International Affairs Forum:
What is the Beyond Oil Project and how was it started?
Mr. Meir Javedanfar:
The Beyond Oil Project came to fruition after doing research about the Middle East and seeing the unpreparedness of many of the oil producing countries. Moreover, the potential impact when oil runs out in terms of political instability, economic instability, and also the impact it could have on security in the region and worldwide.
When I joined the tt30 Club of Rome think tank, we decided to do it on a global scale, not just concentrate on the Middle East. So the Beyond Oil Project was born to survey the readiness of oil producing countries at a time when oil is no longer providing them with a major source of income. For some countries this is predicted to be forty years from now, for some countries even ten years time. We looked all the countries in the world where oil represents more than twenty-five percent of GDP and developed our study to create a table that ranks countries that are most prepared for a time when oil runs out as a major source of income to the ones that are least prepared.
There has been considerable debate about oil shortages and when peaks will occur. What sources were used in the study to gather these estimates and how were the rankings determined?
We used the United States Energy Information Administration (EIA), and OPEC to determine how much declared resources a country has in gas and oil. In most cases the two sources were similar. For countries that are not members of OPEC, we used the EIA as the most credible source of information.
In terms of assessing a country’s preparedness for the time when oil runs out, we looked at roughly thirty indices for each country. We looked at things such as the UN levels of health in countries, education, freedom of the press, World Bank Ease of Doing Business Index, World Economic Form Competitiveness Index, and Transparency International Corruption Index, and then we developed the ranking. We took the indices and then using our formula, we would give them weightings. For example, we gave more weight to investments in health and education or we gave more weight to investments in biotech and high tech more than tourism.
We’ve received very positive feedback about the results and it has raised alarms about the problems that are going to face the world when a lot of these countries run out of oil as a main source of income.
Did the group identify any commonalities within the good performing countries? The poor performing countries?
A lot of the good performers have low corruption, are very business friendly and most importantly, they have government backing for the Beyond Oil industries. For these countries, the government has a vision to move the country away from being a major source of income and back non-oil industries through tax credits and create an investment environment for non-oil. They also have good infrastructures in terms of roads, telecommunication, and education and training. Political stability is very important and democracy is an important factor in many of the countries. The top countries Canada, Norway, the U.S., and the UK have efficient democratic governments in charge where the level of corruption is very low.
The biggest common factor in the countries that are not prepared is corruption. Corruption affects everything, preventing a fair distribution of wealth and, for many of these governments, they are not inclined to planning for the foreseeable future. A lot of the people involved don’t invest in other parts of the economy because they are more concerned about personal or political benefits of their status at the present.
Did you find any surprises during the course of the study?
One of the things that surprised me is in terms of where we are going. There will be energy have and have nots. If not addressed properly, this could wreck havoc in terms of the international balance of power and stability in many regions, especially in the Middle East. In a lot of these countries like Iran, Syria, Iraq, or Yemen, they have no efficient plan whatsoever to replace fossil fuels as a primary source of energy for themselves. We are very pessimisti, as they’re not going to have alternatives to oil not only as income sources but also as sources for energy.
On the other hand, there were surprising factors about other countries that have no oil at the moment. Some countries in central Africa such as Niger, Chad and even parts of Sudan and Algeria are involved in a proposition where the European Union would build massive solar power farms there. This energy would then be transferred to Europe. This could create huge shift in power. A lot of countries in the Middle East who use oil to boost their standings on the international stage are going to see their power dissipated while countries in Africa could replace them. It could create not only an interesting redistribution of power but also upset the standing of many Middle Eastern countries and could even create instability in the region.
Have there been any regional studies, agreements, or anything from OPEC that addresses issues tied to the Beyond Oil situation?
