10 March 2022

The price of powering civilisation

The crisis in Ukraine and the growing embargo on buying oil and gas from Russia is, of course, creating the greatest crisis in energy since 1979. A crisis over half of the population has never experienced, and it is exposing in clear view the irrationality of energy policies in many countries from the past couple of decades.

Until recently the history of energy policy for humanity has been largely driven by a mix of scientific discovery and innovation, and market demand. As the late Julian Simon once wrote, humanity moved from using wood as a primary source of energy, towards coal in the 18th and 19th century (which saved many remaining forests in Europe from decimation), and then towards oil in the late 19th/early 20th century because of price and capacity.  This also paralleled the rise of electricity, largely generated by burning coal, oil and gas (but also some locations, like New Zealand and Norway, benefited from geography and geology enabling hydro). Nuclear emerged in the mid 20th century, but has been constrained to electricity generation (in jurisdictions not taken over by fear, resulting from hyper-catastrophising) and naval propulsion. 

As the world has become ever more electrified, the demand to generate electricity has been fed primarily by fossil fuel burning, albeit the efficiency of this has grown exponentially. The energy intensity of refined fossil fuels has meant their portability literally enabled aviation to become not just viable, but the dominant means of long distance passenger transport, consigning long distance intercontinental rail travel in the United States and Canada to leisure trips.

The economic impacts are palpable, and all of the rhetoric and hysteria from environmentalists about the evils of fossil fuels ignores what they have enabled in the standards of living for billions.  Goods, services, trade and travel are on the scales they are today because of this.

The push to slow down the effects of climate change has resulted in policies that are almost monomaniacally focused on cutting CO2 emissions at any cost. Sure, there are sound reasons to be encouraging a transition towards energy sources that create fewer emissions that contribute to climate change, but there is little point being concerned about climate change if thousands of people literally freeze to death in winter, or starve due to collapses in food production, or the inability of essential goods to be transported long distances. 

So when tyrannies control much of the energy that powers global economies, and the risks of actually going to war with them to stop their aggression are too high (due to the aggressor's possession of nuclear weapons), then cutting off access to that energy has a price, and you're paying it at the pump.

What the crisis in Ukraine has exposed is how utterly vapid and empty the likes of misanthropes like Extinction Rebellion and other environmental extremists are, because there is no easy path away from fossil fuels.  As wonderful as advances in solar and wind energy are, they still have some significant limitations.  Both require significant storage capacity to be sustainable and useful in their own rights, completely unlike fossil fuel or nuclear generated electricity.  Moreover, for most transport, fossil fuels (or biofuel equivalents) have no cost effective or feasible rivals, yet, for aviation, shipping or heavy road freight transport, or indeed many industrial processes like steel production.

One question New Zealanders might ask is what position the country would be in regarding oil and gas supply if the Ardern Government hadn't stopped enabling new exploration of oil and gas in 2017.  Removing this ban today would have no effect, as it takes years to invest, explore and gain any results, but had it happened in 2017, then there might have been a contribution to global supply. The Ardern Government has deliberately decided to constrain supply of oil and gas, not on economic grounds, not even considering national security, but to virtue signal.

The Ardern Government advanced a radical approach to climate change policy, not just to make a contribution equivalent to NZ's largest trading partners, so NZ would be in-step with those it competes with, but to virtue signal.  To cut net emissions by 50% by 2030 is not going to make a measurable difference to climate change at all, but it is all about Ardern and Shaw looking good on the international stage.  

Yet the oil and gas exploration ban does absolutely nothing to contribute to that, at all.  

The wisdom of the US in enabling unconventional oil and gas exploration has disconnected it from being too concerned about oil and gas from Russia (and the Middle East).  

Germany too, with its Green Party Climate Change Minister advocating a natural gas national reserve and to keep coal fired power stations available for energy security, is learning the value of reliable supply. 

New Zealand, on the other hand...

08 March 2022

NZ's Russian sanctions a step forward, but it's far too constrained

The Russia Sanctions Bill is welcome, but one big questions has to be asked. 

Why only have sanctions that can be applied to Russia including those backing Russia (like Belarus)? Why can it not be generic to enable sanctions against any state that egregiously invades another that is either a Permanent Member of the UN Security Council or an ally of it? The People's Republic of China is the obvious example, but it is entirely possible that China or Russia might veto sanctions against the DPRK, or Iran, or Syria. 

