Provisional transcript
Dr John Chipman
Thank you very much for that intervention. We have had a number of different positions put on the table. We would appreciate, in the discussion, the involvement of any members of the regional militaries and navies, on what their sense is of the role of their own armed forces in securing the secure passage of oil supplies throughout the region. I think it also might be useful to note that, in this age of energy and security, when there is a desire to find more energy supplies a number of the prospective or actual offshore energy and oil potentials of the region are found in areas subject to current territorial disputes. Therefore, the types of confidence-building measures that are talked about are all the more necessary if countries and the companies that are exploring oil feel that they have a security of their investment, and that they will not be the subject of territorial disputes of any kind. One or two people among our delegates may also want to give national perspectives on that point.
Participant
Thank you very much for the three perspectives on what I think is probably the most critical of the subjects under discussion. The enhanced supplies of African oil to China currently typify the transoceanic connectivity between Asia and the Pacific and actually serve to bind the region together in one fashion or another. Whilst oil pipelines are beginning to offer some alternatives to the sea lines of communication, I think that there is a long way to go. Insofar as Angola, for example, is concerned, it is now a major supplier of oil to China and has surpassed Saudi Arabia for the last several years. This oil is forced to transit one or the other of the choke points of the Indian Ocean at the hinge points between the Indian Ocean and the Pacific Ocean. Whilst the world’s attention has now for some time been on Malacca, my question to the representative from Indonesia is on whether there is sufficient surveillance available for the oil that is actually transiting through Lombok? If not, is there any scope, in your opinion, for a cooperative endeavour to firstly find out what kind of traffic is moving and then to establish the guidelines for safety and for environmental considerations etc. in these particular areas? Of course, the Strait of Malacca is an obvious one so I will not belabour that.
Dr Ellen L Frost
It is my understanding of the oil trade that oil is bought and sold numerous times when it is already in transit, so the quest for energy security by locking up supplies is illusory. My question for the speaker from Indonesia is: firstly, could you tell us whether Indonesia has resolved its conflicts with the international oil companies, which, in my understanding of these conflicts, were blocking the further exploration of offshore oil? Secondly, there have been proposals in APEC, ASEAN and elsewhere for more regional energy cooperation, perhaps an oil stockpile or an emergency sharing plan or something. I wonder if you could give us your perspectives on those issues.
Participant
My question is also for Pertamina’s Vice President Prawiraatmadja. We had a very clear understanding from you of energy security from an Indonesian point of view but yesterday we had a discussion on climate change and regional security. The problem for me is that discussions on energy security and discussions on climate change practically always run on separate tracks that never seem to connect. Energy security is seen, as you put it, in national terms; climate change is largely seen as a global problem and for many people that means someone else’s problem. How would you connect energy security with climate change concerns, recognising of course, as we all do, Indonesia’s desire to develop and aspire to developed-country living standards?
Manish Tewari
I have a question for the panel. One of the things which I find completely missing from this entire discourse on energy security is a consumer-producer dialogue. Does the panel not think that it is important to institutionalise a consumer-producer dialogue that covers the entire range of issues, some of which were raised by the representative from Indonesia in terms of demand security, access and transportation? If you look at the whole question of energy security in the Asian context, you have the producers of oil and you have the largest consumers of oil. It seems that nobody is talking to each other on an institutional level. Does the panel think that there is a need to institutionalise such a dialogue?
Professor Tommy Koh
In the interests of equity, I want to put one question to each of the three speakers. To Minister Morin, my question is about piracy. Piracy threatens international shipping, maritime trade and energy security because most of it is seaborne. It is therefore a threat to international peace and security? I thank France for raising this issue to the attention of the Security Council. Could you please amplify for the audience the French thinking behind this initiative at the UN? Is the initiative consistent with the UN Convention on the Law of the Sea (UNCLOS), with the relevant IMO conventions, and with the Treaty of Rome? In addition to consulting the other 14 members of the Security Council, will you also consult with the strait states, such as Indonesia, Malaysia and Singapore in order to ensure that the French initiative will have wide support?
I would like to thank Widhyawan Prawiraatmadja for his excellent and exemplary presentation to the meeting. Could you tell us whether or not it is true that Indonesia intends to withdraw from OPEC, as this has been reported in the media? If this is true, could you tell us what you think are some of the implications of Indonesia’s withdrawal from OPEC for Indonesia, for OPEC and for the oil industry?
My question for Minister Margelov is this: many of us in South East Asia are not well-informed about Russia and Russia’s relations with its neighbours so I am asking you to help educate me. In recent years, there have been several disputes between Russia and its neighbours over the supply of oil and, in particular, gas. The international media has reported these disputes in a way that is very negative to Russia, making it appear like a bully. I am sure that this is a mistaken impression so could you try to tell me what the facts are from the Russian point of view and persuade me that the international media did not do you justice?
