The Accidental Superpower
Page 37
7. He’s fine, by the way.
8. That’s the net effect of an increase in rates from 5 percent to 9.5 percent.
9. Different types of frack fluid have to be used for different geologies.
10. Source data for specific well counts is notoriously wobbly, as in many states reporting is voluntary and drillers do not necessarily have to disclose whether they are drilling for (or end up producing) oil or natural gas. The data in this paragraph is courtesy of GHK Companies, one of the major shale players in the United States.
11. With ethane, propane, and butane being among the more recognizable.
12. All jobs estimation data is courtesy of Citibank’s Global Perspectives and Solutions Annual, 2011, pages 74–90. It is a source that is thorough without being wed to energy interests. At present the U.S. federal government has yet to generate any estimates of the impact of shale upon the job market.
13. This is an argument that the environmentalists know well, after all—they wrote it. Most U.S.-based environmental groups—most notably the Sierra Club, the Natural Resources Defense Council, and the Investor Environmental Health Network—quietly lobbied for shale development as recently as early 2012 because they were trying to force coal out of the American fuel mix. It was only when these groups realized that shale had been so successful that it was challenging wind and solar energy that they changed their tune.
14. Here’s a fun fact: Despite shale’s bad PR on the topic of water, all of the country’s shale projects combined still use less water than golf courses.
15. And this is only one factor that is driving down U.S. oil demand. Demographics also plays a large role. A retiring population is, well, retired. Sitting at home or helping with the grandkids uses far less energy than the hustle and bustle of working and commuting. Oil prices have now been in the vicinity of $100 a barrel for seven years, encouraging everyone to adopt technologies that result in lower energy bills. Substituting out the Hummer for a hybrid, installing solar panels, swapping out old windows for double-paned, shifting to compact fluorescent light bulbs, putting radiant heating in your floors—these are all decisions that have had impacts that last for a decade or more. The technical term is “demand destruction,” and it has already shaved more than 11 percent—some 2.5 million bpd—off of U.S. oil demand.
16. Even if you are selling your associated natural gas production at a loss, a couple dollars per 1,000 cubic feet is still better than zero.
1. Seriously. WTF?
2. China has been the largest importer of a variety of common industrial materials such as cement, copper, iron ore, tin, and lead for years, and in 2012 it surpassed the United States as the world’s largest importer of oil.
3. There are several developing states that will have considerably younger populations during this period, but they are not capital providers to the world. Having forty- and fifty-somethings who generate extra capital requires first reaching a level of industrialization that sports sufficiently high per capita incomes so that workers can start thinking of large-scale savings. None of the world’s developing countries are at that point currently, and even if the average growth rates of the previous twenty years continue, none will reach that point by 2025. The one partial exception among the world’s major economies is Saudi Arabia, but Saudi savings come from oil income rather than the retirement planning of their mature workers.
4. Think of a Swiss Army knife, the basic model of which has half a dozen tools (one of which is scissors), each held in place by a hinge, plus the lens for the magnifying glass, a key ring, and the two plastic covers. That’s seventeen pieces. Current 3-D printing technology can print everything but the lens and the covers in a single run, and it comes out of the printer assembled.
1. And on.
2. China recently edged ahead of Mexico for the number two spot in merchandise trade, but if services are included, Mexico and Canada remain the top two.
3. The International Atomic Energy Agency has (repeatedly) censured South Korea for (repeatedly) creating small amounts of weapons-grade uranium in its labs. Either Seoul enjoys risking sanctions or it wants to keep sharp the appropriate skill sets for weaponization.
1. Trust me. Helped write it.
2. Oh, how I wish that were hyperbole.
3. The Saudis have spent billions on the best hardware the Americans are willing to sell, but they don’t train on it. The equipment—complete with Abrams tanks and Apache helicopters—simply sits shrink-wrapped in air-conditioned warehouses, the Saudi strategic plan being that should they ever be directly threatened, the Americans will send troops to man Saudi Arabia’s prepositioned equipment and defend the kingdom. In a Bretton Woods world, it is a fairly clever strategy. In a post–Bretton Woods world, all that equipment is really just a lot of very expensive paperweights.
