Sunday, April 29, 2007

Russia in Natural Gas Market

April 2007 witnessed the first gathering of globe’s largest producers of natural gas in Doha, Qatar. While many of dignitaries attending Doha meeting knew each other from meetings of another Cartel; OPEC, there was one new addition to their club: Russia. Many including Qatari minister of oil emphasized that Doha meeting was not a step toward creating a cartel[1]. Still the gathering itself increased the discomfort of those concerned with the consequences of establishing a natural gas cartel similar to OPEC[2]. Are their concerns justifiable?

If one believes the statements of those who attend Doha meeting, they were not intended to create a cartel. However they were seeking to clarify the rules of the game and have a cooperative approach to international market of natural gas. Particularly Russian representative was insisting that his country is not in favor of a natural gas cartel[3]. The author intends to believe him.

During last years Russia has utilized its position as a monopolist supplier of European natural gas market to gain advantages of a political nature. A cartel is formed to increase profitability and to influence market price by determining a profit maximizing output. Its success depends greatly on its member commitment their assigned quota[4]. That commitment would restrain Russia liberal use of its monopolist position in Europe. Thus one wonders why Russia should seek to help in establishing a cartel at all.

On the other hand it cannot be denied that Russia has learnt a lot from its dealing with European buyers and has enjoyed the political advantages of its position. It is a fact that Russia is seeking to expand its presence in international gas market. Recently it was announced that Russian companies will build Iran-Pakistan-India gas pipeline, nicknamed Peace Pipeline. Dominating supplies to West, it seems Russia would like to dominate the supplies to East as well. Thus the main question is not that if a cartel of natural gas producers is in cards. It is what role Russia is preparing itself to play in this market, that of a game player or a Stackelberg leader?

[2] BBC April 9th 2007
[4] Carlton D. W. & Perloff J. M., Modern Industrial Organization. 4th Edition Addison Wesley.

Conservatism and Progressivism

Have you ever asked yourself what makes one progressive and the other conservative? Why we can call some politicians reformers and some conservatives? What is the difference about the individuals belonging to these two seemingly different camps?

Reading history one cannot help noticing the paradoxical nature of individuals who advocate the ideals of these two different streams. For example let’s look at Petian and de Gaulle. One is the ruler of Vichy who advocated the ideals of extreme right, governed as a dictators and collaborated with invaders of his country. The other was a rebellious brigadier who went to exile to fight that invader. Petain joined those who blamed democracy for France’s defeat in 1940. De Gaulle never accepted power from any institution but democratic ones.

Two men could not be more different as individuals. Petain married a divorcee in a government office and his marriage was not blessed by the Church until he became the Head of French state. Although he headed an authoritarian regime that advocated some of Catholic Church principles, he himself could not be considered a devoted son of Church[1]. On the other hand de Gaulle was raised by devoted Catholic parents, married a devoted Catholic woman and lived his life according to standards of a catholic family. Yet he advocated democracy.

Today there are many such individuals in any establishment including socio-economic institutions of Iran. One wonders where is the line that divides progressive forces of a society and the forces that stall its progress and growth. May be it is time to measure them with regards to their accomplishments and achievements, rather than their beliefs. Prejudice from any group and any side is certainly a reactionary attitude.

[1] See Charles Williams, 2005, Petain: How the Hero of France Became a Convicted Traitor and Changed the Course of History, Palgrave Macmillan.

Friday, April 27, 2007

Boris Nikolayevich Yeltsin

This week Russia said a controversial farewell to one of his most controversial figures. Boris Yeltsin the first elected President of Russia who helped to bring down the soviet system. In State Duma, Russian version of lower house, communist representatives refused to join in the moment of silence calling him the man who betrayed the fatherland. President Putin was full of praise for the man who “sincerely tried to do everything possible to make the lives of millions of Russians better.”

Good or Bad, Yeltsin’s legacy is not limited to Russia. Russian government handling of foreign aids during his tenure has encouraged debating governance and has highlighted the dramatic way that corruption derails growth and development. It also has motivated many to study the role of institutions in transition economies. It also emphasized that a country could move toward free market in ways different than what other imagines. Peter Boettke (1999) studying Post Soviet Russia found out that the reality of Russian economy has diverged at “rules of the game” level as well as “policy within rules” level from what others had expected at first place. Still we are astonished by Russian economy and there is so much to learn about it.

