Debate on oil prices

THE National Assembly is to hold a debate the oil pricing policy of the government and related energy issues. That will follow the sustained high price of oil, which has not come down following a fall in international oil prices. The debate will take place not as a result of a government motion but possibly through an opposition adjournment motion, as the government would prefer.

The opposition members and the people at large were disappointed to learn that the oil prices did not come down after the petroleum minister Amanullah Khan Jadoon indicated that they would do so soon. In fact, they felt angered when the prime minister denied if there was any move to lower oil prices because, as he said, that would affect the government revenues.

So, instead of reducing the prices the oil marketing advisory committee has reaffirmed that they would remain unchanged for the current fortnight. The Supreme Court had earlier indicated that the price fixing of petroleum products should be done not by the oil companies’ representatives but by a larger committee consisting of officials and these representatives.

And yet the company men were given a free hand but possibly with an official advice not to lower oil prices at this stage so that the government’s revenue interest could be saved.

Speaker Chauudry Amir Hussain welcomed the opposition move as it can yield an official policy statement which is likely to be a broad based one in view of the uncertainty that prevails in the world oil market.

The Opec says oil prices will be over $50 a barrel for the next one or two years before easing. Thereafter, they would drop as the refining capacity of the world is likely to increase. The global oil exploration is also set to increase by 13 per cent this year to reach a record total investment of $170 billion.

In Pakistan itself, 100 more wells are to be drilled this year, according to petroleum secretary Ahmed Waqar. While the government says it is not making any money from oil sale, opposition leader Chaudhry Nisar Ali Khan says that when the debate takes place he would show how much money it had been making.

In the last five years, the government has collected Rs 245 billion as gas development surcharge and an average of $49 billion per year from petroleum development surcharge. It collected Rs 77 billion in 1999- 2000 from gas development surcharge and Rs 167 billion in 2000- 2005 from petroleum development surcharge. The petroleum minister gave these figures to the National Assembly recently.

After losing money when the oil prices hit their peak the government is now earning Rs 5 billion a month as petroleum surcharge since October. In fact it has more than made up its losses.

The prime minister has set up a seven-member committee on energy for preparation of a medium to long-term strategy for sustainable development of the energy sector. He is himself the chairman of the committee and all the seven members are federal ministers. Senior officials concerned with the energy sector would be available to the committee for consultation.

Meanwhile, the government has approved a gas allocation and management policy for supplying gas to the fertilizer sector, independent power plants, captive power plants and CNG stations for the optimal utilization of the non-pipeline quality gas to reduce the high cost of fuel imports.

The government has also decided to use its large coal reserves in Thar area of Sindh to make synthetic liquid fuel. For that purpose it will use liquid fuel technology invented by Germans and developed by South Africans. Pakistan has 1.75 billion tons of coal in Thar sector.

Meanwhile, the gas prices are to go up from January 1 and the Karachi Chamber of Commerce has requested the prime minister to refrain from doing so as such a step will hurt exports, already affected by the high cost of production.

The prime minister has said that the rise in gas prices is in the national interest. Gas exploration companies can work in Pakistan only if they get a rate of return according to prevailing international rates.

The KCCI chief Haroon Farooki says that if the increase in gas prices was allowed it would be a fatal blow to the textile and other industries in the country. Any increase in oil prices will meet stiff resistance because it will have a multiplier effect on the prices as a whole.

The cost of transportation beginning with the bus fares will go up. Then the movement of freight will become more costly and food prices rise will lead to rise in other prices. Power production costs will also rise, inducing shopkeepers to raise their prices further. Train and airline fares will go up.

The question arises: if more and more oil and gas discoveries are being made in the country, then why people have to pay international prices to buy their own oil and gas? When Arabs don’t pay international prices for their own oil why should people of Pakistan do so. The problem is that exploration of oil and gas in the country is carried out by foreign companies which insist on charging prices as prevalent in the international market. At less prices than that, they will not be interested in doing exploration work here. The government is helpless in this regard and for its own part it pockets its share of the profits earned through the OGDC which is a partner in such enterprises.

