JAMES A. BAKER, III
Welcome to the Baker Institute. We’re delighted you’re here this morning, and I thank you, Isabel, for that introduction. You know, folks, it’s a real joy for me to be recognized today by Isabel Wilson, because she is one of my closest and dearest friends; I started to say, one of my oldest friends but at our age, that word just doesn’t seem right.
But after all these years of friendship I have a secret about Isabel that I can share with you. I think I can probably trace the development of whatever diplomatic skills I have to a weekend that Isabel and I, and a half a dozen of our college buddies, spent along the Texas-Mexican border after a particularly spirituous—not spiritual, but spirituous—evening in Piedras Negras, when I had to talk our way back into Texas. Trust me, negotiating with Arabs and Israelis was much easier than my discussions that night with the United States Customs people at the border; I was having a little difficulty with my words, and the rest of my friends were not speaking at all.
Isabel of course is more than my close friend; she and her husband Wally have been and they remain invaluable supporters of the Baker Institute. As a matter of fact, their dedication to our Energy Forum is a major reason it is the premier program of its kind anywhere.
It’s a real pleasure, ladies and gentlemen, for us to host you here today. Your Society makes significant contributions to the discussion of issues that affect our State, our nation and indeed the world; and we are honored to be joined by a few dedicated Texans who have contributed so much to our State’s success.
I see our junior U.S. Senator, John Cornyn, and John, we’re delighted to have you with us; I understand that David Dewhurst, our Lieutenant Governor, is registered, I don’t see him out there but I would recognize him and Senator Cornyn and all of the other distinguished public officials who are with us.
Your organization is dedicated to advancing knowledge and understanding. I only made one race for public office myself; that’s why I admire people like John Cornyn who go out there and face the voters and get elected. I always found that the appointed route was an easier route to take. But I never will forget running for Attorney General of Texas some 30 years ago, and I was in a small town out in West Texas and I was making my pitch to the group, a small group there. And I said, “Two of the most significant problems facing the State of Texas today are ignorance and apathy.” And I looked at this grizzled old rancher in the front row, and I said, “What do you think about that, sir?” This guy looked up at me and he said, “Well, now,” he said, “I’ll tell you, Sonny. He said, I don’t know, and I don’t care.” That’s a true story, John. That’s not made up. Elizabeth Dole tried to steal that story from me some years ago.
Your forum today, “U.S. Energy in a Global Context” is certainly a timely topic, as anybody who reads the newspapers and watches television or drives a car can tell you. Here we sit today with crude oil hovering around $90 a barrel and the world’s financial markets fluctuating wildly, partly because I think of those skyrocketing oil prices.
Global demand for oil is expected to increase by more than 50 percent during the first 25 years of this century as we see China and India and other major emerging economies accelerate their own development. Our own consumption of petroleum, based largely on our transportation sector’s huge reliance on it, will increase I think at a slower, but still at a very substantial rate.
Houstonian Matt Simmons has predicted that the world may soon reach peak oil production if it hasn’t already done so. Now, whether Matt is right or not, I do think one thing is certain: developing safe and reliable energy sources to augment and supplant fossil fuels is a challenging test, and we are very much behind schedule.
Now, I’m not an expert on energy matters, and I don’t stand here before you today pretending to be; so I won’t discuss how we got to this critical juncture. And I’m sure not going to make any predictions about the future of oil prices; I used to be very leery of doing that when I was Treasury Secretary, and the same with respect to interest rates, and I’m even more leery of it today, now that I’m no longer privy to a lot of the information I used to be privy to.
Instead, I want to focus on four geopolitical factors that could jeopardize the flow of oil, and thus the price that we have to pay for it. I then want to briefly discuss ways that I think American foreign policy can be practiced so that we can effectively address the global challenges that confront us, including the global challenge of energy.