Dr John Chipman
I await a politician who says that the media is always absolutely fair to them.
Ralph A Cossa
I wonder if the speakers will talk just a little bit about the role of nuclear energy in East Asia. I know Indonesia is at least examining the possibility – there are some questions about that – as are Vietnam and some other places. Does nuclear energy have a role in the future? At our Track II level in the Council for Security Cooperation in the Asia-Pacific (CSCAP) we have looked at suggestions to try to create an enrichment and enhancement-free zone in East Asia in order to remove the problems that we have seen in some other areas. I wonder if that is also on the cards and whether Russia would be open to nuclear fuel storage, creating a fuel storage central repository to help to deal with the problem of what to do with the spent fuel after the reactor has used it.
Dr John Chipman
We would be very interested in the answer to that question, not least because ten days ago the IISS in London released a 172-page dossier on civilian nuclear energy in the Middle East, examining the programmes of the 13 countries in the Middle East that between 2006 and 2007 announced initiatives to be taken in the procurement of nuclear energy, and we are about to embark on one on South East Asia, so that is something the IISS will very much be working on.
Lieutenant General Karl W Eikenberry
I have a question for Mr Margelov. If current trends in global warming continue, there is speculation that, within the next decade, the northern passage may be open to sea commerce, and further development of the high north, which is of great concern to Canada, Iceland, Scandinavian countries and your country. Could you speculate on what the implications would be for energy security should the northern passage be opened? How does that factor in to the development of Russia’s security strategy?
Participant
Ralph Cossa really raised my question. For the Minister of Defence from France, I wonder what experience and sharing of insights on non-proliferation, waste management and safe operation of nuclear technology could be brought to cooperative efforts in the Asia Pacific region?
Pierre Lellouche
I have two questions. Part of the problem we have in Europe, in terms of energy, is the constant inability of the Europeans to get their act together and have a joint energy attitude or policy with regards to suppliers and regards to Russia. It is an exaggeration of the press, but Russia is allowed to play one against the other. Down the line, in Asia, I am wondering if we will see some of that with China taking up half of the oil imports from the entire region and thereby creating enormous difficulties in some of the least developed countries in the area, such as Indonesia and the Philippines. What does this competition for resources, such as raw materials and energy, do for Asian integration? What is your assessment of the kinds of political and strategic problems in the area which will be borne out of this massive pumping by China on world resources, driving great difficulties for neighbours?
I was interested to hear my Russian colleague talk about Russia building an ‘Asia Pacific energy security network’. Can he elaborate on that? Does he have in mind joining the pipes or organising a web of pipes on Russian territory, essentially putting Russia as a central actor in the distribution of energy both to Europe and to Asia?
Professor Dr Dewi Fortuna Anwar
To follow on Mr Lellouche’s question, I have a question regarding China’s increasing investment in the energy area in Indonesia. From your perspective, does Indonesia see this simply as a business proposition or does it have wider strategic implications?
Dr John Chipman
I will come back to the panel and go through the questions. I will give them time to speak in approximate proportion to the amount of questions they were asked. Firstly, we turn to Mr Morin of France. The two major themes that were addressed to him were: could he elaborate more on the French initiative taken to the UN on piracy and the method of consultation that his country might extend to the small countries in this part of the world? Then, to reflect more on the French experience of nuclear energy and how some of that experience might be translated to this region.
Hervé Morin
On the issue of piracy: the French initiative, which incidentally operates in conjunction with that of our American friends is first, to ensure that – as I was explaining in my text – is to ensure that we are able to achieve, all the while upholding each country’s sovereignty, of course, the right to launch proceedings in territorial waters, provided that the sovereign states so agree. The idea is not to overhaul maritime law as a whole; it was already complicated enough to set up as it is. However, what we want is that now, piracy must not go unpunished. I observe that what we carried out through the operation on the Ponant is a first, in that, as far as my memory goes back, this was the first time that a State did not accept the piracy act, deeming that as soon as the hostages were recovered, all was well again. When we were faced with the operation on the Ponant, the President of the French Republic, who led the operation, wanted on the one hand, first of all, of course, that the French hostages return safe and sound, but was also fully intent on ensuring that the act did not go unpunished.
