Reshaping a New World Order: Tectonic Shifts in Global Geopolitics

1. 6th Asia Energy Security Summit 2016 Reshaping a New World Order Post the Oil Price Crash, Failure of Capitalism and Global Recession’ 1st – 3rd March 2016Goa, India Harry Dhaul - Director General, IPPAI

2. The Broad Trends & Underlying Issues Harry Dhaul - Director General, IPPAI

3. This year’s special focus is on the tectonic shifts in the global geopolitical scene and the emergence of new set of challenges • The New Geopolitics • The Changing Situation in the Gulf • ISIS and Radicalization through New Media • Oil Price Crash and Global Recession • New Energy Paradigms • Challenges of Availing Clean Energy for Smart Cities Harry Dhaul - Director General, IPPAI

4. FOOD FOR THOUGHT As per Oxfam, the richest 62 people on earth have as much wealth as half of world population. Oxfam said that the wealth of the poorest 50% dropped by 41% between 2010 and 2015, despite an increase in the global population of 400m. In the same period, the wealth of the richest 62 people increased by $500bn (£350bn) to $1.76tn. ( The Guardian) The richest 1% in India earned 12.9% of all income in 2012, up from 9% in 1998, pointing to problems associated with economic inequality - Chief Economic Advisor Arvind Subramanian, Government of India IS CAPITALISM WORKING ? Harry Dhaul - Director General, IPPAI

5. FOOD FOR THOUGHT • Even as US is shifting from a service oriented economy back to manufacturing again, China on the other hand is showing trends of moving away from Manufacturing to Services in particular. • In spite of Oil being one of the most traded commodities on earth and in spite of having almost 25% of world’s crude oil reserves, Saudi Arab is reeling under a massive oil price crash and is borrowing money. SHOULD WE CALL IT THE TECTONIC SHIFT? Harry Dhaul - Director General, IPPAI

6. LOOKING AT TODAY’S ISSUES THROUGH THE PRISM OF HISTORY • Urban Emission was considered an issue in England as early as the 13th Century when the use of coal was banned in London because of damaging effects to human health. • That was the pre-industrialization era when human being was still looked upon with dignity and was not yet considered a mere commodity or a means to mass production of commodities as was the case later on with the Industrial Revolution. Harry Dhaul - Director General, IPPAI

7. FROM WHERE IT ALL CHANGED- INDUSTRIAL REVOLUTION • The Industrial Revolution that began in UK from around 18th Century brought about a fundamental shift in how human beings were treated. • It not only reduced the human being to nothing better than a mere factor of production but also started a race amongst empires for access to more raw materials and minerals across the world. • The key indicator of merit was changed from WHOM to HAVE • Industrial Revolution thus in essence was the key reason for colonization. Harry Dhaul - Director General, IPPAI

8. INDIA BEFORE INDUSTRIAL REVOLUTION There is no doubt that our grievances against the British Empire had a sound basis. As the painstaking statistical work of the Cambridge historian Angus Maddison has shown, India's share of world income collapsed from 22.6% in 1700, almost equal to Europe's share of 23.3% at that time, to as low as 3.8% in 1952. Indeed, at the beginning of the 20th century, "the brightest jewel in the British Crown" was the poorest country in the world in terms of per capita income. — Manmohan Singh, former Prime Minister of India Harry Dhaul - Director General, IPPAI

9. FROM STEAM TO OIL- THE BEGINNING OF THE MODERN AGE OR MODERN MISERY? • The discovery of OIL, the invention of internal combustion engine and the shift of the British Admiralty from ships run by steam engines to oil engines brought in a paradigm shift and increased the demand for oil exponentially. • The defeat of the Ottoman Empire, the formation of Germany and with the territory of the Ottoman Empire being divided among the Allied Forces followed by the discovery of huge amount of oil in the Middle East, made the region a place for both exploration and exploitation. • In other words, the oil that was discovered in Middle East was plundered to the hilt to finance the WW2 and the world economy thereafter. Harry Dhaul - Director General, IPPAI

10. THE RISE OF THE HOUSE OF SAUD & THE RISE OF THE GULF STATES With the destruction of the Ottoman Empire and Middle East coming under the grip of the European Powers, with the Islamic Holy places coming under the control of the so called Infidels, the House of Saud found unprecedented support from across the Gulf Region and eventually gave rise to the creation of Saudi Arab, one of the most powerful states in Middle East with around 25% of proven oil reserves of the world.The power of Oil empowered Gulf Region and Oil producing countries like never before. It was institutionalized through the creation of OPEC in 1960.

