Sunday, September 10, 2017

Resource wars and the current geopolitical unrest as seen from Russia. A speech from Tatiana Yugay at the 1st Summer Academy of the Club of Rome in Florence


Professor Tatiana Yugay of Plekhanov University in Moscow speaks at the first summer academy of the Club of Rome in Florence. 


The Summer Academy of the Club of Rome is in full swing in Florence. Many things are being discussed and I'll see to present a summary of the main points in future posts. Here, I think I can already start with the presentation by professor Tatiana Yugay who brought to the school a voice from outside the Western World. Professor Yugay is an expert in geopolitical issues and, in particular, she works on questions related to oil and gas. Her thesis at the meeting was that much of the current world unrest can be seen as the result of the ongoing wars for mineral resources which are becoming scarce. She also noted that this situation may be one of the main causes for the rising inequality trends almost everywhere in the world.

In the following, an example of prof. Yugay's work in this field.

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This is an abridged version of a review of Douglas Reynolds' book "Cold War Energy" by Tatiana Yugay and Ugo Bardi published on Energy Research & Social ScienceVolume 34, December 2017, Pages 200-201. For the complete text, write me (ugo.bardi(thingything)unifi.it).




Book Review

Cold War Energy. The Rise and Fall of the Soviet Union, D. Reynolds. Alaska Chena LLC, Alaska (2016).










The fall of empires is a much-studied subject, but also one where an agreement on the cause (or causes) of the fall seems to be extremely difficult to find. For, instance, in the case of the Roman Empire, Demandt [1] describes some 210 theories on why Rome fell, and this is probably an incomplete list. Overall, however, we can divide this domain into two main subsets: theories based on several independent causes acting together (concauses) and theories based on a single cause that generates a cascade of different effects. An example of the first approach – many concauses – is the recent study by Cline on the Bronze Age Civilization [2]. The other approach is probably best represented by John Tainter’s study “The Collapse of Complex Societies” [3] where he identifies a general factor in the decline and fall of civilizations and empires as the “diminishing returns of complexity.”
Douglas Reynolds’ book, “Cold War Energy” examines the most recent case of the fall of a large empire, that of the Soviet Union. It does so falling straight into the camp of the proponents of “single cause collapse.” In this case, Reynolds identifies this cause as the peak of oil production in the Soviet Union, in turn related to the increasing costs of production generated by progressive depletion. 
With some exceptions [4] Reynolds’ interpretation is clearly minoritary. In Russia, today, the prevalent opinion seems to be that the Union’s fall was due to the mistakes, or the outright betrayal, of the secretary of the Soviet Communist Party, Mikhail Gorbachev. In the West, a commonly reported opinion is that the fall of the Soviet Union was the result of a secret agreement between the leaders of the US, UK, and Saudi Arabia. The Saudis agreed to flood the market with cheap petroleum and this caused a loss of revenues for the Soviet Union that depended on petroleum exports for its economy. In general, the most common interpretations focus on shortcomings of the Soviet economic system, namely the lack of the incentives produced by the free market that prevented the Union from attaining the same efficiency of the West in resource exploitation.
Reynolds’ interpretation, instead, is original and interesting since it turns completely around the way the subject is normally discussed. Reynolds focuses on the Union’s strengths, rather than its shortcomings. Reynolds makes the bold step of trying to look for similarities – rather than for differences – between the Soviet Bloc and the Western Bloc. 
Reynolds’ analysis leads us to follow the trajectories of the two superpowers of the 20th century, the USA and the USSR. Reynolds uses the modern concept of energy return on investment (EROI) to show that both countries faced increasing costs of extraction for the vital resource that was crude oil. Neither was able to allocate sufficient capital resources to continue the growing production trend and both went through a production peak. Reynolds makes a strong case for peak oil being a major factor in the collapse of the Soviet Union and he also notes the relevance that this interpretation may have on our modern globalized world which is facing a global peak in the oil production, right in this period. The ongoing social and political turmoil, notes Reynolds, can be seen as similar to the events that brought down the Soviet Union. 
A weak point of the book is that it remains strongly focused on the Soviet Union but doesn’t make an in-depth comparison with how the peaking phenomenon played out in other regions of the world. There are other cases of states that collapsed or went into economic crisis and political turmoil in correspondence with their productive peak: one is Iran, which peaked around 1975, shortly thereafter experiencing the collapse of the ruling Pahlavi dynasty. Other, more recent, cases of peaking followed by turmoil are those of Egypt, Yemen, and Syria. None of these cases are discussed in the book, although an extensive comparison is made with the case of the United States, whose oil production peaked in 1970. Also here, however, we lack an explicit explanation of why the peaking of the internal energy production had such different effects on these two large producing regions. If peak oil is the underlying factor of the collapse of complex societies, why are we talking about the “Former Soviet Union” and not of the “Former United States of America?” (even though the latter term might become useful in a non-remote future).
Reynolds is very passionate about his peak oil hypothesis as the cause of the Soviet collapse that, helps him to further develop and enrich the macroeconomic analysis. On the other hand, we should all be wary of the old saying that goes as ‘when all you have is a hammer, everything looks like a nail'. It is valid for peak oil as well.


2 comments:

  1. Valuable post, thank you.

    Interesting to note the Russian myth as to the reasons for the fall of their empire, ie 'betrayal', pure politics rather than economics, and the myths which were prevalent in Fascist Italy (explained so well by you) and Hitlerite Germany.

    We can add the propaganda counter-myth of today, that Russia is seeking to re-conquer Eastern Europe and dominate Western Europe.

    ReplyDelete
  2. Respected oil analyst Art Berman recently gave a presentation: ‘Long-term Trends in U.S. Crude Petroleum Production and Net Trade’
    http://www.artberman.com/wp-content/uploads/HGS-11-SEPT-2017-Presentation.pdf
    This is from his Slide 10.

    Labyrinth Consulting Services, Inc.
    Houston Geological Society

    Low Oil Prices & The Long
    Term Debt Cycle

    Slide 10

    •Petroleum Age after WWII produced unprecedented economic growth.
    •Oil shocks of 1974-1986 threatened to end that party.
    •Demand destruction & oil production bubble resulted in 18 years of cheap energy.
    •Debt re-started economic growth & debt-based growth of China challenged oil supply after 2004.
    •Second oil shock made unconventional oil possible. Zero-interest rates led to 2nd
    oil bubble.
    •Longest period of high oil prices in history.
    •That bubble burst in 2014 and oil prices collapsed but without demand destruction.
    •Now, we are near the end of long-term debt cycle but denying that the economic basics have fundamentally changed since the post-war era

    I’m sure this is all in the Reynolds' book, but it seems worth repeating that US needed net imports of oil from 1960. Rising consumption continued in the USA, enabled by these imports, even after US oil production peaked in 1970. The trend in rising consumption took a dip from 1979 to mid-80s and then resumed at a slower rate until 2008.

    My knowledge of the Soviet Union is insufficient, but it looks to me that the USA had advantages which the SU did not. USA is (was?) the effective imperial maritime power with the hegemonic currency for accessing key trading globally across all markets, especially trading in the key resource of oil. This was as Berman says, the Petroleum Age.

    best
    Phil

    ReplyDelete

Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014). His most recent book is "The Seneca Effect" to be published by Springer in mid 2017