Most of the time oil discoveries are small in Pakistan but the gas finds are more substantial. The government says that oil prices are higher in India as compared with that of Pakistan, although it is a debatable matter.

Oman is an oil-producing state and offers a 9.5 per cent return on exploration investment to encourage foreign companies to look for more and more oil but Pakistan pays only 3.5 per cent return, says Farooq Rahmatullah, chief of Shell company and Chairman of the Oil marketing advisory committee. So foreign oil companies are less interested in doing exploration work in Pakistan.

If Pakistani companies come up and explore oil in sufficient quantity they may not demand international prices for the oil they will find but Pakistanis do not charge less if the quality of the service too is taken into consideration.

Oil is cheap in Iran because the Iranian State Oil produces it without foreign partnership. And in Saudi Arabia and Kuwait the oil output is so large that a foreign oil company does not demand international price for local sale.

If oil wells in Pakistan were to yield as much oil as the wells in Saudi Arabia and Kuwait, the prices would be very low in Pakistan too. India, whose oil production once met 50 per cent of its oil needs, now caters to 30 per cent of them only because of its growing requirements following increased industrialization and it is paying international prices for the oil it imports.

India and Pakistan have signed an agreement to begin construction of the over seven billion dollar Iran-Pakistan-India gas pipeline by mid-2007. They have 18 months to complete formalities for starting construction and to speed it up so that the project is completed by 2010.

The pipeline will initially would supply 90 million cubic meters of gas per day of which a third will be for Pakistan. The quantity will increase to 150 million cubic meters in three to four years. The gas from Iran which may take five years to be delivered through the system would solve the gas problem of Pakistan to a considerable extent and that may mean more industries being set up.

The Chairman of the oil marketing advisory committee says the government has burdened the companies with building of a strategic oil reserve. Doing that at this moment will be costly. Keeping a strategic reserve is, in fact, the task of the government.

Mr Rahmatullah says that Malaysia was paying the oil marketing companies a return of 8.5 per cent on investment, China 8 per cent, Thailand 5 per cent and the Philippines 4 per cent. How much is India paying the OMCs has not been stated. But currently the marketing companies as well as gas exploration companies are making large profits and are giving very liberal dividends to their shareholders. And the Pakistan Petroleum Limited with its source in Sui and other areas in the south have made the largest profit this year in its history.

Shell’s owns share is selling around Rs 600. The solution to the problem of high energy prices lies in production of more oil and more gas and utilization of Thar coal deposits as earlier as possible. Pakistan should dig 100 wells this year as scheduled without fail and more Pakistani companies should be encouraged and assisted to explore oil. Instead of giving up midway the drilling, more efforts should be made to look for offshore oil.

America’s way to fight a war

IRAQ seems to have the imperial presidency in retreat. Last week the White House accepted Sen. John McCain’s proposal to prohibit cruel, inhumane or degrading treatment of enemy combatants. President Bush is under fire for authorizing the NSA’s warrantless interception of international phone calls and e-mails that were linked to possible terrorists and that ended or originated in the US.

My name has come up for criticism over these issues because of my service in the Justice Department during Bush’s first term. I’ve defended the administration’s legal approach to the treatment of Al Qaeda suspects and detainees. I cannot address the National Security Agency’s programme, which remains classified. But both instances bring up the issue of presidential power in times of war, and I can speak directly to that: The Constitution creates a presidency that is uniquely structured to act forcefully and independently to repel serious threats to the nation.

Let’s consider the president’s right to start wars. Liberal intellectuals believe that Bush’s exercise of his commander-in-chief power has exceeded his constitutional authority and led to a quagmire in Iraq. If only Congress had undertaken the solemn process of declaring war, they have argued, faulty intelligence would have been smoked out, the debate would have produced consensus, and the American people would have been firmly committed to the ordeal ahead. But they are off the mark.

