The boom in tight oil helped change this equation. Burgeoning U.S. tight oil production was critical in convincing both domestic and international skeptics that sanctions on Iran could be imposed and incrementally tightened—all without sparking an economically debilitating price spike. When U.S. officials such as Stuart Levey traveled the world, seeking to convince countries to curb their purchases of Iranian oil, they had two strong arguments to make. In Beijing, New Delhi, and Tokyo, these officials pointed to repeated public statements by Saudi oil minister Ali al-Naimi and other Saudi officials that Saudi Arabia was willing and able to up its production to cover any shortfall that could result from increased pressure on Iran. U.S. officials were also armed with statistics about U.S. tight oil production, whose growth had exceeded even the most optimistic projections each year since 2008. They could argue with confidence that the combined oil resources of the United States and Saudi Arabia could more than compensate for any Iranian oil that came off the market. They even had an insurance policy. A provision in U.S. legislation gave President Obama the ability to ease up on sanctions if the global oil market seemed inadequately supplied. Sufficiently assured that greater pressure on Iran need not create an economic calamity, China, India, Japan, and South Korea all reined in their imports of Iranian oil over time. Europe instituted its own ban on Iranian oil imports in 2012. And, thanks to Saudi cooperation and continued American energy prowess, President Obama never had to rely on the legislative provision to curtail sanctions as a result of tightening oil markets.
While the Iranian example is the most dramatic and consequential, it is not the only case in which the unconventional boom has helped the United States gain international cooperation for sanctions. In the wake of Russia’s annexation of Crimea, for example, the United States and its European allies sought to increase economic pressure on Moscow, both as a means of deterring further Russian incursions and of cajoling Russia to engage in talks to limit violence in eastern Ukraine. In order to maximize the impact of these sanctions, Washington sought Tokyo’s cooperation, given the close financial ties between Japan and Russia.
Tokyo was initially unenthusiastic about enacting such measures. At the time, Russia was the fourth largest supplier of Japan’s natural gas and fifth largest supplier of crude oil. The amount of natural gas Russia provided Japan had risen by 40 percent in the wake of the Fukushima disaster when, overnight, Tokyo sought to replace nuclear-generated electricity with that powered by natural gas. Multiple joint investments in Russian LNG projects such as Sakhalin-1 and Vladivostok in the Far East were intended to help ensure that Japan had a diversified supply of natural gas. The Japanese worried that, over time, sanctions could undermine Russia’s ability to export energy, as the country would struggle to secure the financing required to build needed facilities. Prime Minister Abe also prided himself on a deep personal relationship with President Putin. The two had met five times between when Abe was sworn in during the final days of 2012 and the Sochi Olympics in February 2014.
Nevertheless, despite Tokyo’s wariness, the Japanese government agreed to join the United States in imposing financial sanctions and an embargo on arms sales to Russia in 2014. The ongoing dispute between Japan and Russia over the Kuril Islands, a 1,300-kilometer volcanic island chain north of Japan, certainly factored into Tokyo’s desire to see a clear message sent to the Kremlin about annexation of a neighbor’s territory. But, also important was the expectation that the United States would soon be a significant exporter of natural gas. Knowledge of America’s burgeoning energy revolution helped Japanese policymakers get comfortable with the idea of sanctions, given their confidence that a secure source of U.S. LNG would soon be flowing.
Sanctions have long been a popular tool of foreign policy, as policymakers often turn to them to express outrage or disapproval over an issue important enough to warrant action, but not egregious enough to justify military force. Popularity, however, has not always been synonymous with effectiveness. In their book, Economic Sanctions Reconsidered, economists Gary Hufbauer, Jeff Schott, Kim Elliott, and Barbara Oegg claim that sanctions work only 34 percent of the time. University of Chicago professor Robert Pape is tougher on the tool, claiming that sanctions are almost entirely ineffective—only 5 percent of sanctions have the desired effect. One reason for the relatively poor performance of sanctions is that they are frequently unilateral. In a globalized world, even an economic power like the United States does not have sufficient heft to isolate a country from the global economy on its own. It must have other countries and players, such as the U.N. or regional bodies, join it in its efforts. By assuaging concerns that third parties have about the deleterious effects of constraining energy supplies—either through restrictions on exports, investment, or technology—the new energy abundance has handed American (and other) policymakers a tool that has greater importance and effectiveness than it did in the last decade. While its rejuvenated use may pertain strictly to energy matters, a look at the roster of U.S. sanctions imposed since the end of the Cold War reveals clearly that the most robust sanctions efforts have been on energy producers.
