Jamie Shea explains why energy security is an issue for the Alliance.
Fueling The fire: Debate has been begun within the oil industry as to how it will cope with terrorist attacks. (© NATO)
All modern developed economies are dependent upon an abundant supply of energy both in terms of guaranteed supplies and stable prices. We already saw in the 1970's, when the price of crude oil quadrupled, that sudden disruptions in supplies can have not only major economic but also political consequences for NATO Member States. Today, the tightness in the global oil market and recent price increases, not to mention the threat of terrorist attacks against critical infrastructure, have once again made energy security an issue of strategic importance. A number of recent developments have made NATO countries more aware of their potential vulnerabilities in this area.
One such vulnerability concerns lines of communication and transportation. Forty percent of global oil supplies now transit through the Strait of Hormuz in the Persian Gulf and experts calculate that this will increase to 60 percent in 20 years' time. Certain countries have a disproportionate role in supplying oil and gas to the global market which makes their own policies and internal developments of overall importance to the global economy. For instance, 60 percent of world gas resources are located in just two countries, Russia and Iran.
At the same time, there is increasing evidence that it is becoming difficult to increase supplies or to find new energy resources to cope with rising demand, particularly from China and India. We are losing the equivalent of the North Sea every year in terms of overall production. Russia and Iran are also experiencing difficulties in increasing production because of under-investment and ageing infrastructure. Recent instability in the Nigerian Delta has cut supplies from that country by a quarter. In contrast to many other areas of the economy, much of the world's oil production is in state-controlled hands. Today only four percent of identified oil reserves are controlled by the leading multinational oil companies such as Exxon, Shell or BP. Russia has re-nationalised one third of its production since 2000, which is significant when one considers that Russia's oil output has accounted for 40 percent of the increase in global supplies in recent years. Eighty percent of all oil assets are now state owned and those states benefiting from the current high prices have little incentive to increase production levels. Thus the high prices and the current tightness in the energy market with little or no cushion of spare capacity to draw on will make the impact of even small decreases in supply significant for both North America and Europe.
At the same time both North America and Europe are becoming more dependent on imported energy. The European Union for instance currently imports 44 % of its natural gas and 50% of this figure comes from Russia alone. The shift in consumption from oil to natural gas will in some respects increase the dependency on certain counties. Russia for instance has 6% of global oil reserves but 30% of natural gas reserves. Not surprisingly the current tightness in the market has re-ignited the debate over alternative energy supplies such as bio-fuels or solar power not to mention a renewed interest in nuclear power. Bio-fuels, however, currently make up only 1% of transport fuels and experts do not believe that this figure will increase beyond 5% in the next 20 years. Even today, coal accounts for two thirds of energy consumption in China and India and fossil fuels account for 90% of the energy demand world wide. Oil is still 40% of the global energy mix because of its domination of the transport sector. One statistic alone indicates how the demand could indeed grow exponentially in the years ahead. In the US 868 out of 1000 people own their own car. In the EU the statistic is 680 people out of 1000. But in China it is still only 13. Imagine the impact on energy supplies if the Chinese figure were to come close to that of the EU or the US over the next 20 years.
The Middle East will continue to be absolutely crucial to energy security given the fact that 61% of oil reserves are currently located there. The International Energy Agency calculates that over the past 30 years there have been 17 disruptions in oil supplies involving more than half a million barrels a day in lost production. Fourteen of these were in the Middle East. At the same time, the Middle East is still the region of the world where there is the largest number of undeveloped oil fields. Therefore political stability in this area will be key to energy security as much as to the resolution of other tensions in the 21st century.
This brief overview of global energy trends emphasises that energy is indeed a real security issue. In such a tight market and with so much reliance on oil and gas, threats to energy supply could come from a number of different sources: Terrorist attacks, natural disasters, political intimidation and blackmail or disruption as the result of regional conflicts or tensions to name a few. This suggests the need for a strategy to prevent disruption as well as for arrangements to minimise the effects on supply levels in the event of a major international crisis. It also suggests that energy security has the potential to create a major crisis or, at the very least that the quest to secure guaranteed supplies could increasingly shape the foreign policies and priorities of NATO member states and others worldwide.
Another characteristic of the current concern with energy security is that more and more countries are relying on supplies travelling over enormous distances, such as pipelines criss-crossing entire continents or tankers carrying liquefied natural gas over vast ocean expanses. These supertankers are due to become not only more numerous but also much larger over the next decade. More and more complicated and increasingly vulnerable infrastructure, such as new pipeline projects or the creation of liquefied natural gas terminals, is being created to cope with the rising demand. This is one aspect of globalisation that underscores the inter-dependence linking consumers and suppliers in a complex chain necessitating end-to-end security on both land and sea.