Historically there is one ironic point about Boris Nikolayevich. Building Soviet system Stalin ensured that no one could ever become a threat to its existence. In his paranoia Stalin murdered opposition intellectuals and Communist party ideologists alike. At the end that robustly built system with KGB in charge of its checks and controls, with so many bright minds in its service and so much influence over sources of power was brought down partially by a drunkard. If that is not ironic I do not know what it is. It sure is very Russian.

Wednesday, April 25, 2007

Wednesday, April 18, 2007

Milton Friedman's Comments on The World Bank & IMF

I recently read one of Milton Friedman’s s speeches. “Why Government is the Problem” adopted from his 1991 Wriston Lecture published by Hoover Institution in 1993. In highlighting the differences between public endeavors and private enterprises and why government is actually the problem he mentioned IMF and the World Bank as examples. I quote:

“The general rule is that government undertakes an activity that seems desirable at the time. Once the activity begins, where it proves desirable or not, people in both government and the private sector acquires a vested interest in it. If the initial reason for undertaking for undertaking the activity disappears, they have a strong incentive to find another justification for its continued existence.

A clear example in the international sphere is the International Monetary Fund (IMF), which was established to administer a system of fixed exchange rates, whether that is a good system or a bad system beside the point. In 1971, after President Nixon closed the gold window, the fixed exchange rate system collapsed and was replaced by a system of floating exchange rate. The IMF’s function disappeared, yet, instead of being disbanded, it changed its function and expanded. It became a relief agency for backward countries and proceeded to dig deeper into the pockets of its sponsors to finance its new activities. At Bretton Woods, two agencies were established: one to administer a fixed exchange rate system and the other, the World Bank, to perform the function of promoting development. Now you have two agencies to promote development, both of them, in my opinion doing far more harm than good.[1]

One wonders if the public sector’s love for its institutes is extended to the agents, whom it appointed to oversee them. Right now it seems public sector’s reason to appoint Dr. Wolfowitz as the president of the World Bank has vanished. However the question is if public sector has a “vested interest” in his person as the president of this organization. Financial Times recent story is interesting: Wolfowitz deputy urges him to quit.

[1] It is Friedman’s idea. Many would disagree.

A Documentary on Texan Muslims

I found this movie on Google, about Texan Muslims. I found it very interesting.

Tuesday, April 17, 2007

Virginia Tech

Virginia Tech, I still remember its magnificent buildings, Drill Field and Pamplin Hall, where Economics department is located. It is such a horrible day to learn that these places so glamorously associated with so many innocent and fond memories for generations of students will remind many of horrors of April 16, 2007. As an alumnus my thoughts are with families and I pray for them to find peace.

Sunday, April 15, 2007

Why Wolfowitz Should Go

Last week developing world as well as the developed one learned that the president of the most important development agency of the world has made arrangement for a companion of his to benefit from a rather large raise, suitable contract terms and guarantees that similar officers of her position could only dream of. This has enraged the World Bank Staff Association and media have reported that many might expect Dr. Wolfowitz to step down and some actually have already called for his resignation. Ironically Dr. Wolfowitz has begun his tenure as the president of the World Bank by adopting an anti-corruption stance that has cut the Bank loans to many developing countries.

While finance ministers of the world gather together to start the annual spring, the powerful board of the World Bank has expressed “great concern” about institution’s future. Meanwhile Dr. Wolfowitz has vowed to stay on the job because he believes in the mission of the World Bank and considers himself capable of carrying it out. However there is no doubt that Dr. Wolfowitz has exaggerated his capability and overestimated his credibility, which is declined significantly since last week revelations.

The writer does not have any doubt that Dr. Wolfowitz sincerely believes in the mission of the World Bank. However for the sake of the very same mission he should let someone else lead this most illustrious organization. Should he survives his presence will damage the World Bank reputation and its credibility in the developing countries.

One should not forget that the success of the World Bank plans and achieving its stated “Millennium Goals” depends on so many factors. More than anything it depends on their acceptance by millions who live in developing countries, most of whom are traditionally family oriented and truly conservative in their habits of life.

It would be extremely naïve to think that everyone in the developing countries welcomes the World Bank projects and plans. Any talk of privatization alarms those who are benefiting from subsidies and governments rents. Any talk of efficiency threatens the government officials who are on the jobs because of their political connections and not because of their efficiency. Any step toward diminishing male-female gaps in employment and income threatens those who believe in their traditional way of life. Thus there is always a battle between those who seek sustainable development and those who consider themselves righteous in preserving the status quo.

