Category Archives: Energy

China and Australia: the coal and iron trade

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Western Australia iron ore mining. Image from wikipedia

China’s demand for iron and coal has helped to turn it into Australia’s biggest trading partner and to keep Australia more economically robust than most other rich countries. But in some parts of the country the new relationship with China came as a reminder of the unwelcome side-effects of the boom... Chinese trade not only helped Australia survive the global downturn. It has also boosted the currency’s strength, and made it harder for manufacturers to find markets for their exports. The problem is unevenly distributed around the country. South Australia has suffered the greatest pain: in no other state does manufacturing account for such a big share of the economy.... Five years ago, Mitsubishi closed its plant in Adelaide. Australia’s remaining carmakers, Holden, Ford and Toyota, have shed jobs steadily since then. Australians are buying imported cars more cheaply than ever, especially from Japan; their dollar has risen by 26% against the yen since October.  Even wine, South Australia’s third-biggest export, has suffered: exports in fiscal 2012 dropped in value by A$62m ($65m), or 2%. Codan, an electronics company based in Adelaide, has done better. By making many high-tech products in Malaysia, it has been able to protect itself from the strong Aussie dollar.

The Australian dollar: Resources boomerang, Economist, Apr. 20, 2013, at 44

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The Nuclear Village in Japan: restarting nuclear power

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anti-nuclear protest japan 2011. image wikipedia

After an earthquake and tsunami created a creeping nuclear catastrophe two years ago the Democratic Party of Japan (DPJ) said it would get the country out of nuclear energy by 2040. Although it quickly backtracked, almost all of Japan’s 50 commercial reactors are still lying idle.

In February this year (2013), Shinzo Abe, leader of the then incoming Liberal Democratic Party (LDP), said the new government would restart reactors after they passed a forthcoming set of new safety tests. The country’s “nuclear village”, a cosy bunch from industry and government, cheered. But now the stricken Fukushima Dai-ichi plant is starting to alarm the public once more. On April 15th, 2013 the International Atomic Energy Agency (IAEA), a UN body, flew in to investigate a series of dangerous incidents.

A power outage in March (2013) left four underground pools that store thousands of the plant’s nuclear fuel rods without fresh cooling water for several hours. A rat, it later emerged, had gnawed through a cable. Workmen laying down rat-proof netting caused another outage. Then this month regulators discovered that thousands of gallons of radioactive water had seeped into the ground; the plant’s operator had installed a jerry-rigged system of plastic sheeting, which sprang leaks. The quantity of contaminated water has become a crisis in its own right, the manager has admitted. And now the pipes used to transfer water to safer storage containers are leaking too.

Experts who examined the causes of the 2011 catastrophe reckon the LDP has paid too little attention to what went wrong. Kiyoshi Kurokawa, the chairman of a parliamentary investigation, says the country may be moving “too hastily back towards nuclear power, without fully regaining the trust of the Japanese public and the international community”. Yoichi Funabashi, a former editor of Asahi Shimbun newspaper who headed a private-sector investigation, says it is unfortunate that the 2012 election, which brought the LDP back to office, did not include a proper debate about the future of nuclear energy.

Now the set of policies known as “Abenomics” is making a return to nuclear power ever more pressing. The LDP is expected to push hard to restart plants if it wins a crucial election for the upper house of parliament this summer. Mr Abe’s focus on the economy has given greater say to the voice of business, including the big utilities whose plants are idle. Smaller firms clamour for cheaper power too.

Japan’s broader economic future may be at stake... [the deterioration of  overall current-account balance]  could affect Japan’s ability to keep funding its huge public debt domestically. A big cause is the cost of energy imported to fill the gap left by nuclear power. A weaker yen, the result of the central bank’s radical loosening of monetary policy, is further pushing up the price of imported oil and gas...[T]he public is still afraid of nuclear power. A nationwide poll  in February 2013 found that around 70% of respondents wanted either to phase out all the plants, or to shut them down immediately. Opposition is likely to be strongest at the local level, as regions move to switch their reactors back on. This week an Osaka court ruled on a suit brought by local residents to have Japan’s only two operating reactors, at the Oi plant in Fukui prefecture, shut down. They lost, but their suit looks like only the first of many battles

Japan’s nuclear future: Don’t look now, Economist, Apr. 20, 2013, at 44.