When it comes to terrorism there have been explicit threats from al Qaida in recent months to carry out "economic jihad" by attacking energy facilities. Attacks have already been carried out against a French tanker in the Persian Gulf and against Saudi Arabia's largest oil refinery. Even if these attacks have not been successful they can still destabilise the market and increase insurance premiums. They have also stimulated a debate within the oil companies on the degree to which they can provide security for themselves or if it is necessary to turn instead to governments and international organisations to help with contingency planning and to provide back-up support in the event of an incident or crisis.
A possible NATO role?
Given the direct link between energy supply and the security of NATO Allies, as well as the direct nature of some of the threats, it is not surprising that energy security has also become an issue for discussion within NATO. The North Atlantic Council has already held a reinforced session with national experts. NATO has a responsibility to discuss any subject that concerns Allies, and as certain Allies have an even higher dependency than others on imports of natural gas, it is only natural that they should wish to raise this issue in NATO bodies.
It must be said clearly from the outset that such discussions and consultations do not imply an automatic agreement that NATO will act, nor that NATO is claiming to have a lead role in the field of energy security. It is obvious that the protection of critical infrastructure or crisis response options involving military forces are only a part of the overall package of initiatives that would be necessary to guarantee the security of energy supplies. For instance, there are already a number of initiatives by the G8 nations, the EU, the International Energy Agency and other groups to enhance energy security. These focus on making the Energy Charter more universally accepted, on opening up markets to foreign investment, and on reducing our dependence on fossil fuels as when President Bush recently spoke of reducing America's "addiction to oil".
We need in particular to develop a transport system that is not so massively dependent on oil by developing commercially alternative sources. We must also diversify our network of LPG terminals and pipelines. In order to minimise the effects of a potential disruption in supply and increase energy security strong links should be formed with other energy producing countries. These good relations would reduce the current dependence of many consumer states on just one or two producers of oil or gas. In view of the criticality of the Middle East, working towards a viable and durable peace in that region has become not just a political priority but a priority for energy security.
This said, however, there is also a potential for NATO to add value to the international efforts to improve energy security in a number of niche areas and to address specific contingencies. I see four possible areas of NATO involvement.
Monitoring and assessing the energy security situation
NATO could establish a permanent monitoring and assessment mechanism to keep an eye on developments related to energy security. This could involve regional political consultations with Allies and Partners, based on joint International and International Military Staff analyses and intelligence reports. Briefings, presentations and collaboration with the specialist community such as the IEA and the major energy companies could also play an important part. An existing senior NATO committee could be detailed to follow the issue closely. This group may then prepare the issue before taking it to the North Atlantic Council, NATO's highest decision-making organ. Also, another group primarily concerned with economic issues could be called upon to support this initiative due to the direct links between energy security, economics and market trends.
Furthermore, an Energy Security and Intelligence Analysis Cell could be established by the North Atlantic Council. A similar intelligence unit has been set up to deal with the issue of terrorism and has been successful. Alternatively, we could broaden the mandate of the terrorist intelligence unit to include a specific focus on intelligence related to energy security. Intelligence could be gathered from Allies, Partners, industry and government sources. The Special Committee could also play a role in facilitating intelligence-sharing between different entities in the field of energy security.
In addition to sharing national intelligence among Allies, NATO's maritime operations could monitor shipping lanes that are insufficiently covered by national assets. The coverage of such areas could be used to generate a maritime picture that would be made available to all NATO members and perhaps Partnership countries. This would help to make shipping lanes safer and to identify risks or threats to individual vessels. This maritime intelligence initiative would be linked to the intelligence network of NATO's command, most probably through the Intelligence Fusion Centre.
The quest to secure guaranteed supplies could increasingly shape the foreign policies and priorities of NATO member states and others worldwide
NATO could also invite delegations from states and other international organisations such as the United Nations and the EU to brief the North Atlantic Council on a regular basis regarding their own activities in the field of energy security. Energy security could form topics of discussion at informal NAC-PSC sessions (joint meetings between the NATO North Atlantic Council and the EU Political Security Committee). Energy security is also currently a hot topic at the EU, being a focus of the Finnish presidency. Given Russia's leading role in the field of energy security, we could also make this a regular topic for our NATO Russia Council consultations, just as it has featured in our expert meetings with Ukraine.