Although Dr. Wolfowitz believes in the mission of the World Bank his actions have strengthened the position of those who oppose the World Bank projects. Already too many consider the World Bank to be an agent of an imperialistic power. Many smart politicians use that negative image to cripple its efforts in combating poverty. Dr. Wolfowitz has added to this negative image these actions only justifiable by personal feelings of a nature that millions of people in developing countries do not consider justifiable. Thus he should go to save the mission and to respect those who make this mission a sacred one; the truest and the most noble of all crusades.

Recent Reports:
Washington Post
International Herald Tribune
American Chronicle

Friday, April 13, 2007

Wednesday, April 11, 2007

Be Safe: Protect Yourself against Identity Theft

These are very useful security measure to protect your identity:

1. The next time you order checks have only your initials (instead of firstname) and last name put on them. If someone takes your checkbook, they will not know if you sign your checks with just your initials or your first name, but your bank will know how you sign your checks.

2. Do not sign the back of your credit cards. Instead, put "PHOTO ID REQUIRED".

3. When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the "For" line. Instead, just put the last four numbers. The credit card company knows the rest of the numbers, and anyone who might be handling your check as it passes through all the check processing channels won't have access to it.

4. Put your work phone # on your checks instead of your home phone. If you have a P.O Box, use that instead of your home address. If you do not have a P.O. Box, use your work address. Never have your SS# printed on your checks. (DUH!) You can add it if it is necessary. But if you have it printed, anyone can get it.

5. Place the contents of your wallet on a photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel Keep the photocopy in a safe place. I also carry a photocopy of my passport when travel either here or abroad. We've all heard horror stories about fraud that's committed on us in stealing a name, address, Social Security number, credit cards.
In the event of the theft of your wallet or cards:

A. We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card numbers handy so you know whom to call. Keep those where you can find them.

B. File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).

C. Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and Social Security number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the Internet in my name. The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.

D. Now, here are the numbers you always need to contact about your wallet, etc., has been stolen:
1.) Equifax: 1-800-525-6285
2.) Experian (formerly TRW): 1-888-397-3742
3.) Trans Union: 1-800-680-7289
4.) Social Security Administration (fraud line): 1-800-269-0271

Tuesday, April 10, 2007

Some Links

On Iran:
Sinopec won't buy LNG from Iran because of high price
Pakistan clears Iran-Pakistan-India gas sharing arrangement

On Afghanistan:
I was watching this documentary on Sleeping Buddha of Bamyan, I did a search online and found this: wonder if anyone knows anything about it, did they uncover it? It must be amazing.

On Natural Gas Producers Summit in Doha:
No Cartel but Cooperation

Monday, April 09, 2007

Russia Oil & USA Future

I found this paper by Ratliff from Hoover Institute:

very interesting article

I hate the name 'Cartel'

Leading Gas Exporters have gathered in Doha, Qatar. Qatari Oil Minister Abdullah al-Attiyah told reporters: "I hate the name 'cartel.' We are not a cartel," he added that they have gathered to “consider our interests." It seems this former head of OPEC does not have good memories of running a cartel.

However many teachers of industrial organization would point out to his highness that “gathering to consider your interests” is exactly what producers do in an oligopoly market. It might not result in a cartel. But it will make the game cooperative.
Qatar, Iran, Turkeministan and Russia are world's major providors of natural gas.

Dr. Larijani's Latest Interview

Dr. Ali Larijani played a very important rule in finding a diplomatic solution to secure the release of British Sailors last week. He is the secretary of Iran’s National Security Council. His latest remarks are very important:

“Now that Iran’s nuclear cycle is complete, Tehran is prepared to start unconditioned talks with the West to reach an agreement.”

Many things had been said about last week events. However many observers missed one point. Iran is ready to engage in serious negotiations through what Tony Blair calls: “Silent Diplomacy”. Dr. Larijani already has announced that he will hold talks with Javier Solana soon.

When Clergies Talk about Iran

Media have reacted to clergies’ who have commented positively on Iran:

1. Australian Mufti
2. British Bishops

I might understand Australian media's and politicians' reaction to Mufti's comments. But I cannot understand why British Bishops have been criticized. Many forget that the main presumption is not shared by both sides.

Traveler Report from Iran

This Guardian Article is highly recommended:

Thursday, April 05, 2007

Craig Murray

Thanks God that sailors are safely back home with their loved ones.

During last two weeks I discovered Craig Murray, a career diplomat whose courageous conduct in Uzbekistan earned him an early dismissal. He has a weblog: where he writes. I enjoy reading his notes and his professional approach. He was one of the first diplomats to point out the reality of maritime border between Iran and Iraq. His notes are very interesting. This is his last note on the situation that makes me think a lot:

Nice Suites!