Sure, it is complicating that the People's Republic of China has quite a free trade agreement with New Zealand, but is the Ardern Government that enamoured with the UN Security Council that it wont empower itself to impose sanctions at little notice in the event of a similarly attack elsewhere.

Is it not more powerful to have an autonomous sanctions bill that can be applied as required? 

Hopefully this legislation will get passed quickly and NZ can join the rest of the civilised world in sanctioning the Russian state, Russian politicians and businesses.  However, the entire performance over this shows how weak willed and morally unsure the Ardern Government is when facing real aggressive war, especially when it tries to show off how much it wants "disarmament" with Minister Twyford.

Nearly a year ago he made a speech about disarmament.  It's so utterly full of vapid platitudes that are almost sickening:

It would be comforting to think that, thanks to our rebelliousness in the 80s, and our relentless global advocacy ever since, nuclear weapons were no longer a threat to everything we hold dear.

Do you seriously think that NZ's anti-nuclear policy has had a remote impact at all on reducing the threats of nuclear war? 

How about this:

Youth are the ones whose futures are stolen by the countless billions of dollars spent on weapons every year that could be invested in health, education, and environmental protection if we had a more peaceful world.  

Well I think there are millions of youth in Ukraine who right now wish that much MORE was spent on their defence. Do serious people think defence spending occurs in a vacuum? Most of Europe has benign relations with war unthinkable, but that wasn't achieved by peace activism, it was achieved by having a continent of open free liberal democracies with mutual interests.

The rest of it is nice hippie like platitudes, but that is all. It's utterly without value, and offers nothing to confront those who regard human life as expendable. The value of peace is very little if you don't value freedom and the autonomy of people to be free from aggression.

and NZ does next to nothing to deter aggression, anywhere.



07 March 2022

New Zealand's foreign policy signals virtually no virtue

The war on Ukraine and more specifically the war on Ukrainian people is heart-breaking, revolting and has rightfully appalled most governments around the world. The response of many countries have been wide ranging sanctions. The Financial Times summarises many of them imposed by the US, UK, EU and other Western countries like Canada and Japan including:

  • Travel bans and asset freezes for Russian and Belarus politicians and officials
  • Bans and sanctions on banks, including prohibitions on trading and borrowing by financial institutions
  • Bans on Russian companies raising finance and bans on trading with major Russian companies
  • Restrictions on technology exports, including aerospace and telecommunications 

Australia has imposed its own series of autonomous sanctions, including banning exports of oil exploration technologies, prohibiting financial institutions from providing credit or loans to Russian financial institutions, military or petroleum companies. 

Even scrupulously neutral Switzerland has imposed asset freezes on certain Russian individuals. 

How about New Zealand? The Wall Street Journal has highlighted it for shame.

Well it has done the following

  • a travel ban on Russian officials "involved with the invasion" (even though none could ever travel to New Zealand under current rules that prohibit entry to NZ for non-permanent residents/citizens without specific visas)
  • Prohibit exports to Russian military and security forces
  • Suspended bilateral foreign ministry consultations.

It's literally pathetic. Now the Government has since announced it will be looking to pass legislation to go further, but given NZ's foreign policy is awash with virtue signalling, this looks very much like very little virtue at all.  The constant declaring of what they might be thinking of doing is par for the course for this government led by someone who wants global acclaim.

Look at two of NZ's virtue signalling foreign policies:

  • Anti-nuclear policy: This has achieved absolutely nothing to enhance the peace and security of NZ or anywhere else in the world. However, it is the height of virtue signalling against the US, UK and France.
  • Climate change policy: NZ's contribution towards reducing climate change has infinitesimal impacts, but the Ardern Government wants to be "leading" global commitments to reduce climate change, regardless of the economic cost. It's a showcase designed to encourage others to go further, rather than to simply follow in concert with NZ's major trading partners, but in actual impacts it is almost "net zero".

Yet when a nuclear-powered sovereign state attacks another sovereign state, NZ is found wanting. Of course the Government rejected Gerry Brownlee's bill for multiple reasons.  Minter Ellison Rudd Watts gives various reasons for it being rejected.  

It concluded that "it is likely that the specific regime proposed would have achieved little more than political signalling (and some counter-productive signalling at that)". Yet that has been at the forefront of so much foreign policy to date.  The "counter-productive signalling" is being able to act outside multilateral organisations, but this is exactly what the problem is today. A Permanent Member of the UN Security Council is waging war, and multilateralism wont address this, as much as well-meaning NZ lawyers might think this is "counter-productive" they aren't likely to be victims of war waged by Russia, or indeed China. (Note the lawyers call Ukraine "the Ukraine", unfortunately). 