So, what we want is that, from now on, considering the difficulties involved, and in this case, we had the approval of the Somali authorities (without them, we would not have gone forward), but we feel that, if we want to ensure that piracy is truly hunted down, we have to ensure that we are able to deploy the necessary resources in order to be able to carry out operations against the pirates, in territorial waters. In addition, we have a number of discussions underway with countries that have significant Marine forces, in particular deep-sea Marines; for instance, we have discussions underway with the United States on the organisation of convoys. We are considering, for example, along the Somali coasts or in the Bab El Mondeb straits, ensuring that we are able to conduct convoys or a relatively close patrol, to ensure that the trade routes are as safe as possible. So, those are the two initiatives that we carried out jointly. We did it through the Global Food Programme, in that the French were in charge of the convoys and protection for the Food Programme in Somalia. The Swedes took over after that, if my memory serves me correctly, followed by the Dutch. Now, what we want is that there be a more specific organisation, so that the piracy, which is extremely well-organised, with significant resources, truly be able to be covered through truly international organisation.
On the second point, on nuclear energy, I am not the Minister of Energy, so I am not going to go into the details on how nuclear waste is treated. France’s position is extremely simple: it is that, when countries agree to the idea of inspections and transparency, inspections in particular by the IEA, and agree that all of the nuclear power that a country might have is under the control of international organisations, with the fullest possible transparency, we feel that the countries are entitled to civil nuclear power. We feel that the fight against nuclear proliferation must also bring us to deem that, in those same countries, as soon as they agree to comply with all of the international commitments on transparency in nuclear facilities, they should be able to use nuclear power. If we want the world to be able to develop and develop without contributing to global warming, we feel that all of the countries that comply with international commitments should be able to have access to civil nuclear power. That is France’s position.
Dr John Chipman
Thank you very much. Mr Prawiraatmadja, some of your key questions included Lombok, your relations with international oil companies, to clarify Indonesia’s position with respect to OPEC, and also how the geopolitical relationship with China affects the questions of energy security and supply. You might have noted one or two other questions. You have five minutes.
Widhyawan Prawiraatmadja
Thank you for all the questions. China is the largest oil consumer in the region, but in terms of imports – because China is also a large producer with 3.5 billion barrels a day – the largest importer of crude oil is still in the hands of Japan, followed by China, and then South Korea, and finally going to the Far East. With this bulk of oil that they consume, whenever they import long haul, for example from West Africa, it comes in the bulk of around one billion barrels a day of shipment. Most of this shipment will come through Lombok. It is not really my domain, but with regards to regional energy cooperation, it would be important for the countries in this region to join forces, especially those who consume smaller amounts. They should get together and agree on particular locations from which all these supplies, in large quantities, can be broken down to certain countries. This adds to the energy security of the region. My offer would be to all the countries in the region to join forces in locating a place in which they can agree on where the block supply could take place.
In terms of conflicts with oil companies, I do not know whether there are any. Last week we had an Indonesian Petroleum Association convention. There are probably some different interpretations of contracts, whether the contracts have expired or not, for example, in the case of Exxon Mobil operations or the right to licences for operation. The government has been trying to resolve that amicably, but perhaps there is still some discrepancy in terms of the views. I am hopeful that the parties will reach agreement.
There was also a question about energy security and climate change on separate tracks. With all the consumption to fuel economic growth for developing countries, it would be naïve for developing countries to also deal on their own in terms of climate change implications. It will have to be on a cooperation basis otherwise it will not happen.
In terms of the energy producers-consumers’ dialogue, there is the International Energy Forum, and the International Energy Business Forum for the oil companies related to that. I believe it was in Rome, in the beginning of April, when they tried to have this type of dialogue. I believe it is sponsored by both IEA and OPEC. They have tried to resolve things as well, such as supply and demand. I do not think anyone can do any interventions as far as the oil price is concerned. It would be too difficult to influence.
As far as Indonesia’s membership with OPEC, it is becoming an internal political issue because we are now an oil‑importing country and there are questions as to whether we should be in OPEC or not. So far, I believe the government cannot really give good justification for staying. They can say that they are not a net oil‑importing country, and for that reason it may be more appropriate for us to not be in the OPEC membership, but if we go back into net oil‑exporting countries, we should re‑enter OPEC. This has some precedence in countries such as Ecuador.
In terms of what I can say from the oil companies, Pertamina has never benefited especially from the OPEC brotherhood. Whenever we have to make a deal with other oil companies from these countries, it is business to business and we are treated the same way. As far as Pertamina is concerned, we do not see, one way or the other, whether we should be in or out. The fact is that we have never had any privilege or discount or easy access, and so on, from it. There is no such thing. We have no preference one way or the other.
In terms of nuclear energy, it is still a long shot, although the government has proposed that by 2014 or 2015, we should have one. However, whenever location is decided on, the people in that area say, ‘Why do you not put it in the capital, Jakarta?’ The government then has no answer to that. It will be political and difficult to do.
