Monthly Archives: April 2014

The Thirst for Commodities: loans-for-oil deals

china latin america

China’s demand for commodities has entrenched Latin America’s position as a supplier of raw materials. The country guzzles oil from Venezuela and Ecuador, copper from Chile, soyabeans from Argentina, and iron ore from Brazil—with which it signed a corn-import deal on April 8th.   Chinese lending to the region also has a strong flavour of natural resources. Data are patchy, but according to new figures from the China-Latin America Finance Database, a joint effort between the Inter-American Dialogue, a think-tank, and Boston University, China committed almost $100 billion to Latin America between 2005 and 2013 (see chart). The biggest dollops by far have come from the China Development Bank (CDB). These sums are meaningful. Chinese lenders committed some $15 billion last year; the World Bank $5.2 billion in fiscal year 2013; foreign commercial banks lent an estimated $17 billion.

More than half of China’s lending to Latin America has been swallowed by Venezuela, which pays much of the loan back from the proceeds of long-term oil sales to China. Ecuador has struck similar deals, as has Petrobras, Brazil’s state-controlled oil firm, which negotiated a $10 billion credit line from CDB in 2009.

Such loan-for-oil arrangements suit the Chinese, and not simply because they help secure long-term energy supplies. They also reduce the risk of lending to less creditworthy countries like Venezuela and Argentina. Money from oil sales is deposited in the oil firm’s Chinese account, from where payments can be directly siphoned.  It is no surprise that Chinese money is welcome in places where financial markets are wary. Ecuador, which defaulted on its debts in 2008, has used Chinese loans both to fill in holes in its budget and to re-establish a record of repayment in advance of trying to tap bond markets again.

But Chinese credit has its attractions in other economies, too. It often makes sense for countries to diversify sources of lending. Loans can open the door to direct investment. And as Kevin Gallagher of Boston University points out, the Chinese banks operate in largely different sectors to the multilaterals. Of the money China has lent in the region since 2005, 85% has gone to infrastructure, energy and mining. Borrowers may have to spend a proportion of their loan on Chinese goods in return; some observers worry about the laxer environmental standards of Chinese banks. But the main thing is that money is available. Expect the loan figures to rise.

Chinese lending to Latin America: Flexible friends, Economist,  Apr. 12, 2014, at 27

The Militarization of the Deep Sea: DARPA Tuna

Fiberoptic

Tactical Undersea Network Architectures (TUNA). Solicitation Number: DARPA-BAA-14-32

Defense Advanced Research Projects Agency (DARPA)

DARPA is soliciting innovative research proposals in the area of undersea fiber optic-based communications networks. Proposed research should investigate innovative approaches that enable revolutionary advances in science, devices, or systems. Specifically excluded is research that primarily results in evolutionary improvements to the existing state of practice.

This solicitation seeks proposals for an initial fifteen month phase (Phase 1) of the Tactical Undersea Network Architectures (TUNA) program. Performers are sought for the following Technical Areas (TAs):

TA1. System designs
TA2. Small undersea fiber optic cables
TA3. Buoy node systems.

from Federal Business Opportunities https://www.fbo.gov/index?s=opportunity&mode=form&id=ace0dc74e3f5c7819d49ce2f8a9307de&tab=core&_cview=0, Apr. 17, 2014

The Fate of Radioactive Waste from Oil Drilling

oil platform

Scotoil Services Ltd, a company which disposes of radioactive waste from the North Sea oil industry, inadvertently pumped dangerous particles into Aberdeen Harbour over several months.  The pollution included materials such as lead-210, radium-226 and radium-228, which both glow blue in the dark, and polonium-210, which was used to poison the former Russian spy, Alexander Litvinenko.  An investigation by the Scottish Environment Protection Agency (Sepa) found one “gross” breach and several “major” breaches of the firm’s operating conditions.

However, the public was never told about the leak, which continued unchecked from November 2011 until April 2012, and it also appears that the Scottish Government was not informed either.   While Scotoil had installed equipment to remove solid material from their liquid effluent, in April 2012, they informed Sepa that a final filter they were using had potentially failed Sepa said in a statement.  

