Japan’s risky LNG strategy

By Eric Watkins

LOS ANGELES, May 25 – Liquefied natural gas has fast become the fuel of choice in Japan, a choice that looks to be extending into the future given the indecision of the country’s policy makers over the continuation of nuclear-generated power.

The final decision regarding Japan’s nuclear future has largely been left in the hands of the county’s politicians after a subcommittee of the Advisory Committee for Natural Resources and Energy failed to come to a unanimous decision of its own.

Absent a unified approach, the subcommittee instead decided to present five different policy proposals. The first leaves the choice of energy source to consumers, while the remaining options differ on the percentage of nuclear power in the country by 2030: 0%, 15%, 20-25% or 35%.

The subcommittee’s decision, or perhaps one should say its indecision, is not hard to understand given the degree of popular opposition to nuclear power in the country, a position underlined even by Greenpeace activists who formerly favored nuclear power as the best way for Japan to cap C02 emissions.


“Before the disaster, some people believed that nuclear energy was a good way to cut CO2 emissions, but now it has been proven that nuclear energy is not a reliable means of doing this,” said Greenpeace Japan’s climate and energy campaigner Hisayo Tacked

That view will probably gather more strength following a report that the radiation released in the first days of the Fukushima nuclear disaster was almost 2-1/2 times greater than the amount first estimated by Japanese safety regulators.

At least that’s the view of Tokyo Electric Power Co, operator of the doomed Fukushima Daiichi nuclear power plant, which issued the report.

TEPCO estimated meltdowns at three Fukushima reactors released 2-1/2 times the amount of the first estimate by Japan’s Nuclear and Industrial Safety Agency in April 2011, and 17% more than the highest estimate provided by the government safety agency.

TEPCO, of course, might have good reason for releasing such a condemnatory report of the government, given the fact that it will be unwillingly nationalized in July in exchange for 1 trillion yen of taxpayer money.


While it wants the money, TEPCO has shown itself resistant – hostile even – to efforts by the government to impose changes.

An example of that hostility arose in April when TEPCO Chairman Tsunehisa Katsumata criticized government efforts to force out company president Toshio Nishizawa. “If you are going that far, let us go belly up,” Katsumata said.

Still, regardless of TEPCO’s motivation in releasing a report casting aspersions on the government’s handling of the Fukushima disaster, the plain fact of the matter is that the report will play well in a country where popular opinion appears determined to turn its back on nuclear power.

That turn means alternative sources of power must come into play, a point underscored by the International Energy Agency in its most recent monthly report, underlining demand growth for oil in the wake of Japan’s nuclear shutdown post-Fukushima.


“OECD Pacific demand remains supported by the nuclear-related shutdowns in Japan, with preliminary consumption of 8.4 million b/d in March, 335,000 b/d (4.2%) more than the corresponding month in 2011,” IEA said in its May report

“Heavy fuel oil and other products, which include crude oil for direct burn, continue to dominate growth prospects, as they are the key replacement fuels in the power sector shorn of nuclear capacity,” IEA said

“Demand grew across all product categories, bar naphtha and jet/kerosene, notably residual fuel oil and ‘other products’, which include direct crude burn, rose by 41.6% and 32.5% respectively, on the back of strong electricity generation,” the IEA report said.

The agency said its 2012 demand outlook for Japan remains “unchanged for now at 4.5 million b/d” but it noted that the nuclear closures bring “an additional layer of uncertainty” to the forecast.

“We continue to assume a very gradual nuclear recovery towards end-2102, although a zero-nuclear case has only a marginal impact and would raise our oil demand projections by 80,000 b/d for 2012 as a whole,” IEA said


While the IEA’s remarks underline the growth of oil demand in Japan, they say nothing about the phenomenal growth in demand for LNG. Indeed, reports now indicate that in fiscal 2011 Japan imported 83 million tons of LNG, up 20% on the year, with the same amount expected this year.

In an effort to meet such demand growth, Japanese companies are buying natural gas assets and fields around the world, with some $30 billion pledged in development funding.

Such spending plans, along with the closure of the country’s nuclear facilities, have doubled the share of gas in Japan’s power mix to about 50%, and have now tied the country’s future to a single fuel more than any other major energy-consumer.

