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The Cure at Troy

Written by Declan Ganley

Why the West Must Kick its Oil Habit and How

“History says don’t hope
On this side of the grave.
But then, once in a lifetime
The longed-for tidal wave
Of justice can rise up,
And hope and history rhyme.”

Seamus Heaney, Nobel Laureate
(From The Cure at Troy)

For about a year now, the writing has been on the wall that the US will pull out of Iraq. The shift in control of the US Congress will likely increase the pace of the Iraq withdrawal, as after all, for whatever reason, it does appear that at least for now, the majority of citizens of the United States, and indeed the Western World, wish for such disengagement. By the time you read this the Baker Hamilton report will have proposed a few sensible-sounding measures that are, when boiled down, some face-saving way of orchestrating retreat.

The results of this Iraq withdrawal will soon make themselves clear. Hezbollah declared victory following the Israeli attack on their South Lebanon stronghold, and they were believed: the victory handed to Islamic radicals by this forthcoming withdrawal from Iraq will be truly historic.

This is not Vietnam, it’s much more serious. Islamic radicals struck the very heart of Western Capitalism, downtown New York City, massacring thousands. Afghanistan was invaded and, even there, the west has not won convincing victory. Baluchistan and the North-West frontier of Pakistan are safe havens for radicals who raid almost at will. Large areas of the country remain subject to the sway and fear of Islamism while once-stalwart members of NATO and the Western Alliance shirk from contributing forces and equipment. The largest commitment in men and materiel was made in Iraq and regardless of the historic reasons, the fact remains that Iraq is the main battle ground of Islamic radicalism against the west. The Islamists themselves have said so plenty of times. They are shortly to be handed a victory quite unlike any seen for Islamist forces for centuries.

Saudi Arabia may well be next. The regime might either be overthrown or will otherwise succumb to, or accommodate, radicalism. Resistance by the regime, depending on Western support, will not look to be a long term survival strategy for those faced with deciding which side to pick. Egypt’s ruling party will feel the tremors. The effect there remains to be seen but it may be a severe shock to the West. Iran is empowered beyond what they could have imagined in their wildest dreams only four years ago. They act with impunity in southern Iraq and Lebanon – they move in concert with their Syrian allies, assassinating the democratically elected ministers of Lebanon’s Government.

The British Government has effectively announced the pull-out of British forces from Iraq, leaving only a token force, within the next twelve months. As any Commander of Western forces in Iraq surveys the political scene, they will be acutely aware of the direction in which they are headed. What officer will ask his men to assert themselves, push forward and risk being “the last man to die in Iraq”? Soldiers are not stupid. As of old, if the leadership leaves the field, the army will follow. It was the Stuart King James II, who on finding his men miles from the field, fleeing the Battle of the Boyne, uttered the challenge “You ran from the field” – to which one wily Irish soldier replied “It looks like Your Majesty has won the race”.

As the US and Europe start yet another round of dialogue with Syria and Iran, the Mullahs are rolling around laughing behind closed doors – they did not cave in when we had leverage, now they will declare “the Emperor has no clothes”. Iran is also near guaranteed that they will achieve the possession of nuclear weapons with little real resistance, save for at worst a few impotent “look tough” Cruise missile strikes or “surgical raids” for the benefit of CNN and Fox News viewers, even these options being hampered by a delusional Vladimir Putin happily selling Russian anti-aircraft missile systems to Iran.

The fact is that if Iraq and Iran were to be tamed and security risks eliminated, full mobilisation for war would have to be carried out, complete with drafts, rationing and all of what Churchill referred to as the "blood, toil, tears and sweat" that it takes to secure overwhelming victory. The Islamic radicals look at the western world and discern that we are too “relative”, unwilling to sacrifice, decadent, lacking real belief in a cause, devoid of faith, and what they consider too weak to go the distance. They believe that through faith, commitment whatever the cost, sacrifice and the direct help of God, they will be victorious.

As the pull-out from Iraq commences, their confidence in these views will be much emboldened. This will be proclaimed as a victory akin to the rout of the 2nd Crusade. Here the Francs were forced to lift their siege of Damascus and abandon vast territories, setting the stage for the fall of Egypt, the rise of Saladin and the annihilation of one of the greatest civilisations in history. Thus fell the apogee of Greek and Roman learning, the Byzantine Empire, whose death throes were commented on by Benedict XVI, perhaps giving room to consider that smarter, richer, better does not always beat faith, sacrifice and commitment. The storm is gathering apace, it will present itself with spectacular effect in the cities of the West soon enough.

So given that the admirably peace-loving, civilized and educated peoples of the Western World have overwhelmingly shown that they do not wish to join the struggle in which radical Islam would have us engage, what can we do to offset the risk that they won't have the decency to leave us alone because we don't want to argue the point their way?

One thing we must do is bold, and will take almost unimaginable political courage and leadership. We must sever ourselves from Middle Eastern oil and gas, and as much as possible from all other sources of oil and gas. At least this will choke off the supply of our money to regimes, existing and shortly to come, who are not accountable to their own citizenry, do not need to tax their productivity (because they get our money) and thumb their noses at our values and requests. We may end up discovering that the recipients of our energy euro and dollars become outright enemies of everything we stand for. It was Lenin who said of Western capitalism “The Capitalists will sell us the rope with which we will hang them”. The rope is the money we send for energy they did not create, erasing their need to raise public funds by taxing the economic ingenuity and productivity of their citizens, thus denied the symbiotic relationship between tax producer and tax spender, a most critical component of accountable responsible government.