Reading BBC comments section one can’t help noticing how many people have commented on the suites the British crew members were wearing while meeting President Ahmadinejad[1]. Many commented on how much fashionable and well tailored these suites were. Iranians have a great taste when it comes to garments and suites.

Iranian tailors and domestic suite makers still have a considerable share of attires market in Iran. Traditionally Iranian families buy fabrics and have a family tailor make a garment or suite. The history of a tailor profession after revolution is a classic microeconomics example of demand and supply.

In post Islamic revolution years due to fluctuations in imports and exports and ever present desire for the latest fashions the demand for home made garments increased when Iranian families start to substitute the imported brands with home made outfits. Economically buying fabrics and having a garment made customized was and still is less expensive than buying brand names.

On the other hand inflation reduced households’ real income thus forcing many women to seek opportunities to generate income. Making garments for other women is historically a female dominated domain in Iran. The intimacy that it requires disqualifies many men from offering such services in an Islamic society. Thus many women who were seeking employment found an industry where there was little barriers to enter, and the increased in demand for the product provided them with an increase in the value of marginal productivity.

1980’s and early 1990’s saw a booming home based industry. Many relied on the word of mouth to find the right tailor, who always happened to be missing deadlines by a few days to a few weeks. However liberalizing Iran’s markets and opening up free trade zones of Kish and Qeshm increased the competition and from mid 1990’s Iran’s tailors faced a decline in demand for their services.

Today Iranian tailors are in tough competition with brand names, imported outfits and travelers’ suitcases imports, which include outfits and clothes from Turkey, Europe and Dubai. Still if one wants to look really good in Iran, he or she always calls on a family tailor. The occasion could be a wedding, a birthday or New Iranian year, Norouz. After all to have any social status one has to look good in Iran.

[1] According to IRNA News Agency they also were offered with gifts from President and IRGC Navy before leaving Tehran. These included some handcrafts, pistachio, domestic candies, books, CDs and sacks made of Tormeh, a classic Iranian textile. Iranians might be rough looking but they do have excellent manners as hosts.
[2] Photo is from Fars Agency

Wednesday, April 04, 2007

Some Reports

Dr. Ali Larijani's Interview:

Very interesting reports:

I am very happy for the families.

Seriously You are Free to Go

President Ahmadinejad met with some of the sailors after his news conference, shook their hands and told them that they are free to go. It is said that they would fly out of Tehran tomorrow morning.

Iran President to Free the British Sailors
In his first news conference of Iranian New Year and after spring holidays, President Ahmadinejad announced that British Sailors are free to go. He said that Iranian government has come to this decision considering the approaching occasions; Prophet Mohammad’s birthday, Passover and Easter. He told correspondents that Iranian government offers this decision to the people of Great Britain as an Easter present.

Rough Translation from ISNA and IRNA news agencies reports.

Tuesday, April 03, 2007

Nighline: Secret War Against Iran

Read the report:

And name the country that supported Taliban and Al-Qaedeh, is the main recruiting field for radicals who are destabilizing Afghanistan and is supporting groups who attack neighboring government officials and law enforcement officers.
Hint: It is not Iran!

The Third Task Force on Its Way!

USS Nimitz Strike Force is on its way to Persian Gulf, bringing the number of US Navy task forces in Persian Gulf to three. The strike force includes the cruiser Princeton and the destroyers Higgins, John Paul Jones, and Pinckney. This could encourage Iranians to believe that this administration is indeed determined to attack Iran before summer.

Another Link:

Some Articles

Washington Post: Blair on Iran
IRNA: Abducted Iranian Diplomat Released
President Ahmadinegad News Conference Today
Reuter: Interesting Summer!

Undersecretary Burns Testimony to Senate Foreign Relations Committee on Iran:

My notes: he got to be kidding on citizens’ exchange! Iranian students still have the most difficult time obtaining visa to go home and visit their families.

Monday, April 02, 2007

Technical Issues Regarding Reading a Map

Please read Carig Murray's last post:
As you may notice there are several interesting points here. No one can say certainly that the British sailors were not in Iranian waters given the present information. This is a complicated technical issue. I think today developments and Mr. Larijani's suggestion to form a panel investigating the matter is indeed good news. It also could be a first step toward determining Iran-Iraq maritime borders in Northern Persian Gulf, a step that would eliminate a potential source of conflict between two neighboring countries and prevent such incidents from happening in future.