4. We’ll cover China in depth in chapter 14.
5. Depending on the international mood, you may have heard them called freedom fighters, mujahideen, or Islamic terrorists as well.
6. For full data on how bad things are, the best source remains Iraqbodycount.org.
7. Russian forces in Armenia are there by mutual agreement, mostly to serve as a military tripwire against Azerbaijan and Turkey. Russian forces in Georgia, in contrast, help two secessionist regions—Abkhazia and South Ossetia—maintain independence from Georgian control.
1. If a private corporation had done something similar it would have been illegal in Europe (and the United States) as an antitrust violation.
2. World War II, World War I, the Franco-Prussian War of 1870–71, the Austro-Prussian War of 1866, and the Schleswig Wars of 1848–51 and 1864.
1. My Salvadoran sister-in-law was thirteen when she successfully completed the trip on her third try.
2. There may be some confusion here for those familiar with the Canadian political system. In Canada, “federal” actually means confederal and “unitary” means federal. There is no Canadian political term in general use for the equivalent of “unitary.”
3. Most recently, in 1998, the Canadian Supreme Court ruled that not only are such votes valid, but that should they pass, it would be incumbent upon the other provinces and the national government to undertake negotiations with would-be secessionist provinces to effect independence.
4. At $85,000 per capita (in U.S. dollars) the Albertans are richer than everyone but the Luxembourgers.
5. At the time of this writing all permits for Keystone have already been approved except for a State Department waiver, which would not be needed if Alberta were a U.S. state.
6. Maryland, Alaska, New Jersey, Connecticut, Massachusetts, New Hampshire, Virginia, and Hawaii. The next one down is Texas.
7. Technically they would still be connected via the Northwest Territories, but there is no meaningful infrastructure in the Territories linking the Pacific provinces to the Ontarian core.
1. The United States has fifty-five, fifty-nine if you split Dallas–Fort Worth, Minneapolis–St. Paul, and San Francisco–San Jose, and include San Juan.
2. The United States has ten.
3. In comparison, Minneapolis sits at only one-tenth the elevation despite being seven times the distance inland.
4. Cheniere’s Sabine Pass facility began construction in 2013 and is expected to begin operations in 2016.
5. In the early years, the Americans took brutal advantage of this with the Santa Fe Trail. American manufactures were shipped to Santa Fe (a Mexican city) in order to build economic dependency upon the United States throughout the areas we now think of as the American Southwest. (At the time the Americans founded the trail, Mexico was still an imperial Spanish territory.) When the Mexican-American War occurred just thirty-five years later, most of the sparsely populated territory was so deeply within the American economic and cultural orbit that its inhabitants assisted the American war effort. The result was the capture of what is contemporary California, New Mexico, and Arizona and their transformation into American territories.
6. Portfolio investors, in contrast, find Mexico a frustrating, frightening, and even outright disgusting place to operate because the oligarchs’ territoriality persists in the financial space. Oligarchs control their own banks, which finance their own projects in the regions they control. If they should find themselves willing to reach out for extra capital, they are far more likely to attempt to partner with a foreigner who would then be beholden to their political, economic, social, labor, and land connections than they would be to seek a loan from an institution run by another oligarch. As such, Mexico’s stock markets are woefully underdeveloped and, in part because of the country’s sharp left-right divide, overregulated. Barring changes that to date the Mexican system has proven unable to contemplate, much less initiate, the future of foreign involvement in Mexico will be the same as the past: direct investments in physical plant, infrastructure, and labor and very little involvement in Mexican stock markets, bond markets, or banks.
7. The Central American states of Honduras, Nicaragua, El Salvador, Belize, and Costa Rica are in essence Mexico without the greater Mexico City region—city-states cursed with a territory that is impossible to develop. Panama would be the same if it were not for the canal (and drug smuggling money) providing regular financial infusions into an otherwise worthless topography.