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Hard power will remain the cornerstone of American influence in global affairs. Although the U.S. GDP constitutes less of the global economy than it did decades ago, the American economy continues to be a vital source of strength for its own population and for its ability to endure hardship in the pursuit of other foreign policy and national security goals. In providing the U.S. economy a vital boost during the slow economic recovery in the years following 2009, the energy boom played a critical role in restoring American economic health. It will continue to be an engine of growth, although not necessarily the outsized one it was in the period immediately following the Great Recession. Similarly, the energy boom has many positive implications for American use of military force. As long as the global economy is powered on oil, the United States will have strategic interests in parts of the world with huge oil endowments. But given the energy-intensive nature of combat, the new energy abundance does provide some meaningful relief to those engaged in or preparing for such missions. Finally, the new energy environment has resuscitated an important nonmilitary coercive tool in America’s tool kit: economic sanctions. While the experience of Iran will not necessarily be replicable in other circumstances, the “end of peak oil” will continue to lessen international opposition to using these tools to achieve strategic ends.
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Soft Powering Up
Writing in 1990, Joe Nye, a distinguished professor of international affairs at Harvard University, coined the term “soft power.” He defined the concept, simply, as “the ability to get what you want through attraction rather than coercion or payments.” According to Nye, the soft power of a country depends largely on three dimensions: the culture of the country, its political values, and how it generally conducts itself in the world and at home. To the extent that these three factors are attractive to others and seen to be consistent with its own actions, a country can expect to wield considerable influence abroad. This soft power comes in addition to, and often complements, more traditional notions of hard power: the military, the economy, and coercive elements of policy. The two, taken together, are what have made the United States such a meaningful force in global geopolitics. Just as the new energy abundance has given American hard power a boost, as will be explored in this chapter, it provided a leg up to U.S. soft power.
America has always relied heavily on soft power to influence others. In the decades since the end of World War II, the United States used its soft power to help build international institutions—such as the United Nations, the World Bank, the International Monetary Fund, and the World Trade Organization—that have provided the scaffolding for the global system. During the Cold War, the attractiveness of American ideas, values, and policies helped motivate those living under Soviet rule to oppose it and enabled the United States
to sustain alliances in the face of decades-long pressure from Moscow. At other times in U.S. history, violations of American ideals have reverberated globally, diminishing U.S. standing and influence worldwide. Revelations of the humiliating ways in which U.S. prison guards were treating Iraqi inmates at the Abu Ghraib prison in 2004, for example, had repercussions well beyond Iraq’s borders, suggesting to some that America was no longer the champion of human dignity. And, lately, America’s intense partisanship at home has led many abroad—from Europe to Asia—to question the attractiveness of the U.S. political model.
The United States unquestionably still claims vast stores of soft power, from hosting nearly one million foreign students each year to its continued dominance of the global film industry to American-invented devices such as the iPhone and iPad. If anything, as military force becomes more difficult and less desirable to employ in response to global problems, the need for soft power to advance U.S. interests is only growing. In this context, the considerable boost that the unconventional energy boom has given to American soft power is particularly welcome. In a wide variety of ways, the attractiveness of American culture, values, and policies has been augmented by the boom.
An Antidote to American Decline
The U.S. energy boom has become a powerful antidote to the notion of systemic American decline. For much of the 2000s, it was fashionable to characterize the United States as “despondent, hopeless and pessimistic” in the words of the German newspaper Der Spiegel. The financial crisis of 2008 and the doubt it cast on the U.S. economic model, the dysfunctional politics of Washington, and more than a decade of exhausting combat in Iraq and Afghanistan cumulatively fed almost gleeful pronouncements by U.S. adversaries of the end of the American era. In 2009, China’s government-run People’s Daily declared, “at least one thing is certain: the U.S. strength is declining at a speed so fantastic that it is far beyond anticipation.” In 2011, while speaking at a summer youth camp, Russian president Vladimir Putin described Americans to his young listeners as “living beyond their means and shifting . . . their problems to the world economy. . . . They are living like parasites. They are leeching on the world economy.” Such narratives encroach on the ability of America to inspire others to emulate its system or adopt its values.
Out of this negativity arose an irrepressible phoenix, the boom in unconventional energy. The very nature of the boom underscored the vitality of the U.S. private sector, the ability of the country to innovate, and the resilience of the American economy—elements that have long made America attractive in the eyes of those abroad. While the U.S. government did contribute to stimulating the boom, small companies and relentless entrepreneurs seeking to capitalize on high energy prices parlayed government support into extraordinary technological advances. Appreciation for America’s unique institutional environment and capital markets grew further as other countries sought to replicate America’s unconventional energy experience. Gregory Zuckerman, author of The Frackers, a book about the individuals who pioneered the boom, said, “When I talk to foreigners, they’re even more impressed than many Americans by this renaissance. They understand that it only could have happened in America.”
