www.guardian.co.uk Larry Elliott Monday January 27, 2003 The Guardian

Let's get one thing straight. George Bush's determination to topple Saddam Hussein has nothing to do with oil. Iraq may account for 11% of the world's oil reserves, second only to Saudi Arabia, but the military build-up in the Gulf is about making the world a safer and more humane place, not about allowing America's motorists to guzzle gas to their heart's content. So, lest you should be in any doubt, let me spell it out one more time. This. Has. Nothing. To. Do. With. Oil. Got that?

Of course you haven't. Despite what Colin Powell might say, it takes a trusting, nay naive, soul to imagine that the White House would be making all this fuss were it not that Iraq has something the US needs. There are plenty of small, repressive states in the world - Zimbabwe for one - where the regimes are being allowed to quietly kill and torture their people. There are plenty of small, repressive states with weapons of mass destruction - North Korea, for example - which appear to pose a larger and more immediate threat to international security. But only with Iraq do you get a small, repressive country with weapons of mass destruction that also happens to be floating on oil.

Moreover, the realities of oil dependency are catching up with the world's biggest economy. The US has long ceased to be self-sufficient in oil and, as the recent shutdown of Venezuela's refineries has proved, is therefore vulnerable to its imported supplies being cut off. The growing imbalance between the global demand for oil and discoveries of fresh supplies means that the outlook for the US is even more troubling than it appears. As the director of ExxonMobil, Harry Longwell, admitted in an article for World Energy last year, the discovery of oil peaked in the mid-1960s but demand is expected to continue growing by 2% a year - or the world is sucking oil out of the ground faster than corporations are finding it.

Three choices

Bush and his team know all this. They have worked for the oil industry, been bankrolled by the oil industry, and have spent the past couple of years listening hard to what the oil industry would like, then doing it. Faced with the prospect that on current trends the gap between demand and supply will widen inexorably, Bush has three choices. Firstly, he could listen to the lobbying of executives like Longwell, who are convinced that there is still plenty of oil out there provided the exploration teams are given the freedom to find. That is why Bush has been prepared to court the wrath of the environmental lobby in the US to sanction exploration and extraction in the wilds of Alaska.

The second option is to ensure that the US secures a bigger share of diminishing stocks, buying time in which consumption can continue at its present rate. The seizure intact of Iraqi oil fields is a prime war aim of the US in any conflict, and it is likely that once Saddam has been toppled and an army of occupation has control of the country, the big oil companies will be called in to modernise the country's decrepit oil infrastructure. There have been reports in the Wall Street Journal, denied by the administration, that Dick Cheney held discussions last October with ExxonMobil and other firms about the rehabilitation of Iraq's oil industry. It stretches credulity somewhat to imagine that the subject has never been broached.

In one sense, such an outcome would be no bad thing. A modernisation programme that increased the supply of oil through more efficient production would lead to lower global prices and stronger growth. It might also be environmentally less damaging. Nor, lest we are tempted to get too prissy about this, can it be denied that economic factors have played a big, even crucial role, in determining the diplomatic and military strategy of European countries down the centuries.

But while the Bush strategy has its rationale, it is fraught with risks. One is that the war will not lead to the collapse in oil prices that is predicted by the hawks in Washington. Should the conflict follow the example of 1991, crude could fall quickly to around $20 a barrel. Or prices could hit $50 a barrel if Saddam torches the Iraqi fields and manages to land a couple of Scuds on refineries in Saudi Arabia and Kuwait.

The possibility that an American occupation of the Middle East will destablise the whole region, putting pressure on the autocratic rulers of western client states is a second, perhaps greater threat. It would be a bitter irony if the US found itself in possession of 11% of the world's known reserves only to find that the 25% in Saudi had been seized by a regime with no love for America. Worryingly for Bush, there have already been signs that investors in the Gulf states have been withdrawing their assets from the US, helping to keep shares on Wall Street depressed and contributing in no small measure to the dollar's recent fall. This would turn into a rout should the oil-producing states decide that crude should be denominated in euros rather than greenbacks, a development that has already been canvassed publicly by Opec.