Neither presidents nor Congress have ever acted under the belief that the Constitution requires a declaration of war before the US can engage in military hostilities abroad. Although this nation has used force abroad more than 100 times, it has declared war only five times: the War of 1812, the Mexican-American and Spanish-American Wars, and World Wars I and II. Without declarations of war or any other congressional authorization, presidents have sent troops to fight Chinese Communists in Korea, to remove Manuel Noriega from power in Panama and to prevent human rights disasters in the Balkans. Other conflicts, such as the Persian Gulf War, received “authorization” from Congress but not declarations of war.

Critics of these wars want to upend this long practice by appeals to an “original understanding” of the Constitution. The Constitution, however, does not set out a clear process for starting war. Congress has the power to “declare war,” but this clause allows Congress to establish the nation’s legal status under international law. The framers wouldn’t have equated “declaring” war with beginning a military conflict — indeed, in the 100 years before the Constitution, the British only once “declared” war at the start of a conflict.

Further, the Constitution specifies no step-by-step process to govern war-making, yet it is specific every other time it imposes shared power on the executive and legislative branches.

Why no strict war-making process? Because the framers understood that war would require the speed, decisiveness and secrecy that only the presidency could bring. “Energy in the executive,” Alexander Hamilton argued in the Federalist Papers, “is a leading character in the definition of good government. It is essential to the protection of the community against foreign attacks.”

And, he continued, “the direction of war most peculiarly demands those qualities which distinguish the exercise of power by a single hand.”

Instead of specifying a legalistic process to begin war, the framers wisely created a fluid political process in which legislators would use their funding power to control war.

Would outcomes be better if Congress alone began wars? Not necessarily. Congress led us into two bad wars, the 1798 quasi-war with France and the War of 1812. Excessive congressional control can also prevent the US from entering into conflicts that are in the national interest. Most would agree now that congressional isolationism before World War II harmed US interests, and that FDR should have been able to enter the conflict much earlier.

We did not win the four-decade Cold War by declarations of war. Rather, we prevailed through the steady presidential application of the strategy of containment, supported by congressional funding of the necessary military forces. As we confront terrorism, rogue nations and proliferation of weapons of mass destruction, we should look sceptically at claims that radical changes in the way we make war would solve our problems, even those stemming from poor judgment, unforeseen circumstances and bad luck. — Dawn/Los Angeles Times Service

The writer was a deputy assistant attorney-general in President Bush’s first term and is currently a law professor at University of California.

OIC at the crossroads

THE two-day extraordinary summit of the Organization of Islamic Conference (OIC) concluded on December 9 in Makkah with a declaration and a 10-year plan of action to revitalize the organization and meet the aspirations of the Ummah.

The summit was convened at the initiative of King Abdullah to address the global changes and challenges confronting Muslim countries.

The last summit held in Putrajaya in 2003 had deliberated on the role of the Muslim world in international affairs which all agreed was only marginal. Muslims across the world were in a state of disunity and discord, and their religion was the target of western hostility and identified with fanaticism even terrorism.

The summit was, therefore, also held to draw on a strategy “to counter the harsh offensive on Islam from enemies abroad and some of its own children with deviant ideologies.”

These feelings were shared by all Muslim leaders, expressed most eloquently by King Abdullah. “It bleeds the heart of a believer to see how this glorious civilization has fallen from the heights of glory to the ravine of frailty, and how its targets were hijacked by devilish and criminal gangs that spread havoc on earth.”

The summit was seen as a turning point in the Organization of Islamic Conference’s history, as it was also to address the issues of restructuring, reform and redefinition of the OIC mission, charter and objectives.

The mood and expectations of Muslim leaders gathered in Makkah were best articulated by Pakistan. President Musharraf urged the summit participants to work out a strategy for Islamic revival and renaissance, adopt a conciliatory course in the interest of progress and prosperity of Muslims and pursue policies to face formidable challenges on all fronts, in particular share the expanding frontiers of knowledge, education, science and technology.

He underscored the need for establishing a network of centres of excellence in science and technology in the Muslim world. He sounded a note of caution. “The challenge is indeed enormous, but ‘failure is not an option.”