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The Lure of Impossible: Choking Uranium Markets

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The Rössing Uranium Mine in Namibia

Making nuclear weapons requires access to materials—highly enriched uranium or plutonium—that do not exist in nature in a weapons-usable form.   The most important suppliers of nuclear technology have recently agreed guidelines to restrict access to the most sensitive industrial items, in the framework of the Nuclear Suppliers Group (NSG). Nevertheless, the number of countries proficient in these industrial processes has increased over time, and it is now questionable whether a strategy based on close monitoring of technology ‘choke points’ is by itself a reliable barrier to nuclear proliferation.  Time to tighten regulation of the uranium market?

Not all the states that have developed a complex nuclear fuel cycle have naturally abundant uranium. This has created a global market for uranium that is relatively free—particularly compared with the market for sensitive technologies....

Many African states have experienced increased investment in their uranium extractive sectors in recent years. Many, though not all, have signed and ratified the 1996 African Nuclear Weapon Free Zone (Pelindaba) Treaty, which entered into force in 2009. Furthermore, in recent years, the relevant countries have often worked with the IAEA to introduce an Additional Protocol to their safeguards agreement with the agency...

One proliferation risk inherent in the current system is that inadequate or falsified information connected to what appear to be legitimate transactions will facilitate uranium acquisition by countries that the producer country would not wish to supply....

A second risk is that uranium ore concentrate (UOC) is diverted, either from the site where it was processed or during transportation, so the legitimate owners no longer have control over it. UOC is usually produced at facilities close to mines—often at the mining site itself—to avoid the cost and inconvenience of transporting large quantities of very heavy ore in raw form to a processing plant.,,,UOC is usually packed into steel drums that are loaded into standard shipping containers for onward movement by road, rail or sea for further processing. The loss of custody over relatively small quantities of UOC represents a serious risk if diversion takes place regularly. The loss of even one full standard container during transport would be a serious proliferation risk by itself. There is thus a need for physical protection of the ore concentrate to reduce the risk of diversion at these stages.

A third risk is that some uranium extraction activity is not covered by the existing rules. For example, uranium extraction can be a side activity connected to gold mining or the production of phosphates. Regulations should cover all activities that could lead to uranium extraction, not only those where uranium extraction is the main stated objective.

Restricting access to natural uranium could be an important aspect of the global efforts to obstruct the spread of nuclear weapons...

Excerpts, from  Ian Anthony and Lina Grip, The global market in natural uranium—from proliferation risk to non-proliferation opportunity, SIPRI, Apr. 13, 2013

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The Costs of Covert Operations in Pursuit of Regime Change in Iran

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USB_flash_drive. Image from wikipedia

Washington believed that covert action against Iran’s nuclear facilities would be more effective and less risky than an all-out war... In fact, Mark Fitzpatrick, former deputy assistant secretary of state for non-proliferation said: “Industrial sabotage is a way to stop the programme, without military action, without fingerprints on the operation, and really, it is ideal, if it works.”The US has a long history of covert operations in Iran, beginning in 1953 with the CIA orchestrated coup d’état that toppled the popularly elected Iranian prime minister Mohammad Mossadegh and installed a dictator, Reza Shah. The US has reorganised its covert operations after the collapse of the shah in 1979...

In January 2011, it was revealed that the Stuxnet cyber-attack, an American-Israeli project to sabotage the Iranian nuclear programme, has been accelerated since President Barack Obama first took office. Referring to comments made by the head of Mossad, then US secretary of state Hillary Clinton confirmed the damages inflicted on Iran’s nuclear programme have been achieved through a combination of “sabotage and sanctions”.

Meanwhile, several Iranian nuclear scientists were assassinated. The New York Times reported that Mossad orchestrated the killings while Iran claimed the attacks were part of a covert campaign by the US, UK and Israel to sabotage its nuclear programme....

