When Global Energy Politics Being Currency War

By:

TASNIM ILMIARDHI

Energy Legal Practitioner

Jakarta, Indonesia

tasnim.ilmiardhi@yahoo.com

The energy is a necessity in a country to sustain economic activity in the country. Become an important and strategic for a country to control and manage sources of energy. Control and management of energy sources will be a bargaining position for a country. Moreover, if the country's own, control and manage energy resources that are not owned by other countries, and will make the country a superior among other countries. For some countries the main source of energy is a commodity to shore up the country's finances, become the mainstay export products to meet the needs of the state budget and the main target of foreign exchange. But for some other state, void of energy sources is a burden on state finances, with continuous import of energy to meet energy needs. Energy became one of the issues inside to keep the bargaining position of a country.

The needs of energy in a country often cause pressure on domestic economic conditions of the country. Not even a little, in the fulfillment of energy needs, the country was forced to make an attempt of aggression, either openly or indirectly, militarily, economically and in other ways a more persuasive.

Top Countries Natural Gas Production & Consumption 2014

Rank	Natural Gas Production		Rank	Natural Gas Consumption
	Country	bilion cubic metres		Country	bilion cubic metres
1	US	728.3	1	US	759.4
2	Russia	578.7	2	Russia	409.2
3	Qatar	177.2	3	China	185.5
4	Iran	172.6	4	Iran	170.2
5	Canada	162	5	Japan	112.5
6	China	134.5	6	Saudi Arabia	108.2
7	Norway	108.8	7	Canada	104.2
8	Saudi Arabia	108.2	8	Mexico	85.8
9	Algeria	83.3	9	Germany	70.9
10	Indonesia	73.4	10	UAE	69.3

Source: British Petroleum Statistic June 2015

Even in the Middle East which is an oil-rich region with the potential of reaching 49% of the world's oil needs, the seizure of oil and natural gas resources is a cause of conflict which is dominant among these countries. Conflicts caused by competition over oil resources, will usually trigger a global conflict. Military aggression by Iraq to Kuwait and the United States military aggression on Iraq, is the embodiment of the control of oil resources and infrastructure as well as access to global distribution.

Top Countries Oil Production & Consumption 2014

Rank	Oil Production		Rank	Oil Consumption
	Country	thousand barrels daily		Country	thousand barrels daily
1	US	11644	1	US	19035
2	Saudi Arabia	11505	2	China	11056
3	Russia	10838	3	Japan	4298
4	Canada	4292	4	India	3846
5	China	4246	5	Brazil	3229
6	UAE	3712	6	Russia	3196
7	Iran	3614	7	Saudi Arabia	3185
8	Iraq	3285	8	South Korea	2456
9	Kuwait	3123	9	Canada	2371
10	Mexico	2784	10	Germany	2371

Source: British Petroleum Statistic June 2015

In the development of aggression or modern warfare in action will consider the impact and involve the role of many parties, including capital strength, financial markets, agreement main business, big business tycoons, geopolitical, intellectual and technology, science and culture, speculation, information and media, war proxy, non-governmental organizations, human rights, prestige, sanctions, military, as well as other matters, in accordance with the interests and goals to be achieved.

Top Countries Coal Production & Consumption 2014

Rank	Coal Production		Rank	Coal Consumption
	Country	million tonnes oil equivalent		Country	million tonnes oil equivalent
1	China	1844.6	1	China	1962.4
2	US	507.8	2	US	453.4
3	Indonesia	281.7	3	India	360.2
4	Australia	280.8	4	Japan	126.5
5	India	243.5	5	South Africa	89.4
6	Russia	170.9	6	Russia	85.2
7	South Africa	147.7	7	South Korea	84.8
8	Colombia	57.6	8	Germany	77.4
9	Kazakhstan	55.3	9	Indonesia	60.8
10	Poland	55.0	10	Norway	52.9

Source: British Petroleum Statistic June 2015

The Axis of Russia-Turkey-Iran

Cooperation between Russia and Turkey by Russian energy companies Gazprom and Turkish Botas in building distribution channels of gas through a pipeline from southern Russia via the Black Sea to Turkey (the turk streaming pipe line) will make Turkey an important part in the distribution channels of world energy, in particular the European Union and Asia. Turkey has an additional bargaining position of the EU countries in the path of Euro-Asian energy distribution.