However the lawyers mainly opposed it because "if passed, the Bill would certainly have further complicated the regulatory compliance obligations of New Zealand exporters, importers and trade facilitators".  Do they seriously think Ministers would impose sanctions in some manner that doesn't take into account the impacts on those trading and investing in sanctioned countries? How is this remotely different to NZ having to impose sanctions mandated by UN Security Council Resolutions?

I'm not going to say Brownlee's Bill was perfect, but its timing deserved more attention. It certainly shouldn't have been rejected because moral equivocating Marxists like Teanau Tuiono think it might create "further risk of politicisation of sanctions rather than fairness and equity" (code for sanctions on regimes he quite likes). 

Now NZ sanctioning Russia would largely be symbolic, but it is also about plugging gaps in the global financial and trading system.  The New Zealand Dollar is apparently the tenth most traded currency in the world, so NZ does actually need to plug the risk that it will be used to subvert sanctions from other jurisdictions.  Fonterra has already announced it is suspending exports to Russia. 

Russia takes 0.49% of NZ's exports by value (27th place), slightly less than Egypt. Whereas about 0.97% of NZ's imports come from Russia (19th place), with NZ being a net importer from Russia. The main export is dairy products, the main import is oil products. 

There is no good reason to hesitate. If Switzerland... SWITZERLAND... which until recently refused to join the United Nations in order to remain neutral, can impose sanctions quickly, so can New Zealand.  

To say it can't do it quickly is of course a nonsense. The Ardern Government has demonstrated that when it sees urgency, it gets legislation drafted and passed under extraordinary urgency when it wants, and did so for Covid 19. It could get legislation drafted and passed in the coming week if it wanted to.

The difference is that the Ardern Government didn't plan to have to deal with actual war, war that shows the limits of the United Nations, war that was predicted for weeks in advance.  

It really does need to join the rest of the world, and quickly.

04 March 2022

The purpose NATO exists for should be abundantly clear - the future beyond Ukraine is a new Cold War

During the Cold War, NATO was to the West what the Warsaw Pact was to the communist bloc. Both sides faced off at the Iron Curtain. So when the Cold War ended, and the Warsaw Pact dissolved (mostly because once the jackboot of the Red Army had been removed, most eastern European states were full of citizens that just wanted to be liberal democracies), the question was raised as to why should NATO still exist?

Francis Fukuyama's "End of History" was proclaimed, President Bush proclaimed a New World Order, after the UN Security Council endorsed collective action to expel Iraq from Kuwait. The new Russia was, in fact, a liberal democracy, had dismantled its centrally planned economy, and was now working with Western countries. Sure there was still tension and rivalry in the Middle East, with concerns over Iraq and Iran, the simmering Arab-Israeli dispute, and of course the Korean peninsula, but in Europe, the belief was that liberal democracy had won.

Except of course, it hadn't quite. 

The New World Order declared by Bush was no nefarious shadowy view of the international system, but one which would AT A BARE MINIMUM not tolerate one state taking the territory of another.

That is what the war to expel Iraq from Kuwait was about, and it is why Saddam Hussein's regime was not destroyed at the time. The New World Order was not about regime change, it was about protecting international borders from aggression.

Much happened after that. The war in the Balkans ultimately saw NATO action to deter Serbia from engaging in genocide in Kosovo, following the genocide in Bosnia and Croatia (not all from the Serbian side of course).  Hum.anitarian intervention became an addition to the New World Order as countries were confident that international cross-border war was a thing of the past

9/11 changed all that, although the attack and overthrow of the Taliban in Afghanistan was justified as a response to the aggression of 9/11, the subsequent attack and overthrow of the Saddam Hussein regime was not. Overthrowing Saddam was a settling of old scores and an attempt to demonstrate Western military dominance against potential threats. What it did was show the West incapable of occupying and transforming a nation state without enormous loss of life, or in the case of Afghanistan, ultimately a lack of political will to pay the price in money and lives to institute government that was closer to the ideals of liberal democracies with Enlightenment values. This culminated in the weak withdrawal from Afghanistan last year

Yet Russia had already tested the limits of the New World Order a few years ago and found it wanting. Not only had Russia effectively annexed Abkhazia and South Ossetia from Georgia (which had started in the 1990s),  but the 2014 annexation of Crimea under the Obama Administration (after Obama famously ridiculed Mitt Romney in the 2012 election campaign for claiming Russia was a growing threat) showed the West was unwilling to enforce post Cold-War borders against direct aggression.