11. THE STRANGLEHOLD OF OPEC • The 1973 Oil Crisis or the First Oil Shock heralded the unprecedented stranglehold of OPEC in the Fossil Fuel Market . The price of oil rose from $3 a barrel to $12 a barrel by March 1974. • Since then OPEC continued with its approach of constricting oil supply to create artificial scarcity and shore up demand. Harry Dhaul - Director General, IPPAI

12. Harry Dhaul - Director General, IPPAI

13. The Monopolistic Approach of OPEC Thus, even when economic recession loomed large, the price of oil remained high. This Set-up coupled with economic embargoes on Iran and Iraq worked well for OPEC and especially for Saudis for many decades. But no more… The Shale phenomenon coupled with increased flow of oil from Iran and Iraq and depressed demand have essentially weakened the ability of OPEC to leverage the price of oil anymore. Sustained dependence on Oil is now becoming an Achilles‘ Heel for many OPEC economies Harry Dhaul - Director General, IPPAI

14. Broad Trends- The Giant Slide in Price of Crude Oil Source- https://images.hedgeye.com/media_assets/0061/1544/Oil_cartoon_12.09.2014_large.png Harry Dhaul - Director General, IPPAI

15. THE CRUDE RIDE OVER THE DECADES https://www.linkedin.com/pulse/oils-ups-downs-hammad-tahir-hadi-pmp-cce Harry Dhaul - Director General, IPPAI

16. While Saudis and many Gulf Countries may still make profit per barrel even while the price of oil remains low, their dependence on oil revenues for running their economies, have made most of them depend on a very high price of crude oil to sustain their economies as well as funding alternatives to Middle East oil, such as Shale gas, Tar sands Harry Dhaul - Director General, IPPAI

18. PRICE OF OIL NEEDED TO HAVE NO BUDGET DEFICITS

19. OPEC can no more play the game of reducing production to increase price since if the price of oil increase, shale production would increase too. Further, the additional supply of crude from Iraq and Iran has nullified any chance of increase in oil price in the medium term

20. The high price of crude for long helped the gulf countries in propagating Islam across the world. The void created by the collapse of Communism was to a certain extent filled by a sense of equality that Islam claimed to provide. • In fact any generic study would reveal that the apocalyptic rise of radical extremist terrorism happened after the fall of Soviet Union and collapse of Communism . • In essence, Capitalism’s insatiable thirst for growth and more profits failed to address some of the more fundamental issues of economic and social disparities in the world. • The increasing spate of violence across the world and the demography of those who have consistently been the terror operatives at the ground level indicate that poverty and lack of access to education remain key reasons for their propensity to join radical extremist ideologies. • In other words, from 9/11 to Paris Attacks, it is essentially the HAVE NOTs attacking the HAVEs K E Y O BSERVATIONS Harry Dhaul - Director General, IPPAI

21. OIL PRICE DIP & THE RISE OF SECTARIAN VIOLENCE IN GULF • There has been an amazing coincidence between the collapse of the price of oil and the increasing proliferation of ISIS. • In addition to the oil price crash crisis, the Middle East is now increasingly getting mired in a spate of conflicts, starting from Iraq to Syria, Lebanon and Yemen. If one included North Africa, the spate of violence spearheaded by ISIS and Al Qaeda related groups have spawned across most North African states. Sustained low oil prices and cut in welfare measures may trigger Arab Spring kind of revolts and unrest in many of the Gulf based Monarchies. • The dual crisis of oil price and conflicts have made the Sectarian divide between Shias and Sunnis more profound. • While the Sunni Arab block led by Saudi Arab and Qatar find themselves in a fix as a result of shocking collapse of oil price, Iran on the other hand has been leading a sort of resurgence of the Shia block in Middle East through the nuclear deal, lifting of economic sanctions and de-freezing of nearly $100 billion of Iranian funds . Harry Dhaul - Director General, IPPAI