Cooperation creation of pathways between Russia-Turkey energy makes infrastructure integration into economic integration, and the lock freedom of space for the European Union in meeting their energy needs.

the turk streaming pipe line

Turkey is an importer of gas from Russia's second largest after Germany. In 2013, Russia has exported 26.7 billion cubic meters of gas to Turkey, and is expected to reach 30 billion cubic meters of gas in 2015.

Construction of the turk streaming pipe line and the strengthening of Russian-Turkish cooperation is expected to be able to reduce the bloody conflict in Syria. If the Iranian natural gas can be integrated into the mainframe of turk streaming pipe line through distribution channels other than the territory of Iran, then Turkey-Russia interests increasingly accommodated in tune with the interests of Iran.

It has long been the state of Iran and Syria became for Russia's closest ally in the Middle East region, both for political and economic interests. Trade economic cooperation between Iran-Turkey and Russia-Turkey has a pretty good understanding between countries by not allowing political differences to the crisis in Syria.

In addition, Russia and Turkey agreed to establish cooperation in the field of nuclear energy. Russia is willing to help Turkey in the construction of nuclear power plant (NPP) with a capacity of 1200 MW amount of USD 20 billion in Akkuyu near the Mediterranean Sea.

Russia-China alliance

East Asia showed faster economic growth than any side in the face of this earth. Geography becomes an entry point for a cooperation between Russia and China, in addition to potential market appeal in Far East Asia and Central Asia.

With the largest population on earth as well as the country with the largest reserves in the world, China is a potential market. China's economy today has made this country a country with substantial energy consumption. In addition to the mega deal Sino-Russian in natural gas, the purpose of the cooperation is a long plan in building an integrated economy with the Asian region, particularly in Central Asia.

Russia and China have had an agreement fulfillment and development of energy infrastructure for energy distribution lines. In the agreement, Russia would be to supply 5 billion barrels of oil to China that are in the East China Sea, and will be distributed through a 2,400 kilometer pipeline built linking Angarsk in East Siberia, Russia, to Daqing, Heilongjiang Province, China.

Cooperation in the field of energy is aligned with the strategic interests of Russia and China under the Shanghai Cooperation Organization (SCO). A security cooperation among the five countries of China, Kazakhstan, Kyrgyzstan, Tajikistan and Russia signed in Shanghai, China, with the aim of establishing security in Central Asia and introduced into the world of international stability of the region, as well as to strengthen political and economic relations with countries Central Asia.

Through the help of China Russia wants to reassert its presence in the Central Asian region after the war in Afghanistan and the collapse of the Soviet Union, Russia considered that cooperation with China will be able to help Russia maintain its influence in Central Asia, especially against the US presence in the region.

In addition, China has also become a major market in arms trade with Russia where the Russian military industry and commerce can afford to Russia from bankruptcy. Cooperation with China has also successfully introduced Russia to the countries of Asia-Pacific that directly would bring economic benefits to Russia.

As for China to cooperate with Russia have some consideration. As a major consideration for China in cooperation with Russia is in the interests of China's domestic energy supply. Cooperation undertaken by Russia resulted in the fulfillment of energy for China at low prices, stable, and in the long term.

Project East Siberian-Pacific Ocean oil pipeline (ESPO) between China and Russia is the realization of the strategic alliance, which continues to build the economy in Central Asia. China for energy is an essential requirement for economic growth, while the Russian energy is the force to achieve geopolitical goals.

Russia-China Alliance

Interests of Russia	Interests of China
As the energy market, weapons and other potential commodities, China is becoming the destination of export Russia	Russia as an alternative energy needs at a low price compared with the Middle East
Energy management in Central Asia	Energy management in Central Asia
Maintaining Russian dominance in Central Asia after the war in Afghanistan and the collapse of the Soviet Union	Delivery of mission China as a friendly country and establish cooperation with other countries
Strengthen political and economic relations with the countries of Central Asia	Strengthen political and economic relations with the countries of Central Asia
China as a partner balancing of dominance and power to United States	Eliminate the image that China will become a threat to other countries
Support veto in the UN	Support veto in the UN
Introducing Russia to Asia-Pacific countries	Using the influence of Russia to open up the European market

The cooperation between China and Russia is a strategic partnership to form a concept of China as a friendly country and establish cooperation with other countries, in accordance with the agenda of China as a 'peaceful development'.