That view is underlined elsewhere by the IEA, which says of the 34 countries in the Organization for Economic Cooperation and Development, only five members rely on gas for more than 50% of their electricity. According to IEA data, Japan would become the most gas-reliant in the top 10 energy consumer countries.

Japanese utilities plan to build an extra 24,000 megawatts of gas-fired capacity, 40% more than now, within a decade, according to government reports cited by Bloomberg. Japan will also add 10 LNG import terminals to an existing 28 in the same period, increasing storage capacity by 23%, the data show.

That growing dependence on LNG puts Japan in a vulnerable position.


Shigeki Sakamoto, a researcher with Japan Oil, Gas and Metals National Corp., said that raising dependence on LNG above 50% will probably be thought of as risky because of the fuel’s high price. Japan, he said, should add coal and other fuels to the mix to avoid being “ripped off.”

To the mix suggested by Sakamoto, Tokyo must also strongly reconsider nuclear power and, in particular, its decision to close down the country’s nuclear power plants, a decision already proving costly and one that could become even more costly in the future.

Nuclear energy may not be popular, but then national poverty is not either. If that seems an unlikely possibility for Japan, then consider a report by Barclays Capital.

Higher fossil fuel imports may bring Japan into current account deficit sooner than expected, the Barclays report said, adding that such a deficit will make the yen more sensitive to events abroad and tie its rate movements more closely to that of the oil price.

© Glamma Productions Inc. 2012

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Looking for a win-win in Baghdad

By Eric Watkins

LOS ANGELES, May 23 – At today’s talks in Baghdad between Iran and the so-called P5+1 nations – the U.S., Britain, France, China, Russia, and Germany – the best outcome would be a win-win situation for both sides: one where everyone walks away victorious.

A victory for the P5+1 would be an outright agreement by Iran to allow inspectors into its nuclear facilities. A victory for Iran would be an outright agreement by the P5+1 to wind down the sanctions regime now facing Tehran. The question is: will a win-win be possible?

For Iran, ending the sanctions is a must. Already Tehran is facing such reduced sales of its oil that it must store its excess unsold production. Its shore-based storage is full, and its floating storage – very large crude carriers and other tankers – is rapidly filling up.

That may sound like a matter of comparative insignificance. But to anyone who knows the oil industry, Iran’s rapidly diminishing storage space represents the end game of the sanctions program. It means that, absent any place to store its unsold oil, Iran must stop production.


Shutting in production means first and foremost that Iran effectively closes down its one main source of income. Imagine the feeling that would arise on seeing the last wheel being turned to shut down the country’s main source of income for the better part of a century.

Appalling. That is the best word to describe the situation. Appalling. That is what the shutting down of Iran’s oil industry would be. Appalling. It would be tantamount to national suicide. It would be appalling for all of those reasons and more: once shut down, there’s no telling how quickly that industry might be able to restart.

That is the reality now staring Tehran’s leaders right in the face. And that reality has arrived due to the existing sanctions – not the ones scheduled to take effect on July 1 when the European Union’s go into full effect for the first time.

Nor have Tehran’s leaders contemplated the effect on their oil and gas industry of a completely new round of sanctions proposed this week by the United States Senate that would extend current measures to include any energy-related joint venture anywhere in the world in which Iranian entities are involved.


“It is the sense of Congress that the goal of compelling Iran to abandon efforts to acquire a nuclear weapons capability and other threatening activities can be effectively achieved through a comprehensive policy that includes economic sanctions, diplomacy, and military planning, capabilities and options,” the Senate measure said.

Senators emphasized solidarity with the White House by stating that their objective is “consistent with the one stated by President Barack Obama in the 2012 State of the Union Address: ‘Let there be no doubt: America is determined to prevent Iran from getting a nuclear weapon, and I will take no options off the table to achieve that goal’.”

The Senate measure does not authorize the use of military force against either Iran or its ally Syria, which is under a separate set of sanctions for its repression of anti-government protests.

In a word, the measure leaves Iran to understand that the United States Senators believe in the strength of his sanctions plan and do not need to threaten war to achieve their aims.


