Check Against Delivery
It gives me very great pleasure to be standing here in Houston. I am told that this city is to energy as London is to finance and I am pleased to be here at the heart of the global energy industry. My thanks to the World Affairs Council for their efforts in pulling this luncheon together and to you all for taking the time to be here today.
This is a busy year for the UK in the world. We have Her Majesty the Queen’s Jubilee in June. And then in July the eyes of the world will turn to London for the Olympic and Paralympic Games. It has been a huge and challenging task to get ready for the greatest show on earth and to put on the most sustainable Olympics ever. But it has played to UK project management strengths and to be coming in ahead of time and under budget is yet another reason why the UK is a place where you can really get business done.
And 2012 is also an important year for the UK in Texas. In August we will commemorate the 170th year of UK representation in Texas. Our first Consul-General, Captain Charles Elliot RN, arrived in Galveston in 1842. And this accreditation was not to the United States but to the Republic of Texas. Watch out for events celebrating this anniversary throughout the year.
I am here today though to talk about a different part of the world, the Middle East and North Africa, a region that has seen momentous change over the last year .The energy industry is well represented in the region as you will know. And will play an important part in supporting and encouraging positive outcomes in the region. Today I would like to share with you the UK Government perspectives and hopes on the impact of this movement and how these changes relate to energy security.
The eruption of democracy movements across the Middle East and North Africa is, even in these early stages, the most important development of the early 21st century. With potential long term consequences greater than either 9/11 or the global financial crisis in 2008. An historic change, which at its core, is about people demanding their legitimate rights. A year ago today, the crowds were gathering for the eighth consecutive day in Tahrir Square. Over one hundred thousand protesters took to the streets in the face of heavy military opposition. Their bravery, and belief in their democratic rights, resonated around the world. Ten days later, Mubarak announced he would relinquish power. This act will become a defining moment.
The naked optimism in the West reflected in the epithet the ‘Arab Spring’ has been ebbing. Commentators suggest that the seasons have turned and spring has seamlessly moved into winter - a phenomenon not uncommon in Britain. But as far as I’m concerned, playing with this seasonal metaphor is lazy analysis. I think the term Arab Awakening is more apt. An awakening to the fact that even the worst tyrants could be toppled; that citizens could demand that their democratic, social and human rights be respected; that people could take their destinies into their own hands. Awakening is not value-laden. It suggests both opportunities and challenges. Understanding these is the key to our understanding of its outcome.
Since protests broke out violence has repeatedly caught the headlines. As people demanded their rights in Libya, the Qaddafi regime brutally retaliated, sparking civil war. In Egypt, dashed expectations of political reform led to relapses of violence in Tahrir Square; attempts by Syrians to claim their legitimate political rights have led to over 5,000 deaths. Commentators point to these and argue that powerful elites will never relinquish hold of power; that while rulers may change, systems with centralised power structures will always be autocratic.
But across the region, the wall of fear has been demolished. People know that together they can assert their right to control how they are governed and by whom. Tunisia has democratically elected its parliament for the first time since the 1950s. Morocco conducted free elections under a new constitution. Egypt is in the process of freely and fairly electing for itself a government, and turnout so far has been over 60% - under the Mubarak regime, the elections in 2005 saw a turnout of just 23%. After Muanmar Qadaffi’s 40 year dictatorship, Libya has a new government. Positive reforms are underway in Jordan and Yemen.
Challenges in 2012
Of course, politics cannot be seen in isolation from wider trends. Indeed, while the Arab Awakening was political, it was at least in part triggered by economic realities: unemployment, inequality, corruption, inadequate public services. Even as the Arab World celebrates its new found freedoms, these economic challenges continue to play out across the region.
Quite rightly, people’s awakened expectations include improvements in their economic prospects. Regardless of political reform, countries in the region will still face formidable challenges: growing, well-educated, young populations with high aspirations but poor job prospects. With regional youth unemployment at nearly double the world average, social unrest could continue. Some economies in the region rely on their natural resources, making their currencies uncompetitive and potential for job-creation limited. The fundamentals of economies in the Maghreb are particularly weak. Even with political change, changing economic trajectories can be a slow process.
But young and growing populations have the potential to drive economic growth and can immunise against the problems of aging populations. And with low factor productivity to a large extent caused by poor investment decisions and microeconomic policies, there is real potential for growth if price distortions, trade barriers and labour market regulations are reduced and privatisation is given a push.
The oil and gas sectors will undoubtedly play a major part in the economic reconstruction of the region. The Middle East and North Africa account for almost 60% of global oil reserves and over 40% of gas reserves. This wealth, properly invested, could drive an economic rejuvenation across the region to match the political awakening.