Scotoil has long been at the centre of concerns about radioactive particles washing up on the southern end of Aberdeen Beach, known as Foot Dee.  Drilling for oil and gas causes Naturally-Occurring Radioactive Material (NORM) to build up on offshore equipment – an estimated 50 to 100 tonnes each year from the North Sea alone.  For years, Scotoil and other operators could allow small particles of NORM to be discharged into the sea with the water they used to clean the drills and other pieces of essential kit.

However, tighter restrictions brought in from October 2011 mean that all particles must now be screened out and sent to secure landfill sites in sealed drums, along with the bulk of the solid waste.  Following a Freedom of Information request by this newspaper, it emerged that Sepa became aware of the potential Scotoil leak in April, 2012.  The company contacted Sepa to report “that particles of NORM have been discharged in their liquid effluent to the marine environment… Scotoil’s view is that the filters failed allowing the solid material into the environment”.

Excerpt  from, Ben Borland, Scots kept in the dark over radiation leak into harbour at Aberdeen, Scottish Express, Apr. 26, 2014

The Equinet: decentralization v. enclosure of internet

Internet, image from wikipedia

“The Internet governance should be multilateral, transparent, democratic,and representative, with the participation of governments, private sector, civil society, and international organizations, in their respective roles. This should be one of the foundational principles of Internet governance,” the external affairs ministry says in its initial submission to the April 23-24 Global Multistakeholder Meeting on the Future of Internet Governance, also referred as NETmundial, in Sao Paulo, Brazil.  The proposal for a decentralised Internet is significant in view of Edward Snowden’s Wikileaks revelations of mass surveillance in recent months.

“The structures that manage and regulate the core Internet resources need to be internationalized, and made representative and democratic. The governance of the Internet should also be sensitive to the cultures and national interests of all nations.”The mechanism for governance of the Internet should therefore be transparent and should address all related issues. The Internet must be owned by the global community for mutual benefit and be rendered impervious to possible manipulation or misuse by any particular stake holder, whether state or non-state,” the ministry note says.  NETmundial will see representatives from nearly 180 countries participating to debate the future of Internet…

The US announced last month of its intent to relinquish control of a vital part of Internet Corporation for Assigned Names and Numbers (ICANN) – the Internet Assigned Numbers Authority (IANA).  “Many nations still think that a multilateral role might be more suitable than a multistakeholder approach and two years back India had proposed a 50-nation ‘Committee of Internet Related Policies’ (CIRP) for global internet governance,” Bhattacharjee added.

The concept of Equinet was first floated by Communications Minister Kapil Sibal in 2012 at the Internet Governance Forum in Baku, Azerbaijan.  Dr. Govind, chief executive officer, National Internet Exchange of India, is hopeful that Equinet is achievable. “Equinet is a concept of the Internet as a powerful medium benefiting people across the spectrum. It is all the more significant for India as we have 220 million Internet users, standing third globally after China and the US.”  “Moreover, by the year-end India’s number of Internet users are expected to surpass that of the US. The word Equinet means an equitable Internet which plays the role of an equaliser in the society and not limited only to the privileged people.”

He said the role of government in Internet management is important as far as policy, security and privacy of the cyber space is concerned, but the roles of the private sector, civil society and other stakeholders are no less. “Internet needs to be managed in a more collaborative, cooperative, consultative and consensual manner.”  Talking about the global strategy of renaming Internet as Equinet, he said: “Globally the US has the largest control over the management of the Internet, which is understandable since everything about Internet started there. Developing countries have still not much say over the global management of the Internet. But it is important that the Internet management be more decentralised and globalised so that the developing countries have more participation, have a say in the management where their consent be taken as well.”  The ministry note said: “A mechanism for accountability should be put in place in respect of crimes committed in cyberspace, such that the Internet is a free and secure space for universal benefaction. A ‘new cyber jurisprudence’ needs to be evolved to deal with cyber crime, without being limited by political boundaries and cyber-justice can be delivered in near real time.”