In the United Nations (UN), Russia to China is a country that still has the international influence and have veto power. Russia takes the existence of related Chinese veto against UN resolutions or decisions that harm for China. 

Energy prices down and Ruble Fall

Global Energy Politics has become one of the main features of modern warfare. Not only energy prices but also the financial markets and the national currency to be a factor in this modern war. An example is the manipulation of the decline in energy prices fueled by an abundance of oil supply in the global market, coupled with the siege on the value of the Russian ruble currency. Bidirectional deliberate attacks aimed at Russia is done by trying to cut Russia revenue through economic sanctions and manipulation of the market for the price reduction.

Until present, the EU is a potential market with sufficient purchasing power for energy producers. But the financial crisis of Greece has made concern for countries in Europe will be the impact of the crisis. This makes countries in Europe more vigilant in financial management, which affect the purchasing power of European countries for energy commodities. Besides China's economic slowdown reduces demand increasingly global energy market.

Top Countries Nuclear Consumption 2015

RANK	COUNTRY	NUCLEAR ELECTRICITY GENERATION 2014		REACTORS OPERABLE Aug 2015		REACTORS UNDER CONSTRUCTION Aug 2015		REACTORS PLANNED Aug 2015		REACTORS PROPOSED Aug 2015		URANIUM REQUIRED 2015
		billion kWh	% e	No.	MWe net	No.	MWe gross	No.	MWe gross	No.	MWe gross	tonnes U
1	USA	798.6	19.5	99	98792	5	6018	5	6063	17	26000	18692
2	France	418.0	76.9	58	63130	1	1750	0	0	1	1750	9230
3	Russia	169.1	18.6	34	25264	9	7968	31	33264	18	16000	4206
4	South Korea	149.2	30.4	24	21677	4	5600	8	11600	0	0	5022
5	China	123.8	2.4	26	23144	25	27393	43	49970	136	153000	8161
6	Canada	98.6	16.8	19	13553	0	0	2	1500	3	3800	1784
7	Germany	91.8	15.8	8	10728	0	0	0	0	0	0	1889
8	Ukraine	83.1	49.4	15	13107	0	0	2	1900	11	12000	2366
9	Sweden	62.3	41.5	10	9487	0	0	0	0	0	0	1516
10	United Kingdom	57.9	17.2	16	9373	0	0	4	6680	7	8920	1738

Sources: World Nuclear Association (WNA) 2015; International Atomic Energy Agency (IAEA) 2015

The discovery of new energy sources of shale gas in the United States add new variant types of energy and became a competitor for energy that already exists, and makes America a one prospective investment destination for the energy sector.

Energy production that remain and even tend to grow, continue to meet the financial needs of energy-producing countries, has made supplies of energy commodities on the world market to be plentiful. Abundant energy supplies on the world market has made the price of energy to be down, resulting in a decline in the value of the currency from energy-producing countries, including Russia in this regard.

The high price of energy that never happened, has made Russia into a higher bargaining position against the EU in terms of energy supply, it is also what makes the European Union is on the brink of energy crisis, and making energy prices increasingly soar.

The weakening of the Russian ruble is expected to reduce the bargaining power of the Russian state on European Union that has been dominant. In terms of energy supply, the European Union has a sizeable dependency on Russia.

The impact of the weakening of the Russian ruble will make the price of energy from Russia to be down, and make the European Union countries becomes easier to get energy. For Russia the decline in the value of currencies Ruble make the country increase energy exports as a source of income to meet the needs of the state budget.

Yuan Renminbi and Rupee in a crowd Asia

The most important Asian continent in the world economy. Of the ten countries that have the largest reserves in the world, seven countries are among the countries in Asia, and five among the Asian countries are located in East Asia, these countries are China, Japan, Republic of China (Taiwan), South Korea and Singapore. Five countries a significant impact on Asian economies. Economic and political conditions and policies issued by the five countries of concern for neighboring countries.

In addition, the three countries with the largest population in the world is in this continent. China, India and Indonesia are the countries with the largest population in the world and is a potential market for world trade.  