But we must also look to the wider picture. Global trends in energy consumption cannot be ignored and the Middle East has a vital role to play in ensuring a stable and secure supply of energy to the world market. Recent IEA figures predict that unchecked global demand for energy would reach over 17 billion tonnes of oil equivalent by 2030, an increase of 40% on current production. Meeting this demand, while simultaneously tackling the challenges climate change, is one of the great tests of our time. That we need a stable and affordable energy supply is beyond question. How we achieve it is the key. The Middle East has always played a leading role in meeting global energy demand and this is not going to change. Production of traditional hydrocarbons needs to increase, and countries like Iraq and Libya are leading the way. The oil and gas sectors in these countries should be the lifeblood that drives economic regeneration, not only within their borders after so many years of oppression, but across the global economy.
But this will not be the only change we see in the energy sector. The industry as a whole is transforming rapidly and profoundly. Technological innovation is creating new opportunities in unconventional hydrocarbons and renewable energy resources. The rejuvenation of domestic gas production in the US through your investment in unconventional technologies has transformed the global energy outlook. Similar developments in renewable technologies like wind, solar and biofuel are changing the global energy mix. Traditional hydrocarbons will continue to be important, but their supply will become more diffuse and demand will move away from the historic hubs in Europe and the US.
So the Arab World is at a turning point. Political reform is sweeping the region; the economic certainties of its energy wealth are in flux. Western countries need to recognise how their relationship with the Middle East and North Africa is changing and maturing. As new energy sources develop and the demand from the East increases, our relationship will be based less on the one-way supply of oil, and more on mutual economic benefit, trade and exchanges.
So, the Arab Awakening has thrown up many new uncertainties, but we shouldn’t overlook the old challenges. The Awakening seems to have had little impact on Iran. Its regime continues to oppress its people and isolate the country from an increasingly globalised world. They have now defied six UN Security Council Resolutions that call on the regime to suspend its uranium enrichment programme and enter into negotiation. Its recent decision to enrich uranium to 20% at an underground site at Qom demonstrates the urgent need to intensify diplomatic pressure to return to negotiations.
The necessity of a collective global response is clear, and the United States and European Union have acted decisively in implementing further sanctions. The EU brought into force last week a comprehensive oil ban, an asset freeze of the Central Bank of Iran, measures against Iran’s petrochemical sector, and a ban on Iranian transactions involving gold.
Israel and MEPP
And no assessment of the future of the region could be complete without considering what lies ahead for the Middle East Peace Process. Let me say up front that we do not have the luxury of 20 years to solve the Israeli/Palestinian conflict. On my visit to the Palestinian territories two weeks ago I saw for myself the pace of settlement construction which will soon render futile any ambition remaining for the establishment of a Palestinian state. Unless both sides can agree on a peaceful settlement that guarantees the security of the Israelis and the sovereignty of the Palestinians, Israel will be faced with a series of unappealing choices: a one state solution that preserves Israel’s democratic nature but destroys its essential character; a one state solution that preserves the Jewish nature of Israel, but at the expense of its democratic credentials; Either of these options would threaten the security of Israelis.
Now is the time to resolve the issue. During a period of profound change, Israel has the opportunity to redefine its relationship with the region. The two state solution is not just the guarantor of Israel’s security. It provides the foundations for a normalisation of relations with its Arab neighbours which could help facilitate regional trade and prosperity. This kind of agreement requires courage; the kind of courage exemplified by Sadat and Rabin.
UK / US
Finally, I don’t think that I can address an American audience without saying a little on the enduring bilateral relationship between our two countries. Firstly, that the United States is our most important ally. Our relationship is rooted in history. But it as strong today in the 21st century as it has ever been. The scope of our cooperation in the globalised world is vast. From combating violent extremism to addressing the poverty, ignorance and conflict that underlies it; from promoting human rights, to supporting development and economic growth in the world’s poorest countries; from advocating free trade, to campaigning for global energy and climate security: the UK and US have shared priorities.
There is no better example of the partnership between Britain and the US than in Afghanistan, where we are both resolved to stand shoulder to shoulder with our Afghan partners, to help Afghanistan become a stable and secure state which is able to control its own national security. We are second only to the US in the number of British boots on the ground, and we have taken the lead in Helmand, one of Afghanistan’s most difficult provinces. I have seen for myself the remarkable work being done by British and American soldiers and by their civilian counterparts.
So, the Arab Awakening draws few conclusions at this stage. We cannot be certain of how the situation will unfold in each country. But there are signs abound that the prognosis is positive. What we can be certain of is how the UK, US and the energy sector can play its part in supporting the positives outcomes that we hope to see. Supporting and embedding institutions that we would expect to see in a flourishing democracy; strong civil society; rights for minorities; robust, bold plans for growth and prosperity; employment opportunities and human rights. These will help the countries of the region get back on their feet, to travel in a new direction.
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