In terms of OPEC taking effective action, I don’t think they are doing this. Their focus is on petroleum and they are not helping oil producing countries diversify away from it. In some ways, OPEC is not responsible. They could provide guidance and a helping hand but this all really depends on the governments of each of these countries There are members of OPEC such as the United Arab Emirates, Kuwait, Saudi Arabia, and Qatar that are doing a sterling job of diversifying their economies away from oil but there other OPEC countries are not because of their governments.
On the international scene, we already see the impact of energy on security with the current problem between Georgia and Russia. One of the motivations for Russia to bring such a heavy-handed response to Georgia is because the Russians are very concerned about the Baku-Tbilisi-Ceyhan (BTC) pipeline that bypasses Russian territory and is a very important energy source. The fact that energy is one of the factors behind the conflict; the fact that neither Georgia nor Russia have an effective plan to replace oil, shows that some countries are panicking, it can be a security factor, and armed conflict may be involved. What’s really important about the Georgian-Russian conflict is that it’s a warning of what could follow in the economic international scene if we don’t address the Beyond Oil issues. Once oil runs out and these countries don’t have oil as a major source of income, there could be conflicts over other issues between them and also possibly conflicts over areas where oil is suspected to be there. If we address the issue of Beyond Oil and diversify economies of countries away from oil and encourage them to invest in alternative energy, then we could avoid a lot of instability. The United Nations should take the lead on this. It’s very important to share alternative energy technology with poorer countries that are going to run out of oil. United States should also start investing heavily in alternative energy. If the U.S., with its massive economy, starts becoming more involved, it could lead the way; higher demand would bring the prices down of alternative energy sources, and that could benefit everybody.
China has become a crucial global energy consumer. What did your findings reveal about them?
China is close to the lower half of the table. At the moment they are not investing in alternative energies and their non-oil sector is very primitive at moment. Also, China does not a have a very high technology sector and the level of health is also lower than many countries in our index. The issue of corruption is another issue that affects China’s performance in the study. China has emerged as a global superpower but one of the reasons they are constrained from fulfilling their potential is dependence on other countries for energy.
Are there any particularly progressive programs under way to address the Beyond Oil issue?
The Persian Gulf States have a number of progressive programs. Bahrain has a very impressive one to reduce the amount of income they have from oil. Oman has a program called Vision 2020 whose main goal is to reduce their dependency on oil to less than fifty percent. While it’s a small country and doesn’t have a lot of exports apart from oil, they are taking big steps and are taking this very seriously in order to bring foreign investment in the country and encourage development in the technology sector and improve the education sector. Saudi Arabia has just invested ten billion dollars in the scientific based King Abdullah Economic City. They are investing heavily in the development of the technology sector because they, like a lot of these countries, are waking up to the fact that oil is going to run out one day and they’re worried about the internal repercussions this could have.
The way they’re implementing their Beyond Oil program can be a role model for other countries like Venezuela, but there President Chavez’s obsession with reducing what he sees as U.S. hegemony and nationalizing industries has actually taken focus away from investing in the country’s future. If anything, it makes Venezuela more dependent on oil because of the lavish expenditure policies of President Chavez. The same thing can be said about President Ahmadinejad. Iran’s budget is growing at a pace of fifteen percent a year -oil for oil money - but it’s not being invested in the Beyond Oil industries. If and when Iran runs out of oil, the Iranian economy will be in serious danger
What’s next for the Beyond Oil study group?
This is an ongoing project so we just update the table every year. This project serves as a traffic light to the oil exporting countries and show which ones are in the green zone and which ones are in the danger zone. The more we develop this and the more we use this project to the oil producing countries realize they problems they have and work to avoid it, I think we can help to create a more balanced political security environment on the global scale. If we don’t address the energy problem, I think our problems will become very severe and they could have a very grave impact on the security of the globalized economic system that we live in.
Meir Javedanfar is a Middle East Analyst, he is a Project Manager with the Beyond Oil Project and the Director of the Middle East Economic and Political Analysis Company (meepas). His areas of professional focus lies in the analysis of the politics and economy of Middle Eastern countries, with special focus placed on Iran.
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