22. THE CRASHING OF OIL PRICE & THE CRUSHING IMPACT ON GLOBAL ECONOMY Harry Dhaul - Director General, IPPAI

23. MYTHBUSTER Asia: The New Theater of Energy Consumption For long it was considered that any kind of decrease in the price of oil would immediately have a positive impact on emerging economies as well as the oil importing countries . Asia has been a witness to major propensity towards more economic growth over the last few decades. Millions Tonnes of Oil Equivalent Source: IEA . Harry Dhaul - Director General, IPPAI

24. HOWEVER IT HAS NOT HAPPENED THAT WAY THIS TIME • The crash of oil price is having a cascading impact on some of the major economies of the world. It is expected that Saudi Arab would get bankrupt in the next few years if the price of oil continues Its downslide. • While European economy is already in slump, austerity measures and budget cuts have severely cut consumptions in the rich Gulf Countries whose Consumption was largely catered by imports from China. • A combination of many factors including the massive slowdown in consumption in Middle East has been contributing to Chinese slowdown. This in turn is having a massive negative impact on many economies who used to supply intermediary commodities and raw materials to China. Harry Dhaul - Director General, IPPAI

27. IS CAPITALISM FAILING ? Europe was already reeling under deep economic crisis. Now with the Gulf Economies facing massive economic hardships and the price of oil showing no sign of recovery, China was perhaps the last hope. But with China too now showing signs of deep slump, serious questions may now be raised about theImpact of global economic interdependence and market economy. Economic Interdependence is spreading slowdown like a contagious virus. Is it perhaps time again to have a relook at some of the theories of socialist thinkers like Karl Marx, Charles Fourier, GDH Cole and Antonio Gramsci to refine Market Economy and make it more humane? Harry Dhaul - Director General, IPPAI .

28. The RISE OF ISIS & THE USE OF SOCIAL MEDIA The global economic meltdown has gone hand in hand with massive Proliferation of the Information age where Social Media has done away with All forms of information censoring is now out of bound for states and any message can be disseminated literally at the speed of thought. Thus while the mass is increasingly getting aware of the issues of disparity and their rights, and which gave rise to hitherto unheard kind of concepts like Arab Spring, radical extremist organizations like ISIS have been using Social Media to the hilt and have been spreading their radicalism in a manner which Is increasingly becoming a challenge for the law enforcement agencies Harry Dhaul - Director General, IPPAI

29. Countries from which citizens have gone to Syria to fight for ISIS

30. Even as Global Economies are in Slump. Terror Groups continue to source Funds Easily Image Source- Iraq Energy Institute Harry Dhaul - Director General, IPPAI

31. POINTS TO PONDER UPON • Mere Military actions alone may not solve the problem of ISIS unless the root causes of discontent are explored in depth and adequate measures are taken to correct the wrongs in the Market Economy which has considerably failed to reduce economic disparities and on the contrary has only aggravated it. • Is there a gap caused by rising disparity? • Is Capitalism thriving? • Harry Dhaul - Director General, IPPAI

32. The Other Major Challenge -The Food-Water-Energy Nexus (1/2) Harry Dhaul - Director General, IPPAI

33. The Food-Water-Energy Nexus (2/2) Averting possible water wars demands rules-based cooperation, water sharing and dispute-settlement mechanisms. Addressing this problem has a domino effect because of water’s nexuses with energy, food, pollution, epidemics, climate change and natural disasters. India has a water sharing agreement with Pakistan that has stood the test of time. Agreements with other countries may also be required. Harry Dhaul - Director General, IPPAI

34. DEVELOPING SMART CITIES- CHALLENGES OF ASSURING SUPPLY OF CLEAN WATER AND ENERGY Development of 100 Smart Cities and 500 AMRUT Cities, ( Atal Mission for Urban Rejuvenation and Transformation) is a positive step for India since by 2030 India is expected to have 590 million people or almost 40 % Of its population living in cities as per Mckinsey Global Institute. However access to clean water and green energy would remain major Challenges. Government of India’s thrust towards creating generation Capacity of 175 GW of renewable energy by 2022 is a step in the positive direction. There is a pertinent need for embracing smart technologies in the realm of Water management and sewerage treatment for cities. * Mumbai Sludge *50 million gallons per day (mgd) Thus, along with challenges, Smart Cities provide unique opportunities for Innovation and private participation in the realm of public utilities management. Harry Dhaul - Director General, IPPAI

35. LET THE DELIBERATIONS BEGIN