Daily Sources 9/8

1. The Tel'nik has an interesting piece on the Friday meeting of the Collective Security Treaty Organization (CSTO) in Moscow last Friday. Although Armenia appears to support Moscow's version of the Georgia conflict narrative, they are uncomfortable with the recognition of South Ossetia and Abkhazia as independent regions, given Nagorno-Karabagh. I'm not clear on how this plays out, as Nagorno-Karabagh is a breakaway region of Azerbaijan, with an ethnic majority of Armenians, and basically under the military protection of Armenia, which would lead you to think Armenia would be gung-ho regarding the independence of South Ossetia and Abkhazia ... but it is a complicated region.



2. Jamey Keaten at the Associated Press has the story that President Medvedev has pledged to remove all Russian troops from Georgian territory once EU monitors arrive later in the month.

3. Michael Abramowitz at the Washington Post has the story that the Administration is going to pull from Congressional consideration a nuclear deal with Russia which would have facilitated cooperation between the Russian and American nuclear industries and allowed Russia to import spent nuclear fuel from the US. The deal was signed 4 months ago in Moscow, but the conflict in Georgia means it is unlikely that it would be agreed to in Congress.

4. AP reports that on Sunday Chavez announced upcoming joint maneuvers with Russian warships in late November or December. A Russian Foreign Ministry official confirmed today that this might take place.

5. Kaveh L Afrasiabi has an interesting analysis of the Georgia conflict written as if from the Azeri perspective in the Asia Times. The bit on the never-ending negotiations regarding the status of the Caspian, and how that would seem to put the kibosh on certain pipeline plans, is a fair explanation.

6. Thomas Grove and Orhan Coskun at Reuters have a piece on Turkish efforts to increase Azeri gas exports to the country, given the unreliability of Iranian supply and increased tensions with Russia as Turkey works to maintain good relations with Moscow and meet its NATO obligations. Currently Turkey imports about 6 billion cubic meters of natural gas annually from Azerbaijan's Shah-Deniz field and Hilmi Guler, the Turkish Energy and Natural Resources Minister, is flying today to Baku where he is expected to repeat a request that Turkey import 8 billion cubic meters annually for domestic consumption. Shah-Deniz is estimated to have reserves of 1.2 trillion cubic meters of natural gas and 1.75 billion barrels of condensate. The stakeholders in the project are: BP (25.5%), Norway's Statoil (25.5%), the State Oil Company of Azerbaijan or SOCAR (10%), Russia's Lukoil (10%), Iran's oil trading company NICO (10%), France's TOTAL (10%), and the Turkish Petroleum Corporation or TPAO (9%).



7. Following last Tuesday's news that the Iraqi cabinet has paved the way for CNPC to develop the Al-Ahdab oil field, comes the story by Ahmed Rasheed and Tim Cocks at Reuters that Shell should close a deal by the end of the month to develop natural gas in the southern Basra province.

8. ZAMIN writes that the Supreme Islamic Council of Iraq--a key Shia political organization in Iraq--has announced in Tehran that the Mojahedin-e Khalq [MKO] has been given notice that it has 6 months to remove its members from Iraq. ZAMIN notes that the US has a "vested interest" in the MKO and that we have taken a lead role in guarding their compound in Ashraf, which is in Diyala province. I am not clear as to what the American vested interests are, but it is clear that the US is probably the only organization which could be trusted to provide security for them.

9. Emily Wax at the Washington Post has an interesting story on the potential of a trading route being opened between Kashmir and Pakistan, after protesters have closed down the routes from the region to the rest of India.

10. Ariana Eunjung Cha at the Washington post has another interesting story on how the energy shock is making Chinese--or any distant--manufacturing economically unattractive. Expensive transportation fuels means for a smaller mass market, which would be a feedback loop all its own. It looks like OPEC might try to defend $100/b, but Saudi Arabia is key and have said in the past that $100/b is too high. Even at $80/b the basic emerging markets economies business plan needs to be re-examined.