There are at least 10 major repercussions arising from the US, West and Israeli policy of launching covert war and cyber-attacks against Iranian nuclear facilities and scientists.

First, cyber war is a violation of international law. According to the UN Charter, the use of force is allowed only with the approval of the UN Security Council in self-defence and in response to an attack by another country. A Nato-commissioned international group of researchers, concluded that the 2009 Stuxnet attack on Iran’s nuclear facilities constituted “an act of force”, noting that the cyber-attack has been a violation of international law.Second, the US covert operations are a serious violation of the Algiers Accord. The 1981 Algiers Accords agreed upon between Iran and the US clearly stated that “it is and from now on will be the policy of the US not to intervene, directly or indirectly, politically or militarily, in Iran’s internal affairs”.

Third, the cyber war has propelled Tehran to become more determined in its nuclear efforts and has made major advancement. According to reports by the International Atomic Energy Agency (IAEA), prior to covert operations targeting the nuclear programme, Iran had one uranium enrichment site, a pilot plant of 164 centrifuges enriching uranium at a level of 3.5 per cent, first generation of centrifuges and approximately 100 kg stockpile of enriched uranium.Today, it has two enrichment sites with roughly 12,000 centrifuges, can enrich uranium up to 20 per cent, possesses a new generation of centrifuges and has amassed a stockpile of more than 8,000kg of enriched uranium.

Fourth, the strategy pursued has constituted a declaration of war on Iran, and a first strike. Stuxnet cyber-attack did cause harm to Iran’s nuclear programme, therefore it can be considered the first unattributed act of war against Iran, a dangerous prelude toward a broader war.

Fifth... [s]uch short-sighted policies thicken the wall of mistrust, further complicating US-Iran rapprochement and confidence-building measures.

Sixth, Iran would consider taking retaliatory measures by launching cyber-counter-attacks against facilities in Israel, the West and specifically the US...

Seventh, Iran is building a formidable domestic capacity countering and responding to western cyber-warfare. Following the Stuxnet attack, Iran’s Supreme Leader issued a directive to establish Iran’s cyber army that is both offensive and defensive. Today, the Islamic Revolutionary Guards Corps (IRGC) has the fourth biggest cyber army in the world. Israel’s Institute for National Security Studies (INSS) acknowledged that IRGC is one of the most advanced nations in the field of cyberspace warfare.

Eighth, Iran now has concluded that information gathered by IAEA inspectors has been used to create computer viruses, facilitate sabotage against its nuclear programme and the assassinations of nuclear scientists. Iranian nuclear energy chief stated that the UN nuclear watchdog [IAEA] has been infiltrated by “terrorists and saboteurs.” Such conclusions have not only discredited the UN Nuclear Watchdog but have pushed Iran to limit its technical and legal cooperation with the IAEA to address outstanding concerns and questions.

Ninth, worsening Iranians siege mentality by covert actions and violations of the country’s territorial sovereignty could strengthen the radicals in Tehran to double down on acquiring nuclear weapons. Iran could be pondering now the reality that the US is not waging a covert war on North Korea (because it possesses a nuclear bomb), Muammar Gaddafi lost his grip on power in Libya after ceding his nuclear programme, and Iraq and Afghanistan were invaded (because they had no nuclear weapon).

Tenth, the combination of cyber-attacks, industrial sabotage and assassination of scientists has turned public opinion within Iran against western interference within the country...[P]rovocative western measures have convinced the Iranian government that the main issue is not the nuclear programme but rather regime change.

Excerpts from  Seyed Hossein Mousavian, Ten consequences of US covert war against Iran, Gulf News, May 11, 2013

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Suing Multinational Corporations in US Courts: Kiobel v. Shell

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oil pollution

The Alien Tort Statute (ATS)... grants American district courts jurisdiction over “any civil action by an alien for a tort only, committed in violation of the law of nations or of a treaty of the United States”. At the age of 190 it sprang back to life on April 6th 1979, when it was used to allow two Paraguayans to sue a former Paraguayan policeman in an American court for acts of torture committed in Paraguay.Since then, roughly 150 lawsuits have been filed against American and foreign corporations for actions committed around the world. Four local plaintiffs used the ATS to sue Unocal in a federal court in Los Angeles for human-rights violations allegedly committed during the construction of an oil pipeline in Myanmar. A human-rights organisation used it to sue Yahoo on behalf of two Chinese democracy activists for actions committed in China by a subsidiary. ATS suits against DaimlerChrysler and Rio Tinto, among others, are pending. Though most ATS cases have been dismissed or settled, the costs of settlements can be high and the negative publicity damaging.

