© 2018 by Robert Person.  The views expressed on this website are my own and do not represent the official policy of the U.S. Army, Department of Defense, or U.S. Government.

Mar 26

Exxon's talks to tap Algeria shale gas falter due to unrest (Reuters)

0 comments

 

 

With a global boom in natural gas, companies and countries alike are looking to cooperate to strike a lucrative deal. Recently, ExxonMobil has engaged in talks with the Algerian government on acquiring the rights to develop a shale gas field in Ahnet basin, negotiating with both the government and the state-owned oil company, Sonatrach. However, these talks have stopped because of political unrest in the country, where protests against the sitting president (President Abdelaziz Bouteflika) have raged for a month. With ExxonMobil backing out, this is another loss for the Algerian government and Sonatrach, who have searched for multiple foreign to invest in and develop its gas and oil reserves. As political conditions deteriorating, it appears as if economic conditions may soon follow.

 

 

If they were able to make a deal, ExxonMobil's investment into Algeria could have helped the regime improve its political stability. With an economy dominated by oil and gas, Algeria has a natural resource at its disposal that can bring in massive amounts of wealth. However, in order to get these rents, Algeria needed foreign direct investment from ExxonMobil. Should the deal have panned out, ExxonMobil would have pumped in big investments into Algeria, and it would have created administrative and technical jobs that would give experience and industry-specific knowledge to Algerians, who could then use their skills to help Sonatrach. The improved economy from a developed oil industry would fund the government handsomely; however, this funding in lieu of taxes creates a rentier effect, which may worsen the already poor political conditions. Should the political situation improve in Algeria, it may be likely that ExxonMobil or another foreign investor attempts to invest in the state, as they have important locational advantages, such as a wealth of oil and proximity to Europe's largest Mediterranean ports. Until Algeria creates political stability, though, it is unlikely ExxonMobil or any foreign oil company will seriously consider FDI in Algeria.

 

https://www.reuters.com/article/us-algeria-protests-exxon-mobil-idUSKCN1R11G8

New Posts
  • In his article for Foreign Affairs David Cohen talks about the Trump administration's policy towards sanctions. He talks about how the conditional sanctions the Trump administrations has placed on Iran and now Venezuela will be ineffective because the changes the administration is trying to coerce will essentially mean regime change for the two nations. Cohen goes on to state that these will be ultimately ineffective because the relative cost of the sanctions is lower than the cost of losing power. This means that the leaders of Iran and Venezuela are more willing to bear the pain of the sanctions than lose the regime. This goes along with the lesson we had on sanctions in a couple of ways. First we learned that sanctions are used either as a method of deterrence or coercion. This means that the sanctions inflict financial and economic pain to make the target of the sanctions take or not take an action. These sanctions are meant to cause political changes that will in essence mean a change of regime which is why they will fail. They are effective in causing pain; however, there is not enough sanctions in the world to make it worth losing power. Article link: https://www.foreignaffairs.com/articles/united-states/2019-04-29/sanctions-cant-spark-regime-change
  • https://www.nytimes.com/2019/05/09/us/politics/china-trade-tariffs.html Just before a scheduled round of trade negotiations began on Friday, President Trump announced that he was still going to levy additional tariffs on Chinese imports valued at approximately $250 billion. President Trump claimed that these tariffs would bring billions of dollars back to US manufacturers, but the main focus seems to be inflicting pain on China, as opposed to bringing prosperity to the US. China and the US have not been able to reach an agreement that would minimize or end outright the "trade war" between the two, which stems from the Trump Administration's belief that China is not doing all it can to protect American investments and intellectual property in China, as well as the belief that a large trade deficit with China is inherently bad. The Trump Administration's use of tariffs as a negotiating tool is inelegant, but effective. Unilateral tariffs immediately affect the Chinese export industry, whose products become less competitive in US markets. While this inflicts pain on Chinese exports, whose largest market is the US, it also affects US consumers, who have to pay higher costs for consumer goods. Additionally, because China retaliates with target tariffs (on politically-relevant goods like Kentucky Bourbon and soybeans from the Heartland), US exporters are equally hurt by the trade war. The only immediate winner is the US, who collects revenue from the applied tariffs; however, long-term, US domestic industry should improve, as they will become more competitive when Chinese imports are more expensive. Slowly, we are starting to see this happen: Dan DiMicco, the chairman of a lobby group "Coalition for a Prosperous America," explained that American manufacturing is already experiencing gains in their domestic market shares.
  • https://www.washingtontimes.com/news/2019/may/8/feds-release-168k-illegal-immigrant-family-members/ In Stephen Dinan's article in the Washington Times, he explains the unforeseen immigration due to illegal border crossings. ICE border patrol has released 168,000 illegal immigrant family members this fiscal year, and the number is expected to increase as the border situation increases in volatility (Dinan). Dinan reports that 87% of families in this new pilot program skip their court hearings, and with an ill-equipted government to track them down judges deport them in absentia (Dinan). Dinan argues that this increase in illegal immigration in family units is caused by a 2015 court ruling that stated parents who travel with children must be released in 20 days. Since this is too little time try them in court, the families are set free (Dinan). This article is very relevant to this block in IPE as it highlights a crucial phase that the world is going through. As policies towards free and open borders begin to gain more and more traction, we can expect the number of border crossings into the country to continue. As we talked in class, this may actually be a good thing for the economy, as low skill labor is substituted due to a higher rate of college attenuation and graduation. Dinan says that most migrants interviewed are not criminals, they are just seeking jobs, and know that if they bring children they will find asylum in the US (Dinan). One of the unintended consequences is that some of these migrants are being used to smuggle drugs and weapons into the country, and in some extreme cases, children are being sold to impersonate children of felons migrants of south american countries to gain access with ease. As globalization brings countries closer together and as the trend for free an open borders continues incentivizing cheap labor, it will be interesting to see the effects of these policies 10-15 years in time.