With regards to the intention of China’s company, they come with a lot of money, a lot of power, and they always bring the power of the government with them. We have been one of the recipients of such pressure. Of course it is not wrong for them to do such things, but we have to have a stand. They can come and put the premium. They have the money to do that. Whenever something is available, they can probably bid higher prices. From my point of view, with the oil companies, Indonesia, in the long run, will benefit from a strong national oil company to secure the national interests. Pertamina is not a national oil company by world class standards yet, but we aspire to go there. We know how wide the gap is and we know how we will close it. It will take some time, but the government needs to empower us. This will be through knowing what the benefit of the company would be, working together with other companies. We would get many benefits from the exposure of management best practices, cutting edge technology, and other things from joint ventures with other companies. We should get it from the bona fide companies. I am not saying that China is not a bona fide company, but as far as Pertamina will have to get the best and we will have to stand firm in terms of convincing the government that it should be to the benefit of Pertamina and to the benefit of the country.
Dr John Chipman
Thank you very much indeed. That was very comprehensive. Mikhail Margelov, you do not have to explain all of Russia’s policy, but certainly on the Asia Pacific supply network and other specific points, please give us some clarifications.
Mikhail Margelov
Thank you. First of all, I should say that we love our neighbours, as all countries do love their neighbours. I respect the international media highly. I know well that if a dog bites me, the journalists will not write about it. If I bite a dog, then that is news. After the collapse of the Soviet Union, we in Russia found out that we cannot sell our main export commodity – crude oil and natural gas – directly to our main consumers. We have to go through transit corridors, in Ukraine, Byelorussia, and other countries which were former members of one family called ‘the Union of Soviet Socialist Republics.’ Russia sells 80% of its foreign exports in crude oil and natural gas to the European Union. We are very much dependent on those exports. A large part of the Russian budget comes from the money which we get from selling this 80% of our exports to the European Union. The EU only gets 18% of its oil and gas from Russia. My question is: who is dependent on whom?
Russia is very interested in being a secure and predictable supplier of oil and gas for Russia’s partners. That is why, when we said to our neighbours, such as the Ukraine, ‘We respect your independence and sovereignty. We do not want to humiliate you by selling you oil and gas at the subsidised price, so please pay the market price. Be a secure corridor for the transit of Russian oil and gas to the EU.’ Not everyone was ready, among our neighbours, for such an approach, but we stress again that Russia is no longer an empire; we do not want to pursue and imperialist policy; we are all equal and we all believe in a market economy so you pay the market price.
One of the reasons why Russia is thinking about new channels for its oil and gas exports is because we want to sell directly. The northern passage can be one of the routes for our exports. By the way, in 2002, the first four tankers of Russian crude oil which went to the US went through the northern point of Murmansk. Russia does not believe in unilateralism. We are not ready to develop the new export routes unilaterally. We definitely would love to do it with our neighbours in Scandinavian countries and Canada. This does not only mean the preservation of the environment or assistance for indigenous populations of Arctic regions, for us it means economy first. We would love to do it together with the partners.
We also consider nuclear energy as one of the main sectors for the future of our exports. We are happy that we managed to sign, with the US, the ‘1-2-3’ agreement on Russian sales to the US market. We are hoping that our counterparts at Capitol Hill will ratify it soon. Again, the only limitation we have in this sphere are IAEA regulations. We want to play by the rules, and we want everybody to play by the rules. We are happy only if Mr El Baradei is happy.
Russia is selfish. We need to develop Siberia; we need to develop our Far East. That is why we need to develop our relations with the Asian part of the world. Winston Churchill said, in 1941, ‘There are no roads in Russia. There are only directions.’ We understand very well that it is time to have roads. We look at our country as a possible transit corridor for the trade between Asia and Europe, and for trade between Europe and America, and we are ready for that. We are discussing many projects in the development of our transit capabilities because Russia badly needs to develop its infrastructure. The only way to find proper and secure investment for the infrastructure development is through cooperation with the Asia Pacific region.
As for consumers-producers’ dialogue, it was one of the main topics of the G8 Summit in St Petersburg in 2006. We are promoting the idea not only of a dialogue between consumers and producers, but a ‘trialogue’ between the producers, transporters and consumers. That is what we believe in.
Dr John Chipman
Thank you very much indeed. This session has proven that the question of energy security in the Asia Pacific region is immensely complex. It is a subject on which the IISS is doing a great deal of work now, and will do more, especially in the field of civilian nuclear energy. A number of ideas have been put on the table. This being a meeting of defence ministers, I would not want anyone to lose sight of the specific suggestion made by the French Defence Minister about confidence‑building measures relating to submarines and submarine movements. That might be something that people want to take up privately, between themselves.
Thank you very much indeed to our three panellists and to the delegates who have engaged.
