Foggofwar Prediction: Inertia Will Keep the UK In the EU

Just as inertia and fear of disruption kept Scotland from declaring independence from the UK, I think the same inertia will keep the UK in the EU.

Quick context: there's been talk for a while of potentially exiting the EU and Prime Minister David Cameron is pledging to have a 2017 referendum on the question if the Tories win a majority.

But they won't.

Fivethirtyeight predicts a slim Conservative victory over Labor and pretty much no chance of getting an outright majority.

Could they form a coalition with SNP? Maybe, but SNP has made it clear they won't support a referendum unless Ireland and Wales make it clear they're also on board--which they won't be.

Wales is staunchly against withdrawal--most support comes from the English countryside. But even that support for withdrawal has been dropping after a solid four years (2010-2013) of consistent majority.

The window may have passed.

Labour has made it clear that they'd support a referendum if the UK were to lose more sovereignty to the EU, but that's unlikely--the resurgence in nationalism throughout all of Europe is making it unlikely that the Continent will unite any time soon to give the EU more power. Almost everyone seems a bit grumpy with how much power the EU has now, but not enough to seriously consider leaving.

The UK leaving--unlike, say, Greece--could trigger a mass exodus of "satellite" states, from Poland to Portugal. The fact that it won't leave means we're going to see some ongoing stability--but the threat that it might have left will keep the EU from getting more powerful.

Breaking Down the "Oil War" Hypothesis

A friend recently used the term "War for Oil" when referring to the War in Iraq, and it got me to thinking: regardless of the intent (I will stay well away from that one as I have little to add and nobody wants their minds changed on the matter), did the US secure a significant, reliable source of oil by invading Iraq? Let's find out.

I first went to understand how Iraq's economy has changed since the fall of the Hussein regime. I knew that oil mining contracts went out in 2009, so this helped.

Browsing through Wikipedia brought me upon this great chart (don't worry, I checked the sources), which gives us an idea of whose companies are mining how much:

So the US and UK mine a fairly large amount of oil. Good, but there are a few things to note that change the equation:

1) The US and UK are being paid $2/bbl to mine the oil. While profitable, the oil mining companies bear most of the the costs of mining (including all operations costs) and are likely making somewhere between 1/10 and 1/20 the profit made at other offshore, well, and oilsands sites (this is speculation on my part based on some oil industry experience). So payback in petrodollars is fairly low.

2) The Iraqi government retains the right to sell much of the oil to whomever it wishes--the fact that the US is mining 16% of the oil does not mean that the US will import 1.5 MBpD.

On the other hand, the US is far and away Iraq's largest export partner, accounting for $11B of Iraqi exports in 2006 (according to US State Dept). 70% of the Iraqi economy is oil, so if we assume that oil dominates Iraqi exports, it means that the US is importing $11B in 2006, or 157MBbl at $70/BBL. Let's say that export rate has grown with Iraq, whose economy has about doubled since then. That's about 310MBbl per year or 0.85MBpD. How does this compare to the rest of the US oil economy?

As of 2009, the US imported 10 MBpD and produced 5 MBpD of crude. Assuming we're comparing apples to apples, Iraqi oil imports account for 5.6% of total US oil consumption.

So this looks like a decent amount, but not game-changing. And it's significant, but a few points about the oil market raise some ambiguity as to whether it has a significant impact on the US oil market.

Besides a few embargoes, the oil market is driven by bidding on open market (given different transport capabilities--some stuff is pipeline only, or rail only, some stuff goes out on barges and can go anywhere, which is the case with most Iraqi oil). Different importers (in our case, free-market refineries) will bid for crude oil and import it, turning it around on the gasoline or diesel market to suppliers that you pump your gas from. Iraq does not have any contractual, legal, etc agreement to guarantee the US any amount of oil or at any price (in particular, being part of OPEC means it has the bargaining power to do just about whatever it wants). At the end of the day, the post-war world increased Iraqi oil production significantly, which reduces oil costs for all importers, but the US has not secured a cheap or even necessarily reliable source of oil. The Iraqi government won't enter into any agreements that guarantee US refineries some portion of Iraqi exports--Iraq gains nothing by it. If the Iraqi embargo (from the Hussein era) had remained, the US would simply get its oil from elsewhere at a higher price. Compared to the $800B cost of the war, the cost-benefit doesn't make sense.