Senate Banking Committee Chairman Tim Johnson, Democrat-South Dakota, made that view clear in a statement after the vote.

“With these new sanctions, as negotiations on Iran’s nuclear program are renewed this week in Baghdad, we are reminding Iran’s military and political leaders that they must make a clear choice,” said Johnson.

“They can come clean on their nuclear program, and end the suppression of their people and stop supporting terrorist activities around the globe. Or they can continue to face sustained multilateral economic and diplomatic pressure, and deepen their international isolation,” he added.

The U.S. and its allies are clearly resolved to disallow Tehran the option of nuclear weapons – weapons that Tehran has long insisted form no part of its nuclear program. It has always claimed to be interested only in atoms for peace.


Tehran can make good on that insistence in Baghdad.

Tehran can walk away from the table a winner today. It need only agree to a full and complete inspection of its nuclear facilities, an inspection that would enable a victory for all parties.

The U.S. and its allies would see an end to their concerns over nuclear weapons in the wrong hands, while Tehran could openly have the nuclear facilities it has always said it wants.

That sounds like a win-win.

© Glamma Productions Inc. 2012

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NATO: Advancing maritime energy security

By Eric Watkins

LOS ANGELES, May 21 – The North Atlantic Treaty Organization took a major step forward in international maritime energy security with the signing of an agreement for delivery of the Alliance Ground Surveillance system.

“Today is a big day for the Alliance Ground Surveillance program,” said NATO Deputy Secretary General Alexander Vershbow at the NATO Summit held in Chicago over the weekend.

“The signature of the procurement contract for the AGS system is an important step towards the delivery of this key capability to the Alliance,” Vershbow told NATO Defense Ministers at the meeting.

According to NATO, the AGS Core will be an integrated system consisting of an air segment, a ground segment and a support segment.


NATO said the air segment consists of five Global Hawk Block 40 high-altitude, long-endurance unmanned air vehicles (UAVs) equipped with “a state-of-the-art, multi-platform radar technology insertion program (MP-RTIP) ground surveillance radar sensor.”

The UAVs will also be equipped with an extensive suite of line-of-sight and beyond-line-of-sight, long-range, wideband data links, NATO said, adding that the air segment will also contain the UAV flight control stations.

The ground segment will provide an interface between the AGS Core system and a wide range of command, control, intelligence, surveillance and reconnaissance (C2ISR) systems.

These C2ISR systems will “interconnect with and provide data to multiple deployed and non-deployed operational users, including reach-back facilities remote from the surveillance area.”


The ground segment component will consist of a number of ground stations, which NATO said will provide “data-link connectivity, data-processing and exploitation capabilities and interfaces for interoperability with C2ISR systems.”

The system will have its main base at Sigonella in Italy and at several associated command-and-control base stations.

Earlier this month, NATO announced plans to acquire an AGS system that would give commanders “a comprehensive picture” of the situation on the ground.

It said that “contributions-in-kind” provided by France and the United Kingdom will complement the AGS with additional surveillance systems.

“The composition of the AGS Core system and these contributions-in-kind will provide NATO with considerable flexibility in employing its ground surveillance capabilities,” it said.

“NATO’s operation to protect civilians in Libya showed how important such a capability is,” the organization said, referring to its operations over the oil-rich, war-torn, North African country in 2011.


Los Angeles-based Northrop Grumman will be the prime contractor for the NATO AGS program, and will construct the Global Hawk UAVs, the supporting systems and the payloads.

When announcing the agreement in February, NATO said it planned to buy five Global Hawk unmanned aircraft capable of countering Afghan insurgents, monitoring arms embargoes and “hunting pirates off Somalia.”

NATO made clear in a news broadcast that the Global Hawk unmanned air vehicles would be used in maritime operations off the coast of Somalia, a hotbed of piracy.

In March, NATO allies agreed to extend their counter piracy naval operation Ocean Shield, operating off the Horn of Africa, for a further two years until the end of 2014.


“This decision reflects NATO’s enduring commitment to counter the threat of piracy that exists in the Gulf of Aden and in the Western Indian Ocean,” the alliance said.

But that brief may extend even farther.