NATO expansion has been occurring, with all of the former Warsaw Pact nations now NATO members, and the three Baltic states, all of which had been invaded and occupied by the USSR during WW2. The expansion of NATO to defend former Soviet republics was deferred, not least because of concern of provoking Russia.  Both Georgia and Ukraine have wanted NATO membership, and the results of denying it are now seen in the destruction of Ukrainian cities.

As much as the Western nations will crow about economic sanctions on Russia, and much global unity on condemning Russia, it has done nothing to stem the bombardment and the growing occupation of Ukraine. As much as it is significant that Germany has finally unhooked itself from equivocating on Russia, by stopping the Nordstream 2 pipeline, Russia knows its oil and gas supplies keep much of Europe from grinding to a halt. This is predominantly due to the virtue signalling policies of the EU in energy and the environment which have stopped Europe from pursuing domestic sources of fossil fuels as an alternative, in favour of trying to save the world. Unlike the US which wisely enabled fracking, and is no longer dependent on oil from the Middle East, Europe in transitioning from coal has become reliant more on Russian fossil fuels whilst it inches towards renewables. Even more disturbing, the inexplicable decision of Germany to abandon nuclear power as a bizarre reaction to the Fukushima disaster (even though Germany neither has earthquakes or a risk of tsunami) has further weakened European energy security. Russia, of course, funded and supported anti-fracking activists.  

In the coming weeks and months there is a likelihood Ukraine will fall to Russian tyranny, without a shot having been fired by Western liberal democracies in support of the principles they are meant to be defending.  For the first time since 1968, tyranny has advanced in Europe.

Disturbing as this is, what will be just as disturbing is what the Western response has to be. A return to the clarity that an attack on NATO means war with all of NATO, which includes the risk of nuclear war.  A rearming of European countries, which means a reprioritisation of public spending towards defence, at least matching the NATO target of 2% but realistically needing to go for 3% and above. Permitting expansion of NATO to any liberal democracy that meets the conditions for membership.

It goes beyond Europe though. In the Pacific, a reassertion of the defence of Japan and South Korea, but most importantly a clear assertion by the United States that it will not stand by if Taiwan is attacked by the PRC. It must become too risky and too dangerous for the world's two largest tyrannies, Russia and China, to go any further.  The single biggest risk now is that Russia and China perceive that there wouldn't be any pushback if they go further.

It's too late for Ukraine, we got here due to weak US Presidents, and by that I mean not only Biden, but also Trump and Obama. We can speculate endlessly about whether Putin would have risked attacking Ukraine under Trump or not, and the answer is far from clear.  About all that is clear is that Trump was unpredictable, and that unpredictability was probably a deterrent, but Trump was also a man whose positions on issues was not consistent.

All that can be done now is for a firm redline to be set, by Biden, by NATO and all of its allies, that the West is willing to go to war to defend the borders of liberal democracies.  It is frightening and plenty of people politically on the far-left and right will oppose it, but it also means that Western liberal democracies need to spend more on defence, and less on virtue signalling, "rebalancing/levelling up/building back better" and to strengthen their economies to be resilient against dependence on Russia and China. Allister Heath outlined it starkly in the Daily Telegraph here:

For the first time in more than 30 years, we face a truly existential threat. Our enemy is a hostile state armed with nuclear weapons, a large conventional army and led by an empire-building psychopath: the danger to the European powers is orders of magnitude greater than the very real risk posed after 9/11 by al-Qaeda and Islamic State.

This new conflict will almost certainly be long, complex and extremely expensive. It won’t be like fighting the Taliban, or Saddam Hussein, or lone wolf actors. It will require us to relearn strategies, tactics and virtues at odds with the hyper-emotional performative stupidity and instant gratification of the Twitter era. Our elites will need to reprogramme themselves psychologically, economically and militarily, read some history, become more serious and austere, and knuckle down for a lengthy fight.

The implications for Australia and New Zealand from that are going to be stark. The easy ride of China buying so much, and selling so much back is about to come to an end.

There is some hope, but as Heath wrote:

Yes, Russia is staggeringly weak, a decaying nation with a population much less than half that of the US, and a GDP far lower than that of New York state. But it has nuclear weapons and needs to be deterred and eventually defeated. We must also send a signal to China, a country that is immensely richer and more sophisticated than the Soviet Union ever was, that the West is serious once more. This is a new Cold War, and we must urgently contain the authoritarian powers at war with liberal democracy.