Multinational companies will therefore cheer the Supreme Court’s unanimous decision in Kiobel v Royal Dutch Petroleum (Shell), released on April 17th, 2013. It dramatically limits the ability of plaintiffs to file suit against corporations in American courts for actions committed abroad.  The ruling stems from a case brought in New York by 12 Nigerian plaintiffs living in America. They allege that Shell was complicit in human-rights violations—including murder, rape, theft and destruction of property—committed by Nigeria’s armed forces in the region of Ogoniland. A federal appeals court dismissed their suit, arguing that the ATS provides no grounds for corporate-liability lawsuits. But as the 150 ATS suits show, other courts have disagreed. The Supreme Court agreed to hear the case in order to settle the question.

In an earlier ruling, in 2004, the court cautiously ruled that the ATS permitted lawsuits for “a modest number of international law violations”, such as piracy and crimes involving ambassadors, which would have been recognised when it was adopted. The court’s Kiobel ruling goes much further. It holds that the ATS does not apply to actions committed by foreign companies, and noted a strong presumption against applying American law outside the United States, “There is no indication,” wrote John Roberts, the chief justice, “that the ATS was passed to make the United States a uniquely hospitable forum for the enforcement of international norms”.  In a separate concurrence, four of the court’s liberals took a slightly softer tack, arguing that the ATS should allow suits that prevent America from becoming “a safe harbour…for a torturer or other common enemy of mankind”. But that reasoning still does not permit foreign nationals to use American courts to sue foreign companies for acts committed on foreign soil.

Extraterritoriality: The Shell game ends, Economist, Apr. 20, 2013, at 34

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Foreign Corporate Immunity: Chevron/Canada against Ecuador

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A Toronto judge halted on May 1, 2013 an effort to enforce a $19 billion Ecuadorean judgment against U.S. oil company Chevron Corp in Canada, finding that his Ontario provincial court was the wrong place for the case.  The action is the latest skirmish in a two-decade conflict between Chevron and residents of Ecuador's Lago Agrio region over claims that Texaco, which Chevron acquired in 2001, contaminated the area from 1964 to 1992.

Citing Chevron's promise to fight the plaintiffs until "hell freezes over, and then fight it out on the ice," Justice David Brown of the Ontario court foresaw a "bitter, protracted" battle that would be costly and time consuming.  "While Ontario enjoys a bountiful supply of ice for part of each year, Ontario is not the place for that fight," Brown wrote in his ruling on Wednesday. "Ontario courts should be reluctant to dedicate their resources to disputes where, in dollars and cents terms, there is nothing to fight over."

Alan Lenczner, principal lawyer in Toronto for the Ecuadorean plaintiffs, said they would definitely appeal, arguing that a multinational company could not be immune from enforcement in a country where it earns so much. "Chevron Corp itself earns no money," he said in a statement. "All its earnings and profits come from subsidiaries including, importantly, Chevron Canada."  Chevron Canada's assets are worth more than $12 billion, the plaintiffs had said, and alongside separate actions in Argentina and Brazil, they had sought to persuade the Ontario court to collect the damages awarded to them by the South American court.