The location of successful pirate hijackings has grown from a relatively concentrated area in the Gulf of Aden and off the coast of Somalia, into the larger Indian Ocean, according to a report by the One Earth Future Foundation.

“The changing geographical spread of piracy attacks also alters the countries, industries, and trade routes most impacted by piracy,” the report said, adding that piracy “has increasingly impacted” India, Pakistan, and the Gulf countries.

More to the point, the report – The Economic Cost of Somali Piracy, 2011 – said that, “This transformation in the location of piracy attacks also indicates that there may be an escalating impact on the oil-supplying industries and nations within that region.”


“Over the course of 2011, emerging trends in the Somali piracy business model ushered greater concern about its potential impact on oil trade,” the report said.

It noted that that pirate attacks in 2011 increasingly moved northeast towards the Gulf and Middle East, “where oil trade is heavily concentrated.”

With deployment of the Global Hawks not planned until 2015 at the earliest, NATO clearly will not be using the UAVs in its current anti-piracy program which will run until 2014.

But into the future, the alliance will clearly be well positioned to guard the international oil lanes from East Africa to the Gulf of Hormuz, regardless of who may be seeking to interfere with them, whether pirates from Somalia or naval vessels from hostile states such as Iran.

© Glamma Productions Inc. 2012

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U.S. deals blow to China’s solar industry

By Eric Watkins

LOS ANGELES, May 18 – Solar panels are at the center of a dispute between the United States and China, a dispute that grew shriller this week as the Department of Commerce slapped anti-dumping duties on the Chinese solar panel industry.

China’s state television denounced the U.S. government’s decision to levy anti-dumping duties on Chinese solar panels as “protectionist” and insisted that the tariffs were “unreasonable and without basis.”

More than 60 Chinese firms, including Suntech Power Holdings Co., the world’s largest solar panel maker, and Trina Solar Ltd., face a 31% duty on their exports to the U.S., while all other Chinese exporters of solar cells will be hit with a tariff of 250%.

“These duties do not reflect the reality of a highly-competitive global solar industry,” said Suntech Chef Commercial Officer Andrew Beebe, adding that Suntech will work closely with the Department of Commerce prior to their final decision to demonstrate why these duties are not justified by fact.”


An anchorwoman with state-run China Central Television expressed the fear that, “If these tariffs are levied in full, Chinese companies may have no choice but to exit the U.S. market.”

Not least, she said U.S. consumers would be harmed by the measures, along with solar U.S. firms in the solar industry – a view not shared by the Coalition for American Solar Manufacturing, which said the decision marked “a very positive” first step.

Gordon Brinser, president of SolarWorld, the company that filed the dumping case against the Chinese firms, expressed satisfaction with the decision. 

“The verdict is in,” said Brinser. “In addition to its preliminary finding that Chinese solar companies were on the receiving end of at least 10 WTO-illegal subsidies, Commerce has now confirmed that Chinese manufacturers are guilty of illegally dumping solar cells and panels in the U.S. market.”


The Department of Commerce also granted SolarWorld’s request for a finding of “critical circumstances” to counter the recent flood of Chinese imports into the U.S. market ahead of the decision.

As a result, the preliminary dumping tariffs will be retroactive 90 days from the date the decision is published in the Federal Register.

The case began last October when SolarWorld, with the support of six other solar manufacturers filed anti-dumping and countervailing duty petitions with Commerce and the International Trade Commission.

The petitions alleged that Chinese manufacturers were illegally dumping solar cells and panels in the U.S. market and receiving billions in WTO-illegal subsidies. Commerce issued its preliminary decision on the countervailing duty petition on March 17, 2012.

“Commerce’s ruling in the SolarWorld case is a bellwether decision,” said Steve Ostrenga, chief executive officer of Helios, one of the six firms that launched the complaint along with SolarWorld.


“It underscores the importance of domestic manufacturing to the U.S. economy and will help determine whether the country will be a global competitor in clean technologies or outsource them to China,? Ostrenga said.

But disagreement over the finding of the Department of Commerce came from the Coalition for Affordable Solar Energy, a lobbying group that represents domestic solar installers, Chinese manufacturers and others in the industry said the decision will raise prices for consumers.