The first factor is that more and more petroleum reserves today are under the control of national oil companies. According to the International Monetary Fund, national oil companies had roughly 50 percent of global oil production in 2005, and more than 70 percent of global oil reserves. And those shares are expected to increase. While that is not necessarily bad, it does create the very real possibility that oil will serve as a bargaining chip for politicians who have non-commercial interests. In fact, I think you need look no further, frankly, than Venezuela, or perhaps Iran, to understand the point I’m trying to make about the potential for disruption.
A second factor that could limit oil supply is international terrorism. We should not underestimate the determination of Al Qaeda, and other terrorist groups, to inflict damage on the global economy. Energy supplies and installations provide those groups with very valuable targets. We know that in December ‑ we know this for a fact - in December 2004, Osama bin Laden directed his followers to attack oil facilities as part of his jihad against the United States and the West. To date, fortunately, we’ve been spared on this count, but we must never forget that what happened in New York and in Washington on September 11, 2001, can just as easily happen to the world’s energy centers.
The third geopolitical factor that could disrupt oil supply is regional conflict, particularly conflict in an area of the world where it has often taken place, the Middle East. Last year, the Iraq Study Group heard from ambassadors from countries that neighbor Iraq. And many of these ambassadors told us they have a very serious concern about this. They told us that if the instability in Iraq should spill over to other Gulf states, Sunni-Shia clashes might well erupt all across the Islamic world. Although security in Iraq has improved considerably I think since then, such clashes remain a possibility. If they were to occur, we could expect I think a sharp drop in oil production, followed by a painful spike in oil prices.
And the fourth factor I want to mention is the possibility of monster hurricanes and storms that many scientists predict will be an unwelcome byproduct of the problem of global warming. The rigs and refineries that satisfy about one-third of the United States’ oil needs are all along the vulnerable Gulf Coast. If Class 5 hurricanes became the norm, rather than anomalies, there could be many more episodes like the one which occurred after Hurricane Katrina, when our gasoline supply dropped 8 percent, and our prices rose to about $5 a gallon in some parts of the country.
Now, extreme weather patterns of course are not a geopolitical factor; they’re really not geopolitical in nature. But finding remedies to an issue like global warming certainly is. Dealing with global warming is just one of a complex matrix of global challenges that I think demand serious and prolonged attention from countries that are becoming more and more interdependent. Those global challenges also include but are not limited to the question of terrorism, the spread of weapons of mass destruction, mass migrations of workers in many countries around the world, and economic growth and stability, or the lack thereof.
Now, I would not suggest that the United States, nor for that matter even a small group of developed countries, has the wherewithal to effectively address these challenges. That’s going to demand the sustained cooperation of many, on the international stage. But American leadership I would submit to you is going to be critical, and going to be a critical component of coordinating the myriad of major efforts that’s going to be required.
So this morning let me offer you a few ideas: ten maxims, if you will, that could help the United States find its way to responsibly address these global challenges. And the first maxim I would mention to you is that I think we need to be comfortable as a nation using our power. The United States occupies a uniquely preeminent position in world affairs today. You got to go back a long, long, way to find a time when one single nation occupied as preeminent a position in global affairs as the United States does today.
So maxim number one, we have to be comfortable using our power. In a very real sense I would submit to you we have no alternative, because if the United States does not exercise power, others will. We simply have too much at stake in the world to walk away from it, even if we could, and we can. I think this was true before 9/11, but it is even truer today as we combat those twin scourges of international terrorism and the proliferation of weapons of mass destruction.
We should also remember that the United States has proven itself to be on balance; we have proven ourselves to be a very powerful force for good in world affairs. That doesn’t mean we’re perfect; we’re far from that. But we are a force for good. I remember when I was Treasury Secretary and when I was Secretary of State, how pleased people were when the United States was engaged, and how everybody wanted us to be engaged in international affairs; and everybody understood and recognized that we did not get into somebody else’s sandbox or take over somebody else’s area of influence.