But other experts doubt the possibility of an Equinet or equalising the Internet globally.  Sivasubramanian Muthusamy, president, Internet Society India, Chennai, who is also a participant in the NETmundial, told IANS that the idea of Equinet is not achievable.  “Totally wrong idea. Internet provides a level playing field already. It is designed and operated to be universally accessible, free and open. Internet as it is operated today offers the greatest hope for developing countries to access global markets and prosper.”  “The idea of proposing to rename the Internet as Equinet has a political motive, that would pave way for telecom companies to have a bigger role to bring in harmful commercial models that would destabilize the open architecture of the Internet. If India is considering such a proposal, it would be severely criticized. The proposal does not make any sense. It is wrong advice or misplaced input that must have prompted the government of India to think of such a strange idea,” he said.

Excerpt from India wants Internet to become Equinet, Business Standard, Apr. 20, 2014

Connectivity to the Masses: Satellites for Africa

o3b satellites africa

Africa’s demand for bandwidth is doubling every year, outpacing the laying of terrestrial telecom fibre links and encouraging commercial satellite operators to launch more units into orbit.   The arrival of submarine cables on Africa’s eastern shore just five years ago (see e.g. Eastern Africa Submarine Cable System (EASSy)) was largely expected to herald the end of satellite connections, which had been the region’s only link to the outside world for decades.  But the opposite is happening with Africa’s political geography – notably its many landlocked countries, such as Zambia, South Sudan and Rwanda – bringing undersea cable plans back to earth.

“If you are to provide connectivity to the masses, fibre is not the way to do it. Do you think that it would make economical sense to take fibre to every village in Kenya?” said Ibrahima Guimba-Saidou, a senior executive for Africa at Luxembourg-based satellite operator SES SA “Satellite is still around and will continue to be around because it’s the best medium to extend connectivity to the masses.”  Hundreds of millions of people on the continent still have no access to the Internet, he said….

SES, one of the world’s largest commercial satellite operators, expects to launch its Astra2G satellite in 2014 after sending three others dedicated to Africa into orbit in the last year. Nine of its 56 satellites orbiting the earth are allocated for Africa.  Europe’s biggest satellite operator Eutelsat plans to fire off its tri-band EUTELSAT 3B this month after launching another to extend sub-Saharan Africa coverage in 2013.

The demand for Internet and data services in Africa has been driven by affordable mobile broadband connections. Mobile broadband users could grow by nearly eight times to 806 million by the end of 2018, according to Informa estimates.  New services such as digital television, onboard Internet connection for passenger aircraft, and delivering education and health services electronically will also drive demand.

The private sector has several initiatives to extend the capacity from submarine cables inland using terrestrial cables, but until that bottleneck is addressed, satellite operators are innovating to plug that black hole. One operator, O3B, or Other 3 Billion, has launched four of the next-generation medium earth orbit (MEO) satellites and plans two other launches in 2014 to make an orbital constellation of 12.  At a height of 8,000 kms (5,000 miles), the MEO units allow for faster speeds than traditional stationary satellites at 36,000 kms.  O3B’s tests have delivered capacity five times better than what traditional satellites can manage, making its technology suitable for both voice and interactive applications, said Omar Trujillo, vice president for Africa and Latin America….”A lot of applications for mining, oil and gas, will continue to be done by satellite,” he said. “The main market may not be international links for Nairobi or Johannesburg but will be communication for some of these remote areas that have had very low demand before, but now have fast-growing demand.

Excerpts from Helen Nyambura-MwauraAFRICA INVESTMENT-Africa’s hunger for data sends satellites into orbit, Reuters, Apr. 17, 2014

Nuclear Energy in the Gulf: a response to Iran

IAEA's  Amano wiht UAE Hammadi

Fuelled by rising energy demand and depleting oil and gas resources, nuclear energy has gained strong momentum in the GCC, particularly in countries like the UAE.  The country has lofty ambitions to generate up to 25 per cent of its electricity needs – or 5.6GW – through nuclear means by 2020.  Abu Dhabi began construction of its first nuclear reactor, Barakah 1, in July 2012, and it is in the process of building three more plants.  Emirates Nuclear Energy Corporation, the body responsible for the project, announced in February 2014 that the first two plants are on schedule and are up to 35 per cent complete.