So it is now patently obvious that our oil and gas dependence increasingly exposes us to rising prices, supply interruption threats and growing uncertainty about future supplies. This dependence distorts markets, empowers and transfers billions to unstable and corrupt regimes, causes bad domestic choices in many nations and pollutes our environment.

We unfortunately have not progressed in energy as we have in other industries. The communications industry, for example, has evolved through multiple technology revolutions, expanded its services significantly and created millions of new jobs world wide, while prices for communications services have plummeted. In twenty years, we have experienced communications revolutions taking us from expensive, analogue land line service to cheap, high speed, broadband, wireless voice and data.

What happened to energy? One can hear OPEC and the oil and gas concerns peddle their rapid fire excuses; however, the answer is simple – it’s called indolence. Indolence is the sclerosis that afflicted the communications industry before it faced serious competition. Competition, along with entrepreneurial innovation, revolutionized an industry that was once mired in monopoly. We now have Vodafone, Sprint, Vonage, Google, Yahoo, Nokia, Verizon, among others. We’ve also witnessed the tremendous growth in related hardware and software sectors. What a deal for the consumer. What a boost for the global economy.

We condemn ourselves if we do not rapidly create a new energy paradigm. As a communications entrepreneur, as I consider our energy dilemma, I believe that we can learn a great deal from the communications industry. Utilizing the lessons from the communications revolutions, I believe that we can reach energy security by harnessing one of our greatest assets – entrepreneurship – to revolutionize the way that we acquire and use energy. Through this asset, we can break our petroleum dependence and stimulate innovation and job creation with significant political and environmental dividends.

Several landmark initiatives sparked the recent communications revolutions. In the US, Judge Green’s ruling to break up AT&T was certainly one, but even more significant was an uncommonly good idea employed in Europe in the late 1980s and early 1990s. Several European governments decided to reinvigorate the communications industry by granting wireless phone licenses to newcomers, bypassing the incumbents. This decision opened the marketplace to new and innovative players. Remarkably, these governments resisted the temptation to reap a windfall tax, and instead of selling the licences to the highest bidder, they awarded them through a competition to those applicants who could credibly commit to the widest coverage, fastest rollout, best services and applications, and lowest tariffs. There may have been a few less than perfect decisions but, by and large, the policy was a raging success. The incumbents, after years of pretending to innovate, were suddenly forced into a new paradigm.

So how do we create a new energy paradigm to promote energy alternatives? We need to create a new energy alternatives competition, and in this competition, engage the entrepreneurs of our time. Governments should levy big oil and gas access to consumers, thereby redirecting a portion of the tremendous wealth that we transfer to oil and gas concerns. Oil and gas would pay, let’s say, €0.05 a litre for each litre equivalent sold, into an alternative energy fund set up by individual governments. Based only on US, gasoline and diesel consumption of over 750 billion litres per year, and European gasoline and diesel consumption of over 340 billion litres per year, we would endow this fund with over €50bn a year. An equivalent levy could be applied to natural gas as a non-renewable with many of the same environmental and geopolitical issues.

Through these resource pools and drawing from the communications industry lessons learned, governments could unleash entrepreneurial innovation by announcing an energy alternatives competition. Similar to the GSM (2G) wireless phone licence competitions, governments would invite entrepreneurs to compete for a limited number (say ten or less) of multi-year licences to the capital resources in the energy fund. Each winner would obtain funds to develop and deploy their winning alternative energy plan.

Of course, aggressive innovators will do more to harness the opportunity by, for example, adding significant outside venture and debt capital to the money available from the energy fund. They will harness the power of the free market. They will then move forward and do what entrepreneurs do best — they will innovate and create real competition. As with the wireless phone license competitions, the big oil and gas incumbents must be prohibited from directly or indirectly participating. They must understand that the new contests are intended to break our petroleum and gas dependence. This message will in turn force them to innovate, and the oil and gas potentates to swallow hard.

We in Europe could complement our strategy and the Lisbon Agenda, moving up the value chain to a knowledge economy, by having the EU, and its support organisations, adopt “energy alternatives” as a major focus of investment for R&D capital, third level courses, business start up incentives and other initiatives. This is starting to happen. Such an alternative energy business strategy could very well prove to be a competitive catalyst and differentiator over other competing economies. It is worth noting that if the EU were home to at least a couple of winners in an alternative energy competitive process, we would have done our economy and long-term prospects no end of good. We in the EU should take up this mantle and champion the idea of holding such a competition across Europe and do what we can to encourage the US to consider the same. (Neither Europe nor the US could contemplate not pursuing the approach if one or other decided to make the first move, as the winners would very likely be among the dominant forces in global energy for the next century).

Given our petroleum dependence, and the impending strategic risk, this is not a time for caution: fortune favours the bold. If through this competitive “licence award” re-allocation of resources and promotion of entrepreneurship, we have a fraction of the success that we have had in the communications industry, we will have served humanity well. By unlocking even a portion of the scale of economic resources that such a model would release, we can be near as certain to positively change the dynamic of energy supply. Twenty years from now, we will have produced a number of major non-petroleum and gas energy players. The likely spin-offs in job creation and significant political and environmental benefits will have to be seen to be believed. As a consequence, we will have revolutionized energy, made history and taken major steps towards energy security and towards breaking our petroleum habit. In so many respects, the world might breathe a little more freely. To borrow a line from the Nobel Laureate, Seamus Heaney, we can make “hope and history rhyme”.