Common sense

The third choice for the US and the rest of the developed world is to tackle the imbalance between demand and supply from the other end - by limiting demand rather than by increasing supply. Most governments, including that in Washington, acknowledge the need to take steps to curb emissions of greenhouse gases, and a blueprint for this, known as contraction and convergence, is available. It would involve setting a safe global ceiling on carbon dioxide and the calculation of the emissions consistent with hitting it; providing equal shares of the global emissions budget for each country so that poor countries were not short-changed; and allowing emissions trading in which countries like the US could pay countries like Malawi to pay for the right to pollute by more than the share allocated to the developed world.

The first problem is political will. Britain's forthcoming energy bill should embrace contraction and convergence, but Whitehall conservatism means a golden opportunity will be lost without political backing from the very top. As Alex Evans of the left-leaning IPPR think tank said last week in a paper on the UK electricity industry, the government needs to focus less on setting targets and more on delivery. Evans says that there would be a dramatic fall in emissions and endless opportunities for business if the government took steps to increase energy efficiency by 20% and to commit itself to producing 25% of energy from renewable sources by 2020.

This will be costly, both in terms of money and effort. But wars, too, are costly. The real lesson of the struggle against Iraq is that the depletion of non-renewable energy resources is a problem that will be persist long after the butcher of Baghdad is dead and buried.

larry.elliott.guardian.co.uk

www.alertnet.org NEWSDESK   27 Jan 2003 02:02

By Alister Doyle

KIRKENES, Norway, Jan 27 (Reuters) - The shrinking Arctic icecap may open a fabled passage for ships between the Atlantic and Pacific Oceans within a decade, transforming an icy graveyard into a short-cut trade route.

Ship owners may be among the few to benefit from global warming in the extreme north, where the giant thaw is threatening traditional habitats for indigenous peoples and wildlife ranging from polar bears to caribou.

U.N. studies project that the Arctic may be free of ice in summertime by 2080. The polar passage, clogged by ice throughout seafaring history, may come to challenge the Panama and Suez canals.

"In the next 10 years I believe we will solve the problems of round-the-year goods transport through the Northern Sea Route," said Alexander Medvedev, general director of Russia's Murmansk Shipping Company.

"You can save at least 10-15 days on the voyage from Japan to Europe, especially in summertime," he told Reuters during a visit to Kirkenes on the Arctic tip of Norway.

The company now runs two or three ice-breaker-led voyages a year from Europe to Japan and back, hugging the Russian coast, and reckons the route can be opened year-round if Moscow makes big new investments.

On the other side of the Arctic, the Northwest Passage past Alaska and through a maze of islands off Canada is likely to take longer to be ice-free because it is further north. It also passes through straits that get blocked more easily by ice.

"For the Northwest Passage it will take another 20 years after conditions for the Northern Sea Route are favourable," said Peter Wadhams, professor of Ocean Physics at Cambridge University in England. "I'm sure it's going to happen -- the ice is retreating."

INSURERS WARY

Yet insurance companies are likely to stay wary of both polar routes. High premiums, a need for ice-resistant hulls for ships and ice-breaker escorts may well wipe out the advantages of lower costs due to the shorter distance.

Mariners searched in vain for centuries for a short-cut from Europe to the Far East -- Columbus ran into North America in 1492 when he sailed west from Europe hoping to reach Japan.

The search for passages cost the lives of explorers including Dutchman Wilhelm Barents and Englishman Henry Hudson -- after whom the Barents Sea and Hudson Bay are named. Barents' ship ran aground in 1596 and Hudson died after a 1611 mutiny.

Other explorers were victims of cold or scurvy before a Finnish-Swedish expedition navigated the Northern Sea Route in 1878. The Norwegian Roald Amundsen was first to get through the Northwest Passage in 1906.

Even as the ice shrinks, it may take billions of dollars to open sea routes. Ports in northern Russia have deteriorated since the end of the Cold War when nuclear powered ice-breakers led warships between the Atlantic and Pacific.

"The obstacles are more economic and political -- you have to have a lot of infrastructure: navigational aids, search and rescue teams, the ability to clean up pollution," Wadhams said.