In the backdrop of these assessments and expectations, the result and outcome of the Makkah summit has failed to meet the high hopes vested in it Indeed in many respects it has generated disappointment, owing to its failure to take a balanced view of the world situation. While too much emphasis was laid on fighting extremism and terrorism, the summit failed to comment on the presence of US forces in Iraq and Afghanistan.

Nor did it express support and solidarity in the Iran and Syria both under severe pressure an threats of invasion by the US. The absence of major Muslim leaders, President Bashan Asad of Syria, Abdelaziz Bouteflika of Algeria and Prime Minister, Tayyip Erdogan of Turkey robbed the summit of its luster.

The Makkah declaration revived the status of the member states in the contemporary world, acknowledging the “dire need of a fresh vision to turn the tide”, and called for “collective will” and “joint Islamic action”. The year 10-year-programme of action” to face the challenges of the Muslim people in the 21st century proposes a wide range of reforms, initiatives and proposals to address the multifarious problems confronting the ummah.

It has proposed the established of a free trade zone for the member-states and welcomed the formation of an forming Islamic international institution to finance commerce and called for increasing the capital of the Islamic Bank. The summit observed that the member-states should allocate resources to preserve the Al Aqsa mosque, support Palestinian institutions and establish the Al Aqsa University in Al Quds.

The meeting renewed its approval of the Sudanese peace agreement and the resolution issued by the 10th OIC conference to establish a fund for reconstruction activities in Sudan. It proposed establishing an independent “Islamic human rights institution”to monitor the rights situation in OIC member: states.

The summit stressed the importance of fighting poverty, unemployment and disease by forming a specialized fund through the Islamic Bank. It decided to take steps towards developing science and technology and to narrow the gap between the Muslim nations and developed countries.

Pakistan had made some extremely useful proposals to lift these Islamic world out of it various dilemmas but these were not included adequately in the plan of action. The suggestions related to (i) an institutional mechanism for conflict prevention and resolution with member-states, (ii) a network of centres of excellence in science and technology, (iii) the establishment of a permanent forum of Islamic thought to provide guidance and opinion, (iv) the allocation of adequate financial resources to implement the proposals, and for this purpose, to commit at least 0.5 per cent of GDP of member states, and a dedicated department in OIC secretariat for promoting intro-OIC trade.

The Makkah summit was heralded as a defining moment for collective efforts and resolve, but judging by its decisions such a verdict would be highly exaggerated. The basic requirements to make Organization of Islamic Conference a living and dynamic instrument of restructuring and a new charter reflecting current realities have been postponed until next summit in Senegal.

Who can dispute President Musharraf’s analysis that we are among the most backward. “Our level of socio-economic development is dismal and indeed distressing. We remain stuck in dire predicament facing formidable challenges on all fronts; political, economic and intellectual. Many Islamic lands remain afflicted with conflict and violence.

Most Islamic societies are struggling to evolve stable institutions for governance. Most of us remain far removed from the expanding frontiers of knowledge, education and science and technology.

Our economies remain fragile and mostly dependent on raw material production. Our weaknesses and vulnerabilities, external and internal, are visible. Our differences and divisions are exploited. Our failure to secure a just resolution of disputes such as Palestine and Kashmir has spawned desperation, confusion and extremism. We need to look within, we need to search our soul.

Do we want to continue in our state of apathy or reshape our destiny. Clearly the choice is between getting permanently marginalized or re-emerging as a progressive society standing proudly in the comity of nations.”

This is a fair and balanced portrayal of the ills that plague OIC member states. The deliberations and decisions of the summit, however, failed as in the past to seize the moment and agree on concrete and tangible action fully backed by collective will and adequate financial resources.

OIC today stands at the crossroads of history, but there is nothing to warrant the optimism that decisions of the summit could change the destiny of the member-states in any meaningful way.