Chevron, the second-largest U.S. oil company, has steadfastly refused to pay, saying the February 2011 ruling by the court in Lago Agrio was influenced by fraud and bribery. A related fraud case goes to trial in New York in October.  The Supreme Court of Canada has ruled that the country's courts can recognize and enforce foreign judgments in cases where there is a "reasonable and substantial connection" between the cause of the action and the foreign court. Chevron called Brown's ruling a "significant setback" to the Ecuadoreans' strategy of seeking enforcement against subsidiaries that were not parties to the Ecuador case.  "The plaintiffs should be seeking enforcement in the United States - where Chevron Corporation resides. In the U.S., however, they would be confronted by the fact that eight federal courts have already found the Ecuador trial tainted by fraud," Chevron said in a statement. Last month, a consulting firm whose work helped lead to the $19 billion award against Chevron disavowed some environmental claims used to obtain the judgment.

Excerpt, Judge halts Chevron-Ecuador enforcement action in Canada, Reuters, May 1, 2013

See also how Chevron Destroyed the Paper Trail

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On Fault Lines: Nuclear Waste Storage in the United States

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Yucca Mountain, image wikipedia

A bipartisan quartet of senators dropped a draft of a long-awaited bill on April 25, 2013 that would change how the United States stores nuclear waste.  The draft bill would enable the transfer of spent nuclear fuel currently housed at commercial nuclear facilities to intermediate storage sites. It also would allow states and local governments to apply to host the nation’s long-term waste repository.It also proposes creating a new federal agency to manage nuclear waste, taking that responsibility from the Energy Department (DOE). The president would appoint the head of that agency, which would be subject to Senate confirmation...The bill largely implements findings by the Blue Ribbon Commission on America’s Nuclear Future, an expert panel convened by President Obama in 2010. Some of the suggestions that made it into the draft bill will likely run into opposition.

Chiefly, Republicans will not be keen on moving nuclear waste to interim storage sites before a permanent repository has been identified.  The draft legislation calls for a pilot project to take in waste from high-risk areas — such as waste stored near fault lines — by 2021. After that, any nuclear waste could be sent to interim storage units so long as “substantial progress” is being made to site and select a permanent repository.  An alternative proposal by Feinstein and Alexander would require proposals for the pilot program to be submitted no later than six months after the bill becomes law.  But GOP lawmakers worry that interim storage sites would turn into de facto permanent ones without identifying a permanent facility.  They point to the recent flap regarding the Yucca Mountain site as a cautionary tale.  Obama pulled the plug on Nuclear Regulatory Commission reviews of DOE's application to use the Nevada site in 2009.

Republicans viewed it as a political move — Obama campaigned on shuttering Yucca, and Senate Majority Leader Harry Reid (D-Nev.) opposes the site. They also said it was illegal because federal law identifies Yucca as the nation’s lone permanent repository.  Republicans, therefore, want to ensure a permanent site is selected before transporting waste to interim facilities to avoid a similar political kerfuffle.  GOP lawmakers might also oppose the draft bill’s call for a “consent-based” process that lets states and local governments apply to host the nation’s permanent repository.  Again, they say it’s a legal issue. Since a 1982 federal law fingers Yucca as the nation’s sole permanent nuclear waste dump, some Republicans argue there can be no others.  That’s the line House Republicans have taken.  They say any legislation coming over from the Senate that doesn’t identify Yucca as the nation’s permanent repository won’t move. And Senate legislation has almost no chance of including such a component considering Reid’s virulent opposition to Yucca.

Murkowski and the bill’s other backers have tried to minimize the Yucca issue by contending that more than one permanent storage site is likely necessary to handle the nation’s volume of nuclear waste.  The Alaska Republican has said she doesn’t want to give up on Yucca, but that she wants to do something about nuclear waste. She said the matter is urgent, pointing to leaking nuclear waste containers at the Hanford Nuclear Reservation in Washington state....

Zack Colman, Senators float nuclear waste storage draft bill, The Hill, April 25,  2013

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A Love Affair with Iran: Glencore and Trafigura

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logo of atomic energy organization of iran

Glencore, a commodity trading house run by the billionaire Ivan Glasenberg, traded $659m (£430m) of goods, including aluminium oxide, to Iran last year, the Guardian has established.  The company...has admitted that some of its aluminium oxide ended up in the hands of Iranian Aluminium Company (Iralco).  Trafigura, another commodity trading house, has also admitted to trading an unspecified aluminium oxide (also known as alumina) with Iralco in the past.