And environmentalists want safeguards to protect indigenous peoples in some of the world's largest wildernesses and to prevent a get-rich-quick rush for resources ranging from oil and gas to timber and minerals.

"Melting of the ice will make access far easier to northern Siberia and other wildernesses," said Svein Tveitdal, managing director of the U.N. Environment Programme's polar centre.

"There has to be a strategy for sustainable development of the Arctic. It mustn't become a sort of new Africa, where colonialists exploited the resources." About four million people live around the Arctic.

U.N. studies show that the Arctic ice has shrunk by about three percent a decade since the 1970s and that air temperatures have risen by about five degrees Celsius (41 degrees Fahrenheit) in the past century.

The exploration of oil and gas fields will increase the risk of pollution such as the Exxon Valdez tanker spill off Alaska in 1989. Norway plans to open its first gas field in the Barents Sea in 2006.

The polar regions are most vulnerable to global warming, caused by burning fossil fuels like oil. Scientists say the emissions are blanketing the planet and pushing up temperatures.

In the Arctic, melting ice and snow exposes darker soil and rocks that trap heat. The sun's heat bounces back into space more readily at the equator than near the poles, where low slanting rays have to pass through thicker layers of atmosphere.

ICE RECEDES

New polar routes will save about 4,000 nautical miles (7,400 km) on some routes from Europe to the Far East compared to southerly routes through Panama or Suez. Shipments could include cargoes like grains, frozen fish, oil and gas or cars.

And a route north of Canada, for instance, might save 6,000-8,000 nautical miles for a super tanker from Venezuela to Japan. Vessels too big to pass through the Panama Canal have to go round all of South America.

Japan has also expressed interest in transporting nuclear waste to Europe through the Arctic, a plan denounced by environmentalists who say it could get trapped in ice.

Rob Huebert, associate director for the Centre for Military and Strategic Studies at the University of Calgary in Canada, said one odd spin-off of global warming is that some regions are getting colder, complicating any shipping plans.

"In some areas the ice is getting thicker as it breaks up elsewhere," he said.

Willy Oestreng, a Norwegian professor of international affairs who led a global study of the Northern Sea Route in the 1990s, said Russia was ahead of Canada because of factors including more ports, albeit dilapidated, and ice-breakers.

"The differences are striking. The Northern Sea Route is more developed," he said. He noted that nickel had been shipped from northwest Russia year-round since the 1970s.

www.afxpress.com

DAVOS (AFX) - US Secretary of State Colin Powell said Iraq has "failed the test" and that the current situation "cannot be allowed to continue".

Speaking at the World Economic Forum here, Powell said Iraqi President Saddam Hussein continues "to pose a grave danger to international peace and security".

"Clearly time is running out," he said.

He added that Hussein's "naked defiance" of the UN resolution 1441 on disarmament compromises the authority of the security council.

"We will not shrink from war if it is the only way" to rid Iraq of weapons of mass destruction, he said, although the US is still prepared to wait for diplomacy to act for the time being.

He said that Iraq's 12,000-page weapons declaration to the UN "utterly failed to meet the requirements of being accurate, full and complete".

"Iraq attempted to conceal with volume what it lacked in veracity," Powell told the Forum. "It has failed the test."

Powell demanded to see evidence that Iraq had destroyed "tens of thousands of litres of anthrax" and botulism toxin which can be used in biological weapons.

Three tonnes of growth agent used to make biological weapons, and 30,000 munitions capable of carrying chemical weapons, were also unaccounted for, Powell said.

He also played down differences with European leaders over Iraq, following declarations by French and German leaders rejecting military intervention, but warned that the US was prepared to act alone.

When the US "feels strongly, we will lead. We will act even if others are not prepared to join us," he said.

www.forbes.com Reuters, 01.26.03, 11:19 AM ET By Michael Shields

DAVOS, Switzerland, Jan 26 (Reuters) - Boogeying poolside was out, bashing America was in at this year's Davos business summit as angst over war and recession drove out the traditional strut and swagger of the global elite.

