudan has been troubled with civil war particularly in the South Darfur region in a struggle between different ethnic groups to control the country's energy resources and some have even gone so far as to claim that this may have been the world's first 'Climate Change war'. For many there is relief and hope that a division of the country may finally bring peace.

But what will this split mean geographically and trade-wise for the newly created South Sudan.



 

Map of division of Sudan

 The yellow line marks the bounds of the new South Sudan

No sea access

For a start the new country will become landlocked losing its access to the Red Sea and more importantly its direct access to Port Sudan. Over the last decade, Port Sudan has received considerable Chinese investment. Its port operations have been beefed up and turned into a modern port facility able to process the most up-to-date technology in cargo ships.

Khartoum remains in the north


The historic capital and trading city of Khartoum built at the meeting of the Blue Nile (source in Ethiopia) with the White Nile (source in Uganda) will no longer be within its borders. In recent years, Khartoum has flourished once again as an important trade centre on the Nile River. Much Chinese investment is going into building infrastructure; a new bridge across the White Nile, a sparkling new airport and much new office space and hotels.

Much of the recent boom in Khartoum is due to the building of an oil pipeline to transport oil from the southern oil fields to Port Sudan that passes through Khartoum. When the export pipeline came online in 1998, oil exports increased greatly from a meagre 20-30 barrels a day to upward of 350 barrels a day from 2004 onwards.

The new administrative capital for South Sudan will be Juba, a city too located on the Nile (the White Nile), north of Uganda, but lacking the strategic resonance of Khartoum.

What about the oil fields

Oil is the major revenue generator for Sudan, in 2009 it brought in more than 90% of foreign earnings. Around 75% of the oil reserve will be located in South Sudan. But the oil pipe that transports the oil to the Port Sudan will be controlled by the North as shown in the map above.

This does not bode well for South Sudan as has often been demonstrated in other parts of the world, those who control the pipeline often benefit from a position of power. Moreover the Southern Sudan provinces and the North already have a history of squabbling over the price of oil and their respective shares of profits under the 2005 Comprehensive Peace Agreement.

China in Sudan

China's economic and human presence in Africa has continued to rise over the last decade. In fact, China is the biggest and most active player in Sudan. It has a 40% interest in the oil fields. It has also recently announced that it has entered into a $1.2 billion contract to build a new airport in Khartoum capable of handling aircraft as large as the Airbus A380 that will open in 2012. In recent years, the number of Chinese expatriates working for Chinese companies on big infrastructure projects in Sudan has increased. Small merchants, traders, and others too have joined the large company workers in Sudan, attracted by business opportunities for independent entrepreneurs. They have established Chinese restaurants and other amenities for the workers of the large companies. They have become an anchor for the large Chinese community in Sudan.

What will happen in July

One of the first big tasks for the new South Sudan Government will be to agree with the Khartoum-based Government, a new set of administrative conditions for ongoing oil export. The existing arrangement between the North and the South will expire in July 2011.

However, with the loss of direct access to Port Sudan within its borders, South Sudan is said to be already exploring alternative options with neighbouring countries Kenya and Uganda to export its energy resources. These include a proposal for a new oil pipeline to Kenya (although this is not thought to be viable as it would need to go uphill and would be very costly) and a possible rail link going through Uganda and on to Kenya. China has expressed reservations about the cost-effectiveness of the proposed routes. But there is speculation that Russia may be interested in investing in the largely untapped gas resources that the country holds. Experts agree that there is also considerable scope to increase oil production in South Sudan.

The next few months will be busy as final arrangements are completed for the arrival of Africa's newest country. The Geo Trade Blog will continue to follow events in Khartoum and in South Sudan.