The International Atomic Energy Agency has named Iralco as supplying aluminium to Iran Centrifuge Technology Company (Tesa), which is part of the Atomic Energy Organisation of Iran (AEOI). Aluminium oxide is an important material in gas centrifuges used to enrich uranium.  At the time of the Glencore and Trafigura trades with Iralco, it was not illegal or a breach of sanctions to supply Iran with alumina. It is unknown whether Glencore or Trafigura's alumina passed from Iralco to Tesa, or whether it was used in centrifuge construction.

Since 2006, AEOI has been subject to UN sanctions designed to prevent Iran's nuclear armament ambitions. Trading with Tesa has been specifically banned under US, EU and UK sanctions since July 2010. Iralco was added to the EU sanctions list in December 2012.  Glencore said it "ceased transactions" with Iralco immediately when it learned of its links with Tesa, and the last trade was in October 2012. "Prior to EU sanctions in December 2012, we were not aware of a link/contract between Iralco and Tesa," the company said in a statement.  Glencore said it is "reliant on the relevant regulatory bodies/governments to advise us on developments in who we can/can't do business with".

Tehran, which some experts say already has enough enriched uranium to make several nuclear weapons, is in the middle of upgrading its stock of more than 10,000 centrifuges. The IAEA said Iran is replacing outdated centrifuges with thousands of more powerful IR-2m models.  Experts at the Institute for Science and International Security (Isis) in London said: "Iran is trying to replace maraging [super-strong] steel end-caps with high strength aluminium end-caps."  Mark Fitzpatrick, director of Isis's nonproliferation and disarmament programme, said the new centrifuges could enrich uranium four to five times faster than the existing ones. Iran insists its enriched material is for peaceful use, not for nuclear weapons, but it has refused to allow IAEA inspectors into several of its atomic facilities.

The Guardian has learned that Glencore traded $659m worth of metals, wheat and coal with Iranian entities during 2012. Buried deep in its annual report, one of Glencore's US affiliates, Century Aluminium, 46% owned by Glencore, states: "During 2012 non-US affiliates of the largest stockholder of the company [Glencore] entered into sales contracts for wheat and coal as well as sale and purchase contracts for metal oxides and metals with Iranian entities, which are either fully or majority owned by the GOI [government of Iran].".....

Trafigura, which came to global political attention when it was revealed that a licensed independent contractor of a ship it had chartered dumped tonnes of toxic oil slops in Ivory Coast, said: "We can confirm that Trafigura has traded with Iralco in the past. In October 2011, a physical swap agreement was reached whereby Trafigura provided alumina to Iralco in return for aluminium for Trafigura to export worldwide. No deliveries have been made or exports received since new EU sanctions were published in December 2012.

Excerpts, Rupert Neate, Glencore traded with Iranian supplier to nuclear weapon's programme, Guardian,  Apr. 21, 2013

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HardBall: Chevron and the Oil Pollution in Amazon

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texaco ecuador. Image from wikipedia

An environmental case that has pitted Chevron against Ecuadorean Amazon villagers for two decades has taken another bizarre twist, with an American consulting firm now recanting research favorable to the villagers’ claims of pollution in remote tracts of jungle.  The consulting firm, Stratus Consulting of Boulder, Colo., announced late Thursday (April 11, 2013) that it had originally been misled by Steven R. Donziger, a lead lawyer for the Ecuadorean villagers, and had decided to disavow its contributions to scientific research about whether there was groundwater contamination that sickened the residents in swaths of rain forest.

The move prompted the plaintiffs to assert that Chevron was coercing parties to the case, citing this as another example of strong tactics employed by the company as it tries to overturn an Ecuadorean judge’s decision two years ago that it pay $18 billion in damages, one of the largest environmental awards ever. In this instance, the plaintiffs claim that Chevron pressured Stratus to retract its assessment in exchange for dismissal of legal claims in a countersuit filed by Chevron made against the firm — claims that could have pushed the consulting business into bankruptcy.  “Stratus deeply regrets its involvement in the Ecuador litigation,” the firm said. It remains unclear whether this development with Stratus will have much impact on Chevron’s appeals, because the judge also based his ruling on other environmental assessments. The judge ruled that back in the 1970s, Texaco had left an environmental mess in oil drilling operations while operating as a partner with the Ecuadorean state oil company, and that Chevron, which bought Texaco in 2001, must apologize for and was liable for the damage.