8. As of 2014, Miami is still a major point of entry for South American cocaine. Most of it comes through Venezuela and up the Lesser Antilles chain to the Dominican Republic and Haiti before making the jump to Puerto Rico (a U.S. territory) or Miami. But strong American and Cuban patrols—drug interdiction cooperation between the United States and Cuba is perhaps the highlight of the two countries’ relations—prevent this flow from being more than small volumes smuggled in the holds of larger vessels or pleasure craft, resulting in much higher overhead costs and much lower volumes per shipment. This route is a faint shadow of what it used to be in its Miami Vice heyday. Long gone are the days when small vessels packed to the gills with cocaine could simply sail into Miami Harbor or land in or near the Everglades. Plenty of South American drugs are still shipped by water and air toward the United States, just not all the way to the United States. Most make landfall in Central America or southern Mexico before joining the cartels’ land-bound supply chains.
9. What studies I’ve examined indicate that legalizing illegal drugs is probably a financial wash. In most studies any money saved in terms of law enforcement would most likely be lost in terms of higher health care costs and lost worker productivity. Additionally, most studies assume that a legal market for narcotics would eliminate the illegal market. Unfortunately, any legal, regulated drug distribution system will have end costs higher than the black market, all but guaranteeing the black market’s parallel existence, mitigating any cost savings. For soft drugs like marijuana legalization might be a break-even proposition, but for hard drugs like cocaine legalization would cause more problems—financial and otherwise—than it would solve. As regards the cartels, legalization provides some interesting possibilities. They battle each other over supplies and transport routes, and a legal supply and transport system is simply another source of competition to be addressed with their normal brutal skill set. Colorado’s and Washington’s experiments with legalizing marijuana mean that they have volunteered to be case studies in a way I seriously doubt they have contemplated.
1. Don’t be too harsh on the Chinese. The Yuan were the Mongols. Not a lot slowed them down.
2. Japan conquered Korea outright in 1905, and, in the Russo-Japanese War of 1904–5, sank the entirety of Russia’s Pacific and Baltic fleets in just two battles.
3. Twenty years and nine months if you want to be exact.
4. Using any Chinese statistics is an exercise in risk. The national government regularly reforms the country’s local and regional statistical reporting systems so that it too can get a more accurate picture of the Chinese system. Oftentimes such auditing efforts run afoul of the interests of local politicos to such a degree that the auditors die under somewhat suspicious circumstances.
5. Russian oil may face a more direct route, but the Russians are kings of using energy dependency as strategic and political leverage.
1. That’s for in-state attendance. Out-of-state enrollment currently runs $125,000.
2. There have been many concerns that Islamists within the Pakistani government have often assisted the various Afghan and Pakistani militias by sharing intelligence about the disposition of American forces. This is certainly true. However, such assistance is not given on orders of Pakistan’s civilian or military leadership, but instead by Islamists within the government ranks who wish to assist the Taliban for religious or strategic reasons. In essence it is the Pakistani equivalent of Edward Snowden’s leaks.
3. Chechen War I was 1994–96; it ended with an ignoble Russian retreat from Chechnya and de facto Russian recognition of Chechen independence. Chechen War II began in 1999, when the Russians invaded Chechnya in response to Chechen-based forces invading next-door Dagestan, another Russian republic. Formal military operations lasted until 2001, but it was nearly another decade before the Russians felt sufficiently confident that they had quelled militancy in the republic to reduce their troop deployments below fifty thousand.
4. Remember Mir? The man in charge of the entire Soviet space program was a Dr. Roald Sagdeev, an ethnic Tatar.
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Contents
Cover
Title Page
Welcome
Dedication
Introduction
Chapter 1. The World We Think We Know
Chapter 2. Egypt: The Art of Getting from Here to There
Chapter 3. Technological Revolutions: Deepwater Navigation and Industrialization
Chapter 4. Enter the Accidental Superpower
Chapter 5. Buying Off Geopolitics
Chapter 6. The Demographic Roller Coaster
Chapter 7. The Rise of Shale
Chapter 8. The Coming International Disorder
Chapter 9. Partners
Chapter 10. Players
Chapter 11. History Returns to Europe
Chapter 12. The Alberta Question
Chapter 13. The North American Drug War
Chapter 14. The China Wars
Chapter 15. Migration and Terrorism
Epilogue. The American Age
Acknowledgments
About the Author
Appendix I. No Fear: Climate Change
Appendix II. Demography and Trade
Newsletters
Copyright
Copyright
Copyright © 2014 by Peter Zeihan
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