The World Economic Forum's six-day annual meeting returned to the chic Swiss ski resort after decamping to New York last year for the first time in three decades to embrace a city still reeling from the September 11 suicide plane attacks.

But this year it was hard to hear a kind word about a United States now viewed with distrust and scepticism, especially over the superpower's threats of war against Iraq if it fails to come clean over any weapons of mass destruction.

"It's very worrying that the Americans could be prepared to act unilaterally. They are playing a very risky game," Simon Maxwell, head of Britain's Overseas Development Institute think tank, told Reuters, echoing a common theme in Davos.

U.S. Secretary of State Colin Powell faced pointed questions from the audience on Sunday after a keynote address telling sceptical Europeans the United States was willing to attack Iraq alone if others shrank from disarming President Saddam Hussein.

The theme of this year's meeting was "Building Trust", and surveys of WEF members bore out a lack of confidence worldwide in U.S. leadership. One panel discussion was entitled "U.S. omnipotence: What lies ahead?".

Gone are the days when American businessmen and policymakers showed up at Davos to teach European and Japanese laggards lessons about corporate and economic policy management.

"The feeling of confrontation against the U.S. was very strong, absolutely too strong for my taste," said Peter Brabeck, chief executive of Nestle SA, the world's biggest food company and a veteran of Davos meetings.

"The anti-Americanism is profound," agreed former U.S. State Department official Stuart Eizenstat.

"There used to be disputes between Europe and the U.S. about trade, about bananas, but now we're being accused of trampling on the institutions that we've created."

ORCHESTRAS, NOT SAMBAS No Calypso band jammed on a floating stage in the Davos conference centre's pool this year because organisers axed the customary Saturday night black tie and evening gown soiree.

"A big party is not appropriate at this monent. It doesn't fit the mood," WEF founder and guiding light Klaus Schwab said.

There were plenty of long faces among the 1,000 corporate chieftains and two dozen heads of state or government on hand for the 33rd annual WEF gathering that runs until Tuesday.

The mood was definitely downbeat ahead of a looming war in Iraq and with the world stuck in a stubborn economic slump.

"This is just about the hardest year to forecast and it's difficult to be anything but gloomy," sighed British American Tobacco Plc Chairman Martin Broughton.

WEF Managing Director Jose Maria Figueres said the subdued tone was "as it should be. That is the global mood. Davos in that respect is a reflection of what our members and different stakeholders are feeling. I think it's a very healthy change."

Missing are many of the lavish corporate flings that once filled posh Davos hotels every night. Flaunting wealth and power -- once a hallmark of Davos -- made way for a more introspective mood. A youth orchestra played for delegates on Saturday night -- a slot normally reserved for a raucous do that went on until dawn.

"Before a potential war and addressing pretty serious issues, it's time to focus and not to dance," WEF spokesman Michel Ogrizek said.

The WEF reduced the sprawling attendance list by about 30 percent to 2,000 to make things more intimate. Several of the European ministers who had been due to attend, notably from France, Germany and Spain, dropped out at the last minute.

After the dotcom crash of 2001 and the corporate malfeasance scandals of 2002, many of the past capitalist gurus of Davos were missing.

But Brazil's new leftist President Luiz Inacio Lula da Silva added a dash of colour, joking that he could head home physically intact despite venturing into a capitalist hotbed.

www.ananova.com

Brazilian model Gisele Bundchen is to donate the £100,000 she will earn in a show in Sao Paulo Fashion Week to a new Brazilian government campaign to fight hunger.

Bundchen wants to hand over the fee directly to Brazil's First Lady Marisa Silva, O Globo newspaper said.

She will perform in a show by Ricardo Almeida, a designer who also dresses Brazil's new president Luiz Inacio Lula da Silva. The fashion week starts Monday.

Silva has made the fight against hunger the top priority during his four year term that started on January 1.

The government January plans to announce details of its "zero hunger" programme that is will cost at least £432 million per year.

"The campaign is very important for the country," O Globo quoted Bundchen as saying.

Almeida said she hopes other celebrities will follow suit and donate funds to Brazil's anti-hunger plan.