As the most populous countries of the world and the country with the world's largest foreign exchange reserves, as well as the second largest energy consumer in the world, China has an agenda to make the Yuan Renminbi as a reserve currency in the International Monetary Fund (IMF).

China as the most populous country and the largest reserves in the world into one of Asia's regional economic driving. With foreign exchange reserves amounted to USD 3,771,347 million and a population of 1,306,148,035 inhabitants, China is a potential market and it is expected most of the countries in the world.

Top countries by Population No Country Population 1 China 1,306,148,035 2 India 1,065,070,607 3 Amerika Serikat 297,336,946 4 Indonesia 259,966,894 5 Brazil 184,101,109 Sources: CIA World Factbook (2014)

But the devaluation of the Chinese currency against the US dollar, has made shake the money markets of Asia and some countries in other parts of the world. The background of China devalued the Yuan Renminbi against the US dollar on August 11, 2015 are:

1.  Export July 2015 decreased 8.3%

2.  The oil prices continue to fall

3. The dollar be strong as impact of the expectations of interest rate increase from the US central bank-Federal Reserve (The Fed) to make investors will leave China

China has made financial action by the devaluation openly in order to pursue economic growth began to slow. Countries surrounding economic potential, such as India, Indonesia, Japan, South Korea, Singapore, which although not affected become idle. Countries which have economic cooperation with China to depreciate against the currency, the value of which is quite varied.

India is a country that has a strategic and economic partnership with China experienced a depreciation of the currency, as a result of the devaluation of the Yuan Renminbi action. By 2015 India do economic agreements with China with a value of USD 100 billion and USD 3 billion of the deal for the aircraft, telecommunications and infrastructure sector.

Joining India in strategic security cooperation pact of the Shanghai Cooperation Organization (SCO) led by Russia and China have made the region become increasingly strategic in the world of political escalation, in addition to the economic potential that remains dominant.

Top countries by foreign-exchange reserves & Export-Import

Rank	Country	Foreign Exchange Reserves/FER (Millions of US$)	Export (Billions of US$)	Import (Billions of US$)	Remark/ Figures as of
1	China	3,771,347	2,34	1,96	FER Jun 2015
2	Japan	1,242,935	710,5	811,9	FER Jun 2015
3	Saudi Arabia	672,106	359,4	162,2	FER Jun 2015
4	Switzerland	600,180	388,9	333,8	FER Jun 2015 Europe Region
5	Republic of China  (Taiwan)	426,398	318	277,5	FER Jun 2015
6	South Korea	374,749	572,7	525,5	FER Jun 2015
7	Brazil	368,252	242,7	241,9	FER Jul 2015 South America
8	Russia	364,600	520,3	323,9	FER Aug 21, 2015 Europe Region
9	India	351,920	342,5	508,1	FER Aug 28, 2015
-	Hong Kong	340,768			FER Jun 2015 Teritory of China
10	Singapore	253,280	409,5	366	FER Jun 2015

Sources: International Monetery Fund (IMF) 2015; CIA World Factbook (2014)

India itself also has a strategic agreement with Russia in various fields, such as energy, natural resources, military and nuclear cooperation. In 2015, India and Russia do trade agreements amount USD 30 billion.

With the capacity and potential, India is one of the major force in Asian crowd. India is a country of strategic and economic cooperation with China and Russia. Cooperation which creates a significant force, both in the economic, political, and military technology, and improve the bargaining position of the countries involved in the agreement, either individually or jointly, to other countries.

Currency war, unconventional war

In modern terminology, the war is not just a verb, but extend and contribute to the adjective. War is a competition dominance and superiority are destructive, to conduct the defense and/or attacks on symbols of power and/or interests of a country.

Unconventional war more dynamic with more varied combat spaces by involving many parties shifted or varied as symbols of the existence of a country to adjust the goals or interests of the state. Sometimes, unconventional war negated sovereignty and conventional defense.

The diversity of roles and interests will certainly influence the shape of an unconventional war that will be done. Economic interests, political, social, cultural, and ideological will be collaborated with activities in the field of capital markets, finance and banking, conglomerate, global trade, science and technology, the development of public opinion and mass communication, information and social media, internet and network news, diplomacy and international institutions, countervailing international alliances, government, non-governmental organizations, political identity, human rights, nationalism, psychological as well as military tactics.