An Islamic renaissance can be brought about only by sincere, sustained and collective efforts, through genuine, committed and representative leadership which sadly is lacking among the present leaders of the Ummah. Indeed, some of them are part of the problem and not solution.

The writer is a former ambassador.

Encircling China By Gwynne Dyer

IF I were a Chinese strategic analyst of a moderately paranoid disposition — and all strategic analysts are paranoid by nature — I would be twitching uncontrollably by now.

Call it professional deformation, if you like, but I would have the overwhelming feeling that China is being surrounded and that its enemies are arming against it. And I would take Japan’s latest move as the final proof of a vast conspiracy against my country.

On November 30, Junichiro Koizumi, Japan’s prime minister, declared that Japan’s “peace constitution” should be changed so that the country can legally maintain armed forces and strengthen its military capability. “Can we defend our country with an organization that has no war capability? Commonsense says it is impossible,” he said in a speech to fellow members of the Liberal Democratic Party, which a week before had proposed a constitutional reform that would regularise the position of the Japanese armed forces, now coyly referred to as “Self-Defence Forces,” and give them an official role in assisting Japan’s allies.

For the past 58 years, Japan’s foreign policy has been constrained by the constitution drafted for it by the US occupation forces in 1947, in which it renounced the right to use armed force in international disputes or even to maintain military forces intended for war-fighting at all. Once the Cold War got underway and the United States needed strong allies in Asia, Washington repented of its earlier idealism and began pressing Japan to re-arm, but several generations of Japanese politicians successfully used article 9 of the constitution to excuse their reluctance to build up their military forces to the level that the US wanted.

Over the years, Japan’s “Self-Defence Forces” have gradually grown to a strength of 250,000 , almost half the ratio of military personnel to total population that prevails in the United States. They are well trained and equipped, too, but the constitutional ban means that they lack key types of formations and equipment that would let them wage large-scale war against serious opponents beyond the home islands.

Koizumi wants to free Japan from those constraints, and he has the full support and encouragement of the United States, but the proposal rouses dormant anxieties in other Asians about Japan’s ultimate intentions. There is scarcely a country in East or South-East Asia that was not attacked, conquered or colonized by Japan during the half-century from 1895 to 1945, when it was the sole industrialised country in Asia.

Memories and suspicions about Japan run deep throughout the region, but perhaps deepest of all in China, where the Japanese invasion and occupation in 1937-45 left very deep scars on the Chinese psyche. They have been compounded by contemporary Japan’s striking reluctance to take full responsibility for its past crimes — and now it’s breaking loose from the restraints of the “peace constitution”.

This comes on top of a sharp shift in Japanese foreign policy towards Taiwan. Last February, Tokyo redefined the Taiwan Strait as a “common strategic objective” of Japan and the United States (implying that its forces would join the US in resisting any Chinese attack on Taiwan).

It is bad enough, in Beijing’s view, that the United States has promised military support to the rival Chinese government in Taiwan ever since America’s Nationalist proteges lost the civil war and retreated to the island in 1949. It is close to intolerable that Japan, the old enemy who invaded China in 1937-45 and has never properly atoned for it, should assert an equal right to interfere militarily in China’s internal affairs.

Then there is last July’s ten-year military agreement between the United States and India, which in Chinese eyes foreshadows a full military alliance between the sole global superpower and Asia’s other emerging giant. There are the repeated visits of senior American military officers to Hanoi, which seem to be leading towards a similar US-Vietnamese military agreement. There are the new American military bases to the west of China in Afghanistan, Kyrgyzstan and Tajikistan. It’s hard for people sitting in Beijing to avoid the conclusion that the US is seeking to encircle China with military alliances, in an echo of its Cold War strategy against the Soviet Union.

So they ask themselves: What are the Americans and their Asian allies up to? The answer, in Washington, is “congagement”, a policy of preparing to contain China militarily if it turns nasty combined with an effort to engage China politically and economically in the hope of encouraging democratic reforms. It sounds pretty good in Washington — a wise combination of stick and carrot — but in Beijing the perspective is different.—Copyright