Many of our Partnership countries are either important suppliers of oil and gas or leading transit countries which are closely involved in the current discussions about existing pipeline routes and new pipeline projects. Energy security is thus an obvious topic for enhanced Euro-Atlantic Partnership Council Consultations (Consultations involving all 26 NATO members and 20 Partnership for Peace countries). Some of our Mediterranean Dialogue and Istanbul Cooperation Initiative partners are also among the world's leading suppliers of oil and natural gas. It would therefore make obvious sense to also consult with them over the energy security issue. Special seminars such as those we have held at the NATO Defense College in Rome, could also be devoted to an analysis of energy security trends and challenges to gain further expertise of the subject matter and in order to prepare for future challenges.
Security assistance to Allies
A second possible role for NATO is through providing security assistance to its Allies. This could involve flexible measures ranging from security assistance to one Ally or a group of Allies, or even a NATO operation to secure vulnerable energy-related infrastructure in a time of need.
NATO could be prepared to deploy, possibly under Article 4 of the NATO Treaty, specifically tailored 'Security Assistance Packages' in support of one or more Allies. This could comprise of the reinforcement of maritime and aerial patrols, the reinforcement of national communication and intelligence networks or even assistance to disaster response efforts using our Civil Emergency Plan and Euro-Atlantic Disaster Response Coordination Centre mechanisms. If necessary, in extreme circumstances energy assets could also be protected by the activation of quick reaction forces which could be permanently on standby.
Command and Control arrangements could be inspired by those used during "Operation Display Deterrence" (February 2003) when NATO provided defensive contingency support to Turkey. Various security assistance missions, such as NATO's support to the Athens 2004 Olympics and the upcoming security measures for the November 2006 Riga Summit, can also be seen as possibly useful models. These security assistance missions could also cover consequence management situations.
Maritime surveillance and threat-based response
A third possible role for NATO could be involving maritime surveillance. Due to the recent successes of Operation Active Endeavour, this looks like an increasingly likely possibility. Generally speaking, nations retain responsibility for protecting their own territorial waters but NATO could develop a 'niche' capability dealing with security aspects of maritime lanes of communication.
In this respect, Operation Active Endeavour (a counter-terrorism operation designed to increase maritime security in the Mediterranean post-9/11) could be used as a model. A multinational maritime Task Force (involving Partners where appropriate) could be created to deter attacks against important energy assets such as oil or LPG tankers. However, in reality, it is impossible to protect large expanses of ocean on a permanent basis. What NATO could do is protect certain critical choke points when faced by a specifically heightened threat or conflict situation. This would require a very much intelligence-driven or threat-based responsive approach. It would also require a quick reaction time for the redeployment of NATO naval task forces. The role and positioning of NATO's current naval forces would have to be examined and altered in accordance if NATO was to undertake this role.
A fourth possible role for NATO could be interdiction operations. These are military operations explicitly designed to secure the supply of oil or gas in an actual crisis or conflict situation. An example (albeit not a NATO operation) is "Operation Earnest Will" (1987-1988) which was carried out to protect Kuwaiti oil tankers during the Iran-Iraq war and which involved the international community not only deploying naval assets but also re-flagging tankers (changing the flags of Kuwaiti tankers in order to deter attacks on them). A NATO interdiction operation could involve short-term maritime escort operations, protecting oil rigs and terminals, assisting national authorities to protect port loading/off-loading facilities and protection of refineries and storage sites.
A NATO role in interdiction operations would necessitate elaborate operational planning usually for specific scenarios and also exercise planning for multi-national naval forces and other relevant forces which could be involved. Demanding interdiction operations would need a joint campaign involving air, naval and ground assets.
Developing NATO's role in energy security involves important political aspects, such as developing the relationship with other organisations and Partners. It also involves the development of military options, such as an 'intelligence-driven' approach, that would suffer from a lack of coherence if treated separately. Hence the need to tie these different strands of work together in an overarching political-military concept on energy security. The four possible roles for the Alliance would form the core of this concept.
Although energy security is a relatively new topic on the international agenda, it is an important one and will be with us for many years to come. Due to the increasing global demand for energy and the increasingly globalised nature of the world, any decrease in supply levels could lead to an international crisis. Although NATO has many important topics on its agenda in the run up to its summit in Riga at the end of November, energy security will increasingly be a strategic concern for the Alliance. However, it is too early to determine which roles NATO could and should play. There will need to be further discussion among the Allies before NATO's role and contribution can properly be defined.