Chapter 7
Securing energy in the Asia-Pacific
Plenary session no 4
Sunday 1 June 2008, 9.15 am
SPEAKERS
Hervé Morin
Minister of Defence, France
Widhyawan Prawiraatmadja
Senior Vice-President, Pertamina, Indonesia
Mikhail Margelov
Chairman of the Committee for International Relations, Federation Council, Russian Federation
The fourth plenary session of the 7th IISS Shangri-La Dialogue centred on the theme of ‘securing energy in the Asia-Pacific’, a complex topic that invited consideration of the broader regional security context. Hervé Morin, Minister of Defence for France, noted the growing importance of Asia to the world in general and Europe in particular, saying, ‘We are no longer in an environment that was long ago described as “benign neglect” by Europe about Asia … Asia should not consider Europe as a second-ranking partner’. He stressed his country’s commitment to security in the region, touching on France’s military presence in Afghanistan, recently emphasised by French President Nicolas Sarkozy, and on French efforts to build strong political institutions to enable ‘Afghans to take gradual control of their destiny’. Other French priorities in Asia included the counter-proliferation of weapons of mass destruction and the fight against piracy.
Morin singled out Southeast Asia as being of special concern, noting the importance of the region for global trade. He praised ASEAN’s efforts to foster regional cooperation and pledged French assistance in addressing such security concerns as terrorism, piracy and natural disasters. Morin concluded his remarks by calling for the development of confidence-building measures to avoid the potentially destabilising effects of growing submarine forces in the region.
Widhyawan Prawiraatmadja, Senior Vice-President of the Indonesian oil producer Pertamina, noted that he was presenting his personal views and not those of his company or the Indonesian government. He argued that energy security in Asia was predominantly an issue of oil security. Oil consumption in the region was growing dramatically, a trend which was certain to continue as countries attempted to ‘reach the level of other developed nations’. It was imperative that governments find ways to ensure a steady supply of oil.
Turning to Indonesia specifically, Prawiraatmadja criticised the government’s practice of subsidising fuel prices. Instead of keeping the price of oil artificially low, he argued, the government should be working to increase the purchasing power of Indonesians and allowing oil producers to reinvest dividends to better meet demand. However, he recognised that the problem was a difficult one and that election pressure on the current president complicated the situation.
Mikhail Margelov, Chairman of the Committee for International Relations of Russia’s Federation Council, spoke of growing world demand for oil, particularly in Asia. The rise of the ‘creative economy’ and the pursuit of energy-saving measures had done little to shrink world energy needs, and Asia could be expected to require ever-larger quantities of oil and natural gas. These realities could best be accommodated by diversifying world energy supply and fostering coordination between market participants, including suppliers, transporters and consumers.
Russia was well placed to become ‘both an alternative source of energy supply and an alternative transit route’ for Asia-Pacific. Margelov cited numerous pipeline and transportation projects that showed Russia’s commitment to establishing ‘an Asia-Pacific energy security network’ and boosting exports to Asia. These initiatives were ‘only natural’, as processes of integration were happening all around the world, particularly amongst EU, CIS, NAFTA and OPEC countries. Moreover, Russia’s previous ‘West-oriented policy’ was no longer appropriate as Eastern European states sought membership in NATO and the EU, leaving Russia on the ‘European periphery’. It was clear that the ‘geopolitical and geo-economic positions of Russia’ required greater engagement with Asia.
Questions and answers
The points raised by the session’s three speakers elicited many questions and comments from delegates. Dr Ellen Frost, Visiting Fellow, Institute for International Economics and Adjunct Research Fellow, Institute for National Strategic Studies, National Defense University, US, sought Prawiraatmadja’s perspective on conflicts between Indonesia and international oil companies, and on proposals in APEC, ASEAN and elsewhere for strengthening regional energy cooperation. Another participant, noting that the growing supplier–consumer relationship between Africa and China underscored the importance of transoceanic trade routes, asked for Prawiraatmadja’s thoughts on the security of oil shipments passing through Lombok. A third delegate asked how the energy requirements of countries like Indonesia could be reconciled with the need to tackle climate change.