“We think it’s raising taxes 31% on solar cells and we think it’s going to increase solar electricity prices in the U.S. precisely at the moment that solar power is becoming competitive,” said Jigar Shah, president of the Coalition for Affordable Solar Energy.

The decision by the Department of Commerce coincided with reports that China’s solar panel industry is mired in widespread losses, its profit margins crimped as prices have fallen faster than production costs amid huge overcapacity.


The South China Morning Post reported that the industry, which exports about 85% of its output, has built “too many plants and has suffered from a slowdown in growth in overseas markets.”

Its biggest market, Europe, has cut back subsidies amid its sovereign debt problems.

The paper cited Dr Henning Wicht, principal solar sector analyst at industry research firm iSuppli, who projected global prices of solar panels would fall a further 20% this year after declining 38% last year.

Wicht also forecast that the growth rate of solar panel installations worldwide would drop to less than 10% this year and next year, from 55% last year, before recovering to between 20-30% during 2014-16.

© Glamma Productions Inc. 2012

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Oil under troubled waters

By Eric Watkins

LOS ANGELES, May 15 – China and the Philippines have temporarily staved off conflict in the South China Sea, with each country imposing a ban on fishing in the troubled waters. But no one said anything about looking for oil or gas there.

The two countries announced overlapping fishing bans in disputed waters around the Scarborough Shoal in what the South China Morning Post described as a “face-saving solution” for both countries to their month-long standoff.

China’s Ministry of Agriculture said it would enforce a ban on most fishing activities for most South China Sea waters from May 16 to August 1, adding a face-saving note that the ban is an annual affair.

Indeed, a Chinese foreign ministry spokesman said that the ban was to protect marine life and not related to the standoff at Scarborough Shoal – known as Huangyan Island on mainland China and Panatag Shoal in the Philippines.

Other Chinese officials reinforced that line.


“The ban has no relation to the current tensions in the dispute over Huangyan Island. It is a regular measure that China takes to protect fishery resources in this area every year,” said Yang Shaosong of the South China Sea Fishery Bureau.

“China’s insistence on seeking solutions through diplomatic negotiations has not changed,” the spokesman said of the ban, which affects areas above latitude 12 degrees north. That includes Scarborough Shoal, which lies at 15 degrees north.

But Manila was not buying the Chinese line.

“We do not recognize China’s fishing ban in as much as portions of the ban encompass our Exclusive Economic Zone,” said Philippine Foreign Secretary Albert del Rosario, adding that President Benigno Aquino had decided to impose a ban, too.

“The president has decided that in view of the accelerated depletion of our marine resources, it would be advisable for us to issue our own fishing ban for a period of time,” del Rosario said.


A Philippines foreign affairs spokesman said that no dates or exact areas had yet been set for his country’s ban, but that Philippine ships would remain at the shoal, where they have been for weeks.

The standoff between the two countries began in early April when a Philippine warship tried to arrest Chinese fishermen at the shoal, but was stopped by Chinese marine surveillance vessels.

Du Jifeng, of the Chinese Academy of Social Sciences, told the South China Morning Post that China had banned fishing as a friendly gesture and the Philippines’ response showed that China’s message had been understood and accepted.

“The stand-off has become a standstill, as neither country can come up with an effective solution,” Du said. “I believe it will quickly cool down as the ban comes into effect.”


The cooling off can also be attributed to a recent underlying agreement between China and the U.S. to restrain their respective allies in the region.

“Earlier this month the US and China held strategic and economic talks in which the two agreed to avoid tensions over hegemony in the Asia-Pacific region,” said Chen Hsin-chih, a professor of political science at Taiwan’s National Cheng Kung University.

“China complied with US wishes in condemning North Korea’s recent failed rocket launch, calling it a ‘serious violation’ of UN resolutions, and the US likewise has obliged by remaining on the sidelines of the Scarborough Shoal spat,” Chen said.

According to Chen, the U.S. emphasized that sovereignty conflicts in the South China Sea should be dealt with via peaceful, collaborative, multilateral and diplomatic means and made it “crystal clear” that it does not support any rash actions by the Philippines on the issue.