11. The Wall Street Journal has an op-ed by John D. Shages, former deputy assistant secretary for petroleum reserves at the Department of Energy, lauding Barack Obama's plan to make the grades of crude oil in the Strategic Petroleum Reserve match the sophistication of American refining capacity. Whew. OK ... 40% of American refining capacity is sophisticated enough to profitably refine heavy complicated grades of crude oil. The SPR holds nearly only light sweet crudes, which are easy to refine. The plan is to exchange a good portion of the SPR's light sweet holdings for heavier crudes. The difference could be captured monetarily, as in money back to the Government and perhaps taxpayers, or by getting a larger volume of the heavier crudes in return for a smaller volume of light sweet, thus growing the emergency capabilities of the SPR. Probably a good idea. (Interesting to see the WSJ back an Obama plan, too.)

12. Hurricane Ike's 5 day track, as of 5pm EST Monday, courtesy the NOAA:

Daily Sources 9/4

1. Jihadica has a very interesting piece on a report from the Ingush Mujahidin which details successful tactics in their conflict with the Russians. (The Republic of Ingushetia is just between Chechnya and North Ossetia in the Caucasus.)



The report talks of the centralization of the mujahidin efforts in the Caucasus, and, apparently, the Dagestani and Chechen Fronts both released reports recently alluding to the same phenomena. (Dagestan is to the east of Chechnya, on the littoral of the Caspian Sea, just north of Azerbaijan.)



This, in Jihadica's view, means that there might be some credibility in the FSB's (formerly the KGB) warning of imminent al-Qaeda attacks. This underscores my view that Russian interests are much closer to the West's than the press--and several Senators--would have it. Russia has little interest in establishing a precedent for "self-determination" in the region, but also has no interest in establishing a precedent of allowing Russia-identifying groups be attacked, with impunity, by other self-identifying groups, such as Georgians. Russians constitute an ethnic minority in many of the countries in the former Soviet Union and that is a potent political issue that Medvedev and Putin cannot allow to get out of control. For a sense of the ethnolinguistic complexities of the region we're talking about, see the following map:



2. Steven Lee Myers and Alan Cowell at the New York Times write that Cheney has reaffirmed US support for Georgian membership in NATO.

3. David Jolly at the New York Times writes that BP has reached a compromise regarding the leadership of TNK-BP in Russia, where the current CEO would be replaced by the end of the year with a Russian-speaking candidate with extensive Russian business experience. The parties also tentatively agreed to placing 20% of TNK-BP shares in an IPO, pending Moscow's agreement.

4. Alex Lawler at Reuters reports that PFC Energy thinks that pressure is building within OPEC for production quota reduction. (Evidently meeting on Tuesday, September 9, not the 6th, as I've previously noted ... my bad.)

5. Turns out that Brazil has not officially turned down OPEC invite, Brazil's National Energy Policy Council has the final word on the membership, as per BBC.

6. Joshua Partlow and Juan Forero at the Washington Post have an interesting piece on the United States closing a military base in Ecuador. Ecuador recently rejoined OPEC and its current President is a close ally of Chavez's. A war nearly broke out between Colombia and Ecuador--with Venezuela mobilizing its troops for good measure--not so long ago.

7. Bursa Malaysia is set to launch a crude palm oil futures contract denominated in US dollars this Friday, as per Reuters. (Interesting given all the talk of moving away from dollars in the oil and financial industries.)

8. Yves Smith at Naked Capitalism writes that the CFTC appears to believe that oil traders have been under-reporting inventory and tanker information. This is very interesting because the folks that the "anti-speculation" legislation currently under consideration in Congress goes after are the non-commercial players, i.e., the people who do not have to report these numbers. Those players would be the commercial players, those not considered "speculators." Pretty clear this evil speculation rhetoric was nonsense from the beginning, but just so you know.

9. Co-Chairman of the Pakistan People's Party and Pakistani Presidential Candidate Asif Ali Zardari has an op-ed in the Washington Post today. He writes that it is "essential" that the judiciary be reconstituted, but apparently he is against the reinstatement of Supreme Court Chief Justice Chaudry, the rallying point for the lawyers revolution in that country.

10. In a nice bit of irony I missed until just now, the first company to request a release from the Strategic Petroleum Reserve due to Gustav as per Christian Schmollinger and Tina Seeley at Bloomberg was Citgo, or PdVSA (Petroleum de Venezuela S.A.). In a moment the DOE must have relished, the USG immediately agreed to help via a release from the SPR. The next day, Citgo lets the DOE know it has met its requirements via other means.