Addressing his remarks to the entire panel, Manish Tewari, Spokesperson, All India Congress Committee and Advocate, Supreme Court of India, asked whether the institutionalisation of a consumer–producer dialogue would be a good way of ensuring energy security in Asia. Professor Tommy Koh, Chairman, Institute of Policy Studies and Ambassador-at-Large, Ministry of Foreign Affairs, Singapore, also directed questions to all three panellists. He asked Morin to provide information about a French initiative within the United Nations to address piracy; Prawiraatmadja to speak to reports that Indonesia intended to withdraw from OPEC; and Margelov to address the impression, largely driven by the international media, that Russia had bullied its neighbours during disputes over the supply of oil and gas. Lieutenant-General Karl W. Eikenberry, US Army, and Deputy Chairman, Military Committee, NATO, asked Margelov to comment on the energy-security implications of the possible opening of the northern passage to sea commerce owing to global warming.
Ralph Cossa, President, Pacific Forum, Center for Strategic and International Studies, sought the panellists’ views on the role of nuclear energy in East Asia, and asked whether Russia was prepared to create a fuel-storage repository to house spent reactor fuel. Another participant wondered whether France would also lend its expertise in nuclear technology, waste management and non-proliferation to the region.
Noting that Europe had struggled to develop a joint energy policy with respect to suppliers, especially Russia, Pierre Lellouche, Member, French National Assembly and Chairman, French delegation to NATO Parliamentary Assembly, asked how China’s role as Asia’s dominant energy consumer might affect smaller, less-developed countries, such as Indonesia and the Philippines, and how it might affect regional integration.
Professor Dr Dewi Fortuna Anwar, Deputy Chairman of the Indonesian Institute of Sciences, followed up on these questions by asking whether Chinese investment in Indonesia’s energy sector was purely a business proposition or a trend with wider strategic implications.
Replying to questions from participants, Morin noted that the French – and American – anti-piracy initiative was intended to allow proceedings in territorial waters (with the agreement of affected sovereign states) that would ensure no act of piracy went unpunished. Discussions were also under way to organise international convoys to patrol trade routes in an organised, consistent fashion. Morin summarised France’s position on the nuclear question by saying, ‘when countries agree to the idea of inspections and transparency … 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’.
Prawiraatmadja noted that securing Asian imports, including those passing through Lombok, was a priority. He suggested that the region’s countries could increase energy cooperation and enhance security by joining forces and agreeing on a location from which these imports could be distributed to national customers. Cooperation was also required to effectively address the implications of climate change. Although some communication was taking place within the International Energy Forum, the International Energy Business Forum and other institutions, a dialogue between energy producers and consumers was unlikely to influence the price of oil.
Prawiraatmadja was not aware of any conflicts between the Indonesian government and oil companies, but speculated that there might be some outstanding differences in the interpretation of contracts, which the Indonesian government would wish to settle amicably. The government’s proposal to build a nuclear-energy facility by 2014–15 had encountered resistance, as few Indonesians were willing to live near such a facility.
Indonesia’s membership of OPEC was the subject of debate because Indonesia had become an oil-importing country. Prawiraatmadja added that Pertamina had no strong opinion on the subject, as the company had never drawn any particular benefit from OPEC.
The best way to respond to growing Chinese power would be to ‘build a strong national oil company to secure the national interests’. Pertamina was not a world-class national oil company, but aspired to become one through ‘exposure to management best practices, cutting-edge technology and other things from joint ventures with other companies’. For this it would need the cooperation of the government.
According to Margelov, Russia was ‘very interested in being a secure and predictable supplier of oil and gas for Russia’s partners’. That was why it had asked its neighbours, such as Ukraine, to pay the market price for Russian oil and gas. Russia desired that neighbouring states provide a secure corridor for the transit of its energy exports to the EU, to which Russia sells 80% of its foreign exports in crude oil and natural gas. By contrast, only 18% of the EU’s oil and gas comes from Russia. ‘Who is dependent on whom?’ he asked.
Russia was seeking new channels for its oil and gas because it wished to sell these commodities directly. It hoped to develop new export routes in the north with the cooperation of the Scandinavian countries and Canada. Moscow was also keen to increase its exports of nuclear energy and awaited the ratification of the ‘1-2-3’ agreement on Russian sales to the US market. Of course, Russia was committed to abiding by IAEA regulations: ‘We are happy only if [IAEA Chief] Mr ElBaradei is happy’. A consumer–producer dialogue was something Russia supported; indeed, the government was promoting the idea of a ‘trialogue’ between producers, transporters and consumers.
Margelov concluded by bluntly asserting that ‘Russia is selfish’. The country had a strong need to develop Siberia and its Far East region. There was great potential for Russia to develop its infrastructure by becoming a transit corridor between Asia and Europe, and Europe and America, a project that required increased cooperation with the Asia-Pacific region.