The currency was devalued

or depreciate against the dollar in 2015

No	Country	Currency	Remark
1	Russia	Ruble	·  Down 46% during 2015 ·  Cooperation with China in the fields of economy and security ·  Members of the Shanghai Cooperation Organization (SCO)
2	China	Yuan Renminbi	·  Down 1.08% ·  Cooperation with Russia in the field of economics and security ·  Members of the Shanghai Cooperation Organization (SCO)
3	Kazakhstan	Tenge	·  Down 26% during 2015 ·  Cooperation with the China-Russia economic and security ·  Members of the Shanghai Cooperation Organization (SCO)
4	Tajikistan	Somoni	·  Down 10% during 2015 ·  Cooperation with the China-Russia economic and security ·  Members of the Shanghai Cooperation Organization (SCO)
5	Kyrgyzstan	Som	·  Cooperation with the China-Russia economic and security ·  Members of the Shanghai Cooperation Organization (SCO)
6	Armenia	Dram	·  Down 15% during 2015 ·  Allied Russia
7	Turkmenistan	Manat	·  Down 19% in 2015 ·  Allied Russia
8	Saudi Arabia	Riyal	·  Down 1% ·  Export of energy to China ·  Oil price fall
9	India	Rupee	·  Down 1.7% ·  Export of commodities to China ·  Members of the Shanghai Cooperation Organization (SCO)
10	Indonesia	Rupiah	·  Down 1.4% ·  Export of commodities to China
11	Malaysia	Ringgit	·  Down 2.66% ·  Export of commodities to China
12	Vietnam	Dong	Export of commodities to China
13	Turkey	Lira	·  Down 3.95% ·  Establish strategic cooperation in the field of energy with Russia
14	Egypt	Pound	Slowdown of global trading impact to the traffic of vessel in Suez Cannal
15	Nigeria	Naira	·  Down 20% during 2015 ·  Export of energy to China
16	South Africa	Rand	Export of commodities to China
17	Zambia	Kwacha	Export of  commodities to China
18	Colombia	Peso	·  Down 2.02% ·  Export of coal to China

Source: various sources 2015

In progress , the competition aims to demonstrate the dominance of economic interests into activities in fulfilling the needs of the country. However, not infrequently a weakening currency countries are doing in order to make exports more competitive in the global market. Higher export volume will spur economic growth, on the other hand makes imports more expensive, which affects consumers prefer local products rather than imported products.

Increase in this trade, generally translates into a lower deficit in the balance or surplus, higher economic performance, and faster GDP growth. Stimulated of monetary policy that typically result in a currency becomes weaker also have a positive impact on the capital and domestic markets for real estate, which in turn boost domestic consumption through the addition of wealth.

It is not too difficult to pursue growth through currency depreciation, either openly or covertly, and it is considered as reasonable. Usually the depreciation of currency of a country, will be followed by similar action from several countries, especially in neighboring countries, as a competitive devaluation policy for precaution in protecting the interests of each country's economy.

Top Currency No Currency Country 1 Dollar US 2 Pound sterling British 3 Euro Europe Union 4 Yen Japan Sources: International Monetary Fund (IMF) 2015

Currency war is a war which refers to a situation in which some countries are trying to deliberately depreciate the value of their domestic currency in order to stimulate their economies. Despite currency depreciation or devaluation is a common occurrence in the foreign exchange market, but the characteristics are quite visible from the currency wars are a significant number of countries that may simultaneously be involved in an attempt to devalue their currencies at the same time. Currency war triggered by exhaustion of all options to stimulate the economic growth of the country.

Negative Impact of Currency War:

1. The rate of currency depreciation which may be greater than expected, could lead to rising inflation and capital outflows and deter foreign investment.
2. A currency war could lead to the emergence of greater protectionism and create barriers to trade, which will certainly have an impact on the disruption of global trade.
3. For company competitive devaluation may increase the volatility of the currency and cause the cost of hedging is higher.
4. In the long term, the devaluation of the currency can reduce the productivity of the industry, this is because the import of goods, capital and machinery to be too expensive for local businesses. If the currency depreciation is not accompanied by structural reform of the economy as a whole, can cause damage to industrial productivity and the business climate.
5. Damage to the productivity of industry and business climate could cause the destruction of the economy of a country that resulted in the dissolution of state and government.

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