That said, it should be recalled that the U.S. and the Philippines recently conducted a military exercise on how to retake an oil and gas platform in the South China Sea from “terrorists”.

That prompted speculation that the exercise simulated protection of the disputed Reed Bank off Palawan Province when Manila starts drilling for gas there later this year.

In a word, the Chinese and Philippine bans on fishing in the South China Sea have brought welcome relief from the standoff that has occupied much world attention for the past month. But the bans on fishing make no statement about oil or gas under the sea, commodities that surely are more contentious than fish.

© Glamma Productions Inc. 2012

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Crunch time for Iran

By Eric Watkins

LOS ANGELES, May 14 – International sanctions against sales of Iran’s oil are being felt in the Islamic Republic, a factor which many Western officials attribute to Tehran’s push for renewed talks over the country’s nuclear energy program.

The primary factor in Iran’s desire for talks is the reduction in its exports of crude, which the International Energy Agency sees falling off significantly from levels achieved a year ago – and for very significant reasons.

“1Q12 imports from Iran seem to be around 0.3 million barrels per day (b/d) below 4Q11 levels, and that imports in April look to have fallen more sharply, with much of the drop apparently being funneled into the 0.5-0.8 million b/d that Iran seems to have placed in floating storage,” IEA said.

“Although sources acknowledge that Iranian floating storage has risen over April, total volumes vary between 23 and 35 million barrels (bbl), with up to half of the Iranian fleet possibly engaged in storage,” IEA said.


The agency said that the difficulty in knowing precisely how much of Iran’s oil is being stored comes from the fact that crude oil tankers controlled by the National Iranian Tanker Co (NITC) have reportedly been ordered to routinely deactivate their Automatic Identification System (AIS) transponders.

“Switching off the transponders, even for only a limited period of one or two days, can hamper that tracking of a vessel’s movements,” IEA said, adding that deactivation of transponders permits vessels to obscure destination ports and ship-to-ship transfers in mid-ocean.”

Very clearly, deactivation of the transponders can be used to protect the guilty when it comes to determining just who is buying Iran’s oil as well as how much they are buying. But the more important point is that the obscurity also masks how much oil is going into storage.

The significance of this has not been lost on Nigel Kushner of the UK-based Whale Rock Legal Ltd, who wrote in a recent article for the Mondaq Report, that Iran potentially faces a complete shutdown of its oil industry as it runs out of space to store its produced but unsold crude.


“It is said that 14 of NITC’s fleet of 25 very large crude carriers, each loaded with about 2 million bbl of oil, are now at anchor acting as floating storage, with a further five of Iran’s nine Suezmax tankers, with capacity of one million bbl, also parked offshore with oil aboard,” Kushner said.

“This suggests Iran’s difficulties in selling its oil are getting more acute,” he said, adding that with more than half the NITC fleet at anchorage, Iran’s capacity to export oil is severely curtailed.

“The Iranian shipping sources said that storage tanks on land at Kharg Island, with capacity of some 23 million bbl, are now full,” said Kushner, who drew the ominous conclusion that, “If it cannot find new buyers for its crude Iran’s only option other than floating storage would be to curtail oilfield production.”


In its assessment of the situation, the IEA reported that Iran is due to take delivery of the first of eight new very large crude carriers that are due to be completed in 2012.

IEA did not report when the new VLCC’s are due, but it doesn’t take much of a mathematician to determine that Iran is running out of storage exactly as fast as it is producing oil that does not sell – exactly as fast.

If Iran has to shut down production for lack of space to store that oil, then it surely will face even further problems down the line. Oilfields may or may not respond quickly to efforts at restarting them, if they respond at all.

Little wonder then that Iranian officials are heading to the negotiating tables twice this month, first with the International Atomic Energy Agency on May 14-15, and then with the Group of Five plus One around May 24.


The sanctions against Iran are working. With oil prices relatively high, Iran is not suffering too terribly much at the moment. But if its entire industry faces shutdown, then the Islamic Republic will simply have no oil to sell. Worse, its fields might even become permanently or completely damaged.

That is a steep price to pay for nuclear weapons – something that Iran professes not to want. If so, then the Islamic Republic needs to do just one thing: allow international inspectors to determine that its nuclear program is aimed at nothing more than atoms for peace.