Chevron has refused to apologize. In addition to appealing the decision in the Ecuadorean courts, Chevron also filed a countersuit in federal court in New York against Mr. Donziger and Stratus Consulting, accusing them of racketeering and fraud. Because Stratus has now retracted its statements on the Ecuadorean pollution, Chevron agreed not to pursue claims against the firm anymore. On Friday, Chevron filed witness statements from Douglas Beltman, a Stratus vice president, and Ann Maest, a Stratus scientist, in which they now say they were not aware of scientific evidence of groundwater contamination in the former Texaco concession area or of any adverse health impact to people from the operations.

Mr. Beltman stated that “at Donziger’s direction,” he drafted portions of a report in the first person as if it were written by Richard Cabrera, the supposedly independent expert, that detailed environmental damage for the Ecuadorean court. “Donziger stressed to me and Ann Maest the importance of Stratus ensuring that no one learn of Stratus’ involvement in any aspect of the Cabrera Report or Responses,” he said.  In an interview, Mr. Beltman said, “This settlement was extensively negotiated with Chevron and we think it’s fair and it’s not extortion.”  Mr. Donziger said he could not comment since he was a defendant in the racketeering case filed by Chevron.

It was not immediately clear what impact Stratus’s recantation would have on the case. Chevron’s appeal is before Ecuador’s highest court, the National Court of Justice, and the company is defending itself in courts in Canada, Argentina and Brazil to avoid paying damages in those countries. The plaintiffs are waging an international campaign seeking damages because Chevron has no assets in Ecuador itself...

Kent Robertson, a Chevron spokesman, said the statements should uphold the company’s position in the American racketeering case and in the international enforcement proceedings. “The declarations today show there is no scientific evidence to support the plaintiffs’ lawyers’ allegations,” he said.

Craig Smyser, a lawyer for some of the Ecuadorean plaintiffs, said the statements by the consulting firm “should have almost no effect” because the Ecuadorean judge relied on many expert reports other than the one that Stratus was involved in.  He attributed the decision by Stratus to repudiate its earlier work to the “immense financial strain that threatened the financial extinction of the firm, including a campaign by Chevron to discredit Stratus with various government agencies and businesses with which Stratus worked.”

Chevron has been playing hardball for at least four years. The company produced video recordings from pens and watches wired with bugging devices that suggested a bribery scheme surrounding the proceedings and involving a judge hearing the case. An American behind the secret recordings was a convicted drug trafficker.  But the oil company appeared to gain the upper hand three years ago when it won a legal bid to secure the outtakes from a documentary about the case, “Crude,” in which Mr. Donziger was shown describing the need to pressure a Ecuadorean judge and boasting of meetings with Ecuadorean officials.

In a sworn statement filed in an American court, Alberto Guerra, an Ecuadorean judge who heard the Chevron case in 2003 and 2004, accused Nicolas Zambrano, the judge who issued the $18 billion verdict against Chevron, of taking a $500,000 bribe from the plaintiffs. Mr. Zambrano denied the charge, and in his own affidavit, said that Mr. Guerra had told him that Chevron would offer him $1 million in return for a favorable judgment.  Chevron has denied offering any bribes.

By CLIFFORD KRAUSS, Consultant Recants in Chevron Pollution Case in Ecuador, NY Times, April 12, 2013

Chevron in the Amazon

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Gas as a Tool of Foreign Policy: Gazprom

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Gazprom_headquarters, Moscow. image from wikipedia

The good times for Gazprom once seemed like they would never end. The world’s largest natural-gas producer, founded out of the old Soviet gas ministry, enjoyed sky-high gas prices for years. The gas flowed along pipelines into Europe; the profits flowed back. Gazprom began work on a $1.9 billion headquarters in St Petersburg and acted as a bottomless wallet for Russia’s rulers. Whatever problems it encountered, it could “drown with money”, as Natalia Volchkova of the New Economic School in Moscow puts it.  All this is now under threat. Its ageing gasfields are in decline. Thanks to America’s shale boom, gas is more plentiful on the world market. Gazprom’s European customers are realising that they have other choices. The prices it can charge are falling, and with them the firm’s prospects.