Barakah Unit 1 is scheduled to enter commercial operations in 2017 while Unit 2 is scheduled for operations in 2018, pending regulatory approvals. The third and fourth units are slated to begin commercial operations in 2019 and 2020 respectively.  Lady Barbara Judge, a member of the UAE nuclear programme’s International Advisory Board and former chairman of the UK’s Atomic Energy Authority, says she is confident that the programme will be recognised as the best new built nuclear power project of the century.

“The UAE has a ruler who is very stable and who is very interested in the diversification of energy supply, it doesn’t have the political problems that you have in other countries, it understands the planning process about where to put the power plant, it has got good sites, it has an independent regulator and the country is building schools to develop skills and training among locals,” she explains.

Along with the UAE, another Gulf country that is actively pursuing a nuclear programme is Saudi Arabia.  The Kingdom’s nuclear ambitions are substantially larger. It hopes to become the Middle East’s largest nuclear power producer over the next 20 years at an estimated cost of roughly $100 billion, with plans to build 16 nuclear power plants that will generate 17.6GW of power progressively to 2032.  Saudi’s King Abdullah City for Atomic and Renewable Energy (Ka-Care), which focuses on energy diversification, has set up an independent regulator, the Saudi Arabian Atomic Regulatory Authority, to oversee the Kingdom’s civil atomic energy programme.   Ka-Care is also in the process of creating the Nuclear Holding Company to serve as the private sector arm of the Kingdom in designing and operating nuclear power plants and research reactors.  Saudi Arabia has signed nuclear cooperation agreements with several countries including Japan, France and Jordan with Ka-Care negotiating with Russia, Czech Republic, UK and the USA for “further cooperation.”

The country hopes to call for preliminary bids for its first nuclear reactor in 2014, say officials. Construction on the first reactor is expected to begin in 2017 and is slated for completion by 2022.  Similar to the UAE, the Kingdom has a stable government, huge coffers and vast land slots – all extremely suitable for nuclear power generation, opines Lady Judge.

However, nuclear energy may not necessarily be the best option for the GCC region, states Mohammed Atif, area manager, Energy Advisory, Middle East at DNV GL – Energy.  “A reasonable diversification of fuels is always beneficial for a region in order to reduce risks and price volatility,” he says…..“Nuclear power plants generally tend to generate electricity only, whereas the GCC is accustomed to co-generation where power plants generate electricity and also desalinate water. Unless the system adopts nuclear technology which incorporates desalination technology, then a challenge remains in terms of ensuring sufficient desalination capacity.”

An Oxford report on nuclear power production in the GCC published in December 2012 also pointed out that nuclear power generation could prove an expensive option for GCC states.  “The substantial initial investment costs, coupled with the high expected level of long run variable costs, is unlikely to render nuclear power cost effective vis-à-vis conventional oil and gas fired power plants in the region,” it says.  The existing absence of cost-recovering power tariffs throughout the GCC already renders effective cost recovery for nuclear power unlikely, implying a substantial bill in the form of nuclear power subsidies to be picked up by GCC governments.”  There are also other hidden costs, such as national and regional security concerns and the future disposal of nuclear waste.

“And the acquisition of nuclear technology by GCC states, albeit for civilian purposes, provides fuel to those critics of nuclear power in the region who fear a nuclear arms race in the Gulf should Iran pursue a nuclear weapons programme in the future.  “All these concerns make nuclear power a potentially costly option for the GCC,” the report cautions.  While initial costs are sizeable, Lady Judge believes that they can be recovered during the long-life of nuclear plants – estimated at around 60 years. She also affirms that energy subsidies are bound to fall away.

Excerpt from Aarti Nagraj, Nuclear Power: Boon Or Bane For The GCC?, Gulf Business, Apr. 19, 2014