If the war in Iraq was designed to secure oil, it ultimately failed... or at least won't pay off monetarily. There's no doubt that world oil production has increased due to the fall of the Hussein regime and the end of the embargo, and this has lowered oil prices for the moment, but the costs of the war will likely far exceed the benefit from lower oil prices. At 15MBpD of consumption, if oil is worth $5/BBL less (which is more than generous given the size of the oil market), the US economy would save about $27B per year. Not including inflation, it would require about 30 years to pay back the cost of the war.

Hopefully, then, the war wasn't considered an oil investment. If it was, it was probably the worst investment the US ever made.

The Atlantics: A Return to Arms-Length Continental Management

1) The Visegrad 4: Eastern Europe as a Major Player
2) The Re-Emergent Russian Bloc
3) Baltic Solidarity to an Emerging Russia
4) The EU Periphery: "Core" EU's Albatross
5) The Atlantics: A Return to Arms-Length Continental Management

Today we continue our 5-part series on the Blocanization of Europe by discussing the changes that will happen to the UK, US, Canada, and Iceland as the Continent splits into blocs.



The Atlantics are largely a classic story, and largely a bloc that has existed since the beginning of the second World War. The question of The Atlantics bloc has always been about just how much the Atlantic powers get distracted from each other.

To be clear, the Atlantics consist, fundamentally, of the United States, Canada, and the United Kingdom--I've (controversially, I supppose) tacked on Iceland due to perceived mutual benefit and a few historical interactions.

The United States, Canada, & United Kingdom have the exact same interest on the Continent: prevent any power from amassing enough wealth, power, and influence that it could project that power out of the Continent. For the UK, this threat is more immediate. But for the US & Canada, the fall of the UK to a Continental power would spell long-term disaster (if one consolidated the Continent from Moscow to London, its economy would be a bit larger than that of Washington & Ottowa combined).

We saw this during the first and second World Wars, as well as the Cold War--the US, Canada, and UK have a "special relationship" not despite geopolitics but because of it (which generally makes such a relationship more reliable and less fickle). It will continue to be so.

So why are we even discussing this? Trends looked, briefly, like they would turn awry for the North America / UK relationship in the 2000s, while Europe was upset with the US over Iraq and wildly enamored with its own experiment: a politically strong European Union. It appeared as if the UK had turned its attention towards the Continent, and would actually embrace a unified Continental power.

But this was never to be. The UK managed to sneak in a Eurozone deal in which it had the option of keeping the Pound as a currency for as long as it wanted (it will keep the Pound, for sure). The UK has lobbied against a stronger European military or foreign policy cooperation, preferring to limit its involvement to free trade, and a few domestically popular legislative concepts.

The UK has been skeptical of its involvement with the European Union, and has now grown exceptionally so. Unlike the United States, the European Union would not go to war with itself to maintain its cohesion--there is too much Nationalism at the level of each country, and the EU's tendrils of cohesion are already too weak, and getting weaker. As the UK pulls away, the European Union will do little to stop it.

The United Kingdom is very worried about recent Franco-Russo-German cooperation in military & economic matters. In the 19th and 20th centuries, it was usually 2 of these powers versus the other, and the United Kingdom always sided with the underdog to prevent Continental consolidation. But the UK shudders to think of facing all three at once, and will turn increasingly towards the US for support if this cooperative trend continues on the Continent among its major powers.

And of Iceland? Iceland has no military at all, and depends on NATO for protection. But if NATO's cohesion weakens (which it will), it will need to cling to one of the Blocs for security. Why the Atlantics, and why not the Baltics?

As we'll discuss in our final installment on The Blocanization of Europe, the Baltics are too preoccupied with defending their borders from Russia to reach out to protect Iceland. The US, UK, and Canada will pick up the slack--the US rarely backs off an opportunity to have a forward base of operations in exchange for military protection, and will take the opportunity here as Russia's power grows (as much as Iceland may hold its nose during the deal).