Years of easy money have made Gazprom fat and slow. It dominates its domestic market, producing 75% of Russia’s gas. It enjoys a monopoly over exports of the stuff. Until recently, it had a tight grip on western Europe, where it supplies around 25% of gas. It retains an even tighter grip on former Soviet-bloc countries in eastern Europe. For a long time, this insulated Gazprom from shifts in global gas markets.

Gazprom is not a normal company. It serves two masters. As a firm that issues shares to outside investors, it should in theory strive to maximise profits in the long run. But since it is majority-owned by the Russian state, it pursues political goals, too.  In practice, it serves one master more assiduously than the other. As President Vladimir Putin consolidated his power in the early 2000s, he built Gazprom into a main instrument of Russia’s new state capitalism. He appointed allies to top positions. He used Gazprom as a tool of foreign policy, for example by cutting off gas supplies to Georgia, Ukraine, Belarus and Moldova during political rows.  Gazprom’s deep pockets have helped Mr Putin at home, too. It sells gas cheaply in Russia, so that the poor do not freeze in winter. Oddly for an energy company, it has bought television stations and newspapers, all of which are now friendly to the Kremlin. Mikhail Krutikhin of RusEnergy, a consultancy, says, “Gazprom has one manager: Putin.”

With friends in high places, Gazprom has enjoyed low taxes and privileged access to gasfields. But its costs are startlingly high...And some projects favoured by Mr Putin are of questionable economic value. For example, he is dead set on building a $21-billion South Stream pipeline between southern Russia and Austria via eastern Europe. This project has political appeal because it would bypass troublesome Ukraine as the main transit route for gas to Europe. But given weak prices and demand, it is “commercial idiocy”, says Mr Krutikhin. The opening in 2011 of Nord Stream, an offshore pipeline to Germany, was a diplomatic coup for Mr Putin, but it is still running far below capacity....

Gas on the spot market is often much cheaper than Russian gas delivered under long-term contracts... Because so many of its customers are tied to contracts, the full effects of the global gas glut on Gazprom’s bottom line will not be felt straight away....   The final threat to Gazprom’s old way of doing business is legal. An antitrust probe launched by the European Commission alleges that Gazprom is using its dominant position in central and eastern Europe to restrict competition and hike prices. If it loses the case, it could face a fine of up to $14 billion and lose the mighty lever of being able to charge some European countries more than others.  An adverse ruling might also threaten its strategy of trying to dominate the European gas market by owning both the supplies and the means of distributing them. Gazprom has quietly bought gas pipelines and storage facilities. It has tried to strike deals whereby it lends money to impoverished European utilities in order to secure their custom. If this strategy stops working, Gazprom will no longer be such a potent foreign-policy tool for the Kremlin....

Gazprom’s future may involve more robust competition even at home. Two domestic rivals have emerged: Novatek, a gas producer part owned by Gennady Timchenko, an old acquaintance of Mr Putin’s, and Rosneft, a state-owned oil firm led by Mr Putin’s trusted adviser, Igor Sechin. Put together, non-Gazprom firms now account for a quarter of all Russian gas production....

The other way to get gas to Asia would be via pipeline. The obvious destination is China, which sits on Russia’s doorstep and is potentially the world’s biggest market for gas. The two countries have haggled unsuccessfully for a decade. In February they revealed they had agreed to everything related to pipeline exports apart from the price. China has signed up to import gas from Central Asia, Australia, the Middle East and west Africa; almost everywhere, in fact, except Russia. China refuses to pay Asian prices; Gazprom won’t budge.

Gazprom: Russia’s wounded giant, Economist, Mar. 30, 2013, at 69

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