That’s a small price to pay, especially when measured against the loss of the country’s entire oil industry. What responsible leader would wish to be known as inflicting such a catastrophe on his own country and on his own people, not just for now, but forever?

© Glamma Productions Inc. 2012

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Panetta: ‘The time has come’

By Eric Watkins

LOS ANGELES, May 9 – U.S. Secretary of Defense Leon Panetta yesterday made a convincing case for the Senate to ratify the United Nations Convention of the Law of the Sea, saying “the time has come” for America to fully assert its role as a global leader by acceding to the treaty.

“It is the bedrock legal instrument underpinning public order across the maritime domain,” Panetta told a reception hosted by the Pew Charitable Trusts and the Atlantic Council.

“We are the only permanent member of the UN Security Council that is not a party to it,” Panetta said, adding that “China, France, Russia, Britain, other countries, Germany, India, 161 countries – 161 countries have ratified this treaty and approved it.”

International negotiations on the treaty concluded in 1982, and it came into force 12 years later, but President Ronald Reagan opted not to submit the treaty for ratification, due to concerns about its mining provisions. The treaty was later revised, but has met with continued opposition in the Senate.


Panetta said the U.S. is the only industrialized country in the world that has not approved the treaty, which puts the nation at a “distinct disadvantage” especially when it comes to disputes over maritime rights and responsibilities.

“By not acceding to the Convention, we give up the strongest legal footing for our actions,” he said, asking “How can we argue – how can we argue that other nations must abide by international rules when we haven’t officially accepted those rules ourselves?”

Panetta insisted that the country’s business community supports ratification of the treaty, especially companies involved with offshore oil, shipbuilding, commercial shipping, and communications.

“They need this treaty to do business. They need this treaty to be able to do their business and to accomplish their goals,” he said, adding “the same is true when it comes to national security.”


The United States is at a strategic turning point after a decade of war, said Panetta, citing the need to reduce the defense budget by nearly $500 billion over the next decade.

But even as the U.S. reduces its expenditures, he said it still must confront transnational threats that are beyond the ability of any single nation to resolve alone.

Panetta said that a key part of the government’s new defense strategy is to try to meet these challenges by modernizing its network of defense and security partnerships.

Washington is developing such partnerships, Panetta said, to “support a rules-based international order that promotes stability, that promotes security and that promotes safety.”

“That’s also why the United States should be exerting a leadership role in the development and interpretation of the rules that determine legal certainty on the world’s oceans,” he said.


Panetta told his audience that the U.S., a country with one of the largest coastlines and continental shelves on earth, has more to gain from the treaty than almost any other country.

By ratifying the treaty, he said, the U.S. would be in a position to negotiate in its own best interests instead of being absent from the debates over issues of national concern.

“By moving off of the sidelines where we are now and sitting at the table of nations that have ceded to this treaty, we can defend our interests,” he said. “If we’re not there, then they’ll do it and we won’t have a voice,” he warned.

“Treaty law remains the firmest legal foundation upon which to base our global presence on, above and below the seas,” Panetta said. “By joining the Convention, we would help lock in the rules that are favorable to freedom of navigation and our own global mobility.”


The defense secretary also underscored the value of the treaty for other U.S. interests, saying it would help “lock in” a massive increase in the country’s resource and economic jurisdiction, “not only to 200 nautical miles off our coast, but to a broad continental shelf beyond that zone.”

Not least, Panetta said accession would ensure the ability of the U.S. to reap the benefits of opening the Arctic, a region he described as of “increasingly important” maritime security and economic interest.

“We already see countries that are posturing for new shipping routes and natural resources as the Arctic ice cover melts and recedes,” he said, adding that the Convention is the “only means for international recognition and acceptance of our extended continental shelf claims in the Arctic.”

It now remains with 100 U.S. Senators to reach their decision to support this treaty as outlined by the Secretary of Defense. Let’s hope enough of them will see their way clear to put America on an equal footing with 161 other nations around the globe by finally endorsing this Convention of the Law of the Sea

After all, the time has come.

© Glamma Productions Inc. 2012

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