Ultimately, the US, Canada, and UK will work together to play European powers off each other and try to keep the continent divided. They will back the underdog (in this case, the Visegrad 4) against powers like Russia & Germany that are looking to expand their influence across larger swaths of the Continent. North American / UK cooperation will only grow into the future as the Atlantics return to their old strategy of managing Europe at an arms length.

British Coalition Partners Slipping on Foreign Policy PR

Nick Clegg (Deputy Prime Minister) and David Cameron (Prime Minster), the leaders of the current British ruling coalition, both made a pair of rather major faux pas on the topic of British foreign policy and warfighting.

Clegg's gaffe: Railing on the Iraq War and calling it "illegal" alongside senior Conservative party members that all voted for it.

Cameron's gaffe: Calling the UK the "Junior Partner" in the Alliance against fascism in 1940.

Now, I don't want to bring this up just to give these poor gents a hard time (they don't need my advice that they need a bit more pampering from their PR folks before they open their mouths). There may be real repercussions here.

The first and most immediate is that the Conservatives have traditionally had more pro-war clout than the Labour party (Churchill, for example, was a Conservative during the war... and, just for added punch, a Liberal earlier on), and this would typically be of great assistance as the unpopular Afghan war effort drags on. While these gaffes may seem small, British media are even more prone to hype up such slips than American media. It could potentially be quite an issue in Parliamentary debates, and the Coalition might face a surge of pressure against the Afghanistan war (with Clegg and Cameron being seen as "out of touch" on how Britons think of war and the sacrifices therein).

Second, it could begin to send fissures into a coalition once thought strong. The Liberal Democrats and Conservatives came out of their coalition talks looking surprisingly unified and strong--both sides were pleased to see themselves in office at all, especially the Liberal Democrats. But alternatives do exist--the Liberal Democrats, Labour, and a few other small left-leaning parties could potentially make their own (even less stable) coalition.

Britain has a strong tendency towards government instability when coalitions form. If comments like these persist, tensions between the Conservatives and Lib Dems might grow. If so, the Lib Dems may become increasingly frustrated with the Conservative government. And, interestingly, the only party that is nearly guaranteed a spot in any governing coalition is the Liberal Democrat party (because Labour and Conservatives will never form a coalition with each other). If enough Liberal Democrats defect, they could enter coalition talks with Labour and other smaller parties, and then hold a vote of no confidence.

Now, this is a bit of a far-fetched scenario from just a few comments, but it's something that must be taken with sufficient gravity in the British political world. If comments like these are not minimized and well-controlled, instability may form in the UK coalition government, allowing anti-war sentiment to become a rallying cry for the Labour party to take power. The very fate of the Afghan war would be at risk.

Lisbon Treaty Sees Fissures On Day One

The Czech President Klaus signed the Lisbon Treaty (the last EU leader to do so) today, after the Czech Republic's constitutional court gave the treaty its thumbs-up.

But already, fissures have emerged. The Tories in the UK, who are poised to take over in big numbers by next June at the latest, are furious, and David Cameron (the very-likely next PM) is currently under great pressure to come up with some sort of legal scheme to re-transfer a great deal of power from Brussels to London. It might mean a secession, in the end: there seem to be few options left for the Tories besides total withdrawal.

Italians are also quite irate over a European Human Rights Court decision to ban crucifixes in Italian schools. And it seems that it's not a particularly politically divisive issue in Italy--they're either very attached to these crucifixes or they simply don't want Brussels meddling so deeply in their business. But this is, quite literally, what they wished for.

Disaffection and disillusionment is coming quickly at the heels of the Lisbon Treaty. Skittles and beer are not being poured on the streets in celebration, as the visionaries of the EU had hoped.

The big question: will these jitters settle, or will they undermine the process completely? The United States certainly had similar problems, and still has the occasional fight for sovereignty between a state government and Washington, but it does hold. But then again, a civil war was fought to keep it together. Surely, the Europeans will not go killing each other to preserve the Union; will that make it all too easy for the UK (and then others) to drop out?