Salvaging the Liberal International Order
In his far-reaching book World Order, Henry Kissinger describes the period between 1948 and the turn of the century as “a brief moment in human history when one could speak of an incipient global world order composed of an amalgam of American idealism and traditional concepts of balance of power.” That moment was a product of enormous effort on the part of the United States and its Western allies to create and sustain the set of norms, institutions, and frameworks undergirding an international order based on the values of participatory governance, respect for state sovereignty, and liberal economic interaction. Much of the world did well under this system. Democratic governance, by no means universal, is treasured by those who have it and desired by many who do not. While nonstate actors have risen in importance, states, by and large, have remained the main protagonists on the international scene. The liberal economic order has been even more successful, driving a period of unprecedented economic prosperity in which more than a billion people have been lifted out of extreme poverty since 1950. Wars have not ceased, but as pointed out by Harvard professor Steven Pinker, organized violent conflicts of all kinds have diminished in the past quarter century.
This liberal international order, however, is under strain from both of the two tendencies that eventually challenge every world order in the view of scholars and statesmen. First is self-doubt; one could make the case that “those charged with maintaining the system”—primarily the United States—now question the values serving as the foundation of the order. The 2016 U.S presidential election underscored how many Americans resent what they view as the excesses of globalization and explicitly or implicitly question the applicability of their political arrangements to other systems. Moreover, the positions articulated by President Trump suggest that he is the first U.S. president since World War II who sees the costs and responsibilities of underwriting the global order as greater than the benefits that accrue to the United States. The second challenge—also clear in today’s world—is when the international order struggles to accommodate significant changes in relations between major powers.
China’s relationship to the current world order is particularly problematic. While perhaps no single country has benefited more from the economic structures in place over the last seventy years, China rejects the political constructs that often accompany them. Moreover, China had little say in the development of the rules of this order, given its preoccupation with its own civil war after World War II—the time of “the creation” in the words of Secretary of State Dean Acheson. Now, as a global power, Beijing is skeptical about both the legitimacy of these rules and their applicability to China and much of the world. At a minimum, China desires a greater say in how the system works, precipitating the need for the international order to adapt to new realities, or to crater under their pressure.
Scholars and policymakers feverishly debate whether it is possible for the United States and its allies to maintain the current system under this strain. Doing so is very much in the interest of the United States. America has been the country most invested in this international order, and the spread of its advantages to others. But the order has also been the vehicle through which America has been able to influence and shape the world to its benefit. Its stewardship of the system—with its international norms and behaviors—is the ultimate soft power vehicle. The new energy abundance can help the United States with this challenge of adapting the order while still preserving it in several ways.
First, the new energy abundance reinforces one of the mainstays of the international order: well-functioning markets. As described in Chapter Three, the new energy landscape is transforming—and will continue to transform—the nature of natural gas markets from being segregated, rigid, politicized, and in many ways inefficient to being more integrated, fluid, and better able to allocate resources in a predictable manner.
In addition, the energy boom has increased the confidence of critical players, most notably China, in the market. When energy was perceived as scarce, there was a trend of growing reliance on nonmarket measures to secure energy needs. Given these doubts about the sufficiency of global energy supplies, China therefore pursued a wide range of deals—from equity investments to secure ownership of energy resources in other continents to bilateral arrangements in which oil was sold outside the market—to ensure access to this most strategic of commodities. The new energy abundance has changed China’s approach. It is now more comfortable relying upon the markets, which are the core of the liberal economic order, to meet its energy needs.
The new energy abundance also diminishes certain challenges to the international order that have persisted since the turn of the century. For instance, Beijing’s strategy of acquiring oil and gas resources in Africa and Latin America—intent
ionally or not—led China to support its own gallery of rogues; it cultivated relationships with governments acting decidedly outside the norms of the international order. In protecting regimes from Venezuela to Zimbabwe, China created space for governments that flouted international norms to exist and prosper. Now, as discussed in Chapter Ten, in the face of the new energy abundance, China may see less need to pursue resources in this manner and at these costs, potentially removing or minimizing a persistent irritant to the international order. More obviously, an era of low prices will weaken regimes for which oil and gas revenues are a lifeblood; from Russia to Venezuela to Iran, many of these countries are the most frequent challengers to the international order.
Finally, the new energy abundance offers the United States and others more breathing room to conduct the reform of global energy governance structures that is required to meet new realities. In February 1974, with the world still reeling from the Arab oil embargo, Secretary of State Henry Kissinger convened an energy conference in Washington, D.C. The goal was to establish some sort of institutional framework to galvanize cooperation among energy-consuming countries. A new institution—the International Energy Agency—did emerge over the course of the year following the conference. The new Paris-based body was constructed under the auspices of the Organization for Economic Cooperation and Development (OECD), an organization established in 1961 to promote markets and economic development among politically like-minded countries. By its charter, all members of the OECD—and therefore the IEA—must be led by democratic governments with a commitment to market economies. For many years after the establishment of the IEA, this subset of countries coincided nicely with the large energy- and oil-consuming countries of the world.
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