You look at the major global conflicts of the last century: World War I, World War II and the Cold War, and the United States really played a historic role in defeating imperialism and totalitarianism. Other countries depend upon United States’ leadership, and when there is no leadership from the United States, there is a serious vacuum out there. This of course is most obviously true of our allies in Western Europe and East Asia and elsewhere. But even countries that are sometimes anything but friendly, often seek our engagement.
Second maxim: We need to recognize that even U.S. power is limited. As powerful as we are, we cannot solve every problem in the world. Iraq, for instance, has shown the limits of our military strength. But our power is limited in other areas as well. As strong as our economy may be, and it is terrifically strong, we represent over 25 percent of total world GDP, we still need the cooperation of others in such areas as expanding trade and investment, and in macroeconomic policy coordination.
The same of course is true in the diplomatic arena, where our influence can be constrained, when we’re not able to persuade others. Securing the support of China and Russia for instance, is going to be critical in crafting a response to Iran’s nuclear programs.
Third, we should be prepared to act unilaterally when the situation requires it. Unilateral action after all is the surest and best test of a great power. But we should never, never undertake unilateral action lightly. For reasons that I will discuss in a moment, I think it is almost always preferable to act in concert with others. But when our vital interests are at stake, we must be prepared if necessary to go it alone.
We did that twice, as I recall when I was in government. The first time the United States ever used force in the aftermath of the Vietnam debacle was in Grenada by President Reagan. It was very difficult. But we didn’t tell a lot of people what we were going to do; it was the first time we’d done it since Vietnam.
I never will forget an incident where we were briefing. We pulled the Congress together to give them a briefing about what we were going to do in Grenada, and President Reagan wanted to make it meaningful; so he invited them all up to the Yellow Room in the residence. At that time, we had a Republican Senate but a Democratic House. And this was at 11:00 at night, the night before the action went down. The action went down about 3:00 a.m. the next morning. So we briefed the leadership, and at the end of the briefing Tip O’ Neill stood up and he said, “Mr. President, thank you so much for that briefing,” he said, “But that’s not consultation; that’s notification. Good luck.” And he stood up and walked out of the room.
So the point I’m making here is that there are times when we have to act unilaterally. We acted unilaterally and quite properly, in my view, in Panama, when we had that thug down there, Noriega, beating up on our servicemen. There are times when that needs to happen. But we ought to, if we possibly can, try to cobble together allies to help us out. We need to.
And that brings up the fourth maxim: we need to appreciate the importance of those allies. It’s no coincidence that the three great global conflicts of the 20th century that I mentioned earlier, World Wars One and Two and the Cold War, were all won by coalitions. It’s good to get coalitions because by securing allies, policy makers can achieve some very important goals. Most obviously, if you have partners, you can spread the human and the financial cost of any action; you can create what could be called an efficient division of international labor.
Again, back to the Gulf War of 1990 and 1991, we had a military coalition there, composed of the United States, Britain, France, and even many Arab countries, and others as well. But that was bolstered by financial support from Gulf Arabs, the Japanese, the Germans and a number of other Western Europeans.
In addition, I think allies can help secure legitimacy for your actions. In the case of that Gulf War in ‘91, the U.N. Security Council’s authorization of force prompted support for action against Saddam Hussein, not just in the international community but in the Congress of the United States as well.
And that was even perhaps more important. I daresay we never would have gotten the approval of the Senate, back in those days, which was a Democratic Senate, had we not first gone out and gotten, in effect, an authorization from the rest of the world. It put us in the position of going to a senator, and saying, “Senator, you mean, you’re not going to support the President of the United States in this action, but the President of Ethiopia is going to support him?” It was very meaningful.
Maxim number five: We need to use all of the means at our disposal. And when I say all of the means I’m talking about tools such as moral suasion, bilateral talks, multilateral action ‑ those actions can occur through formal institutions such as the U.N., like the war in ‘91; NATO and the IMF. But it can also be pursued through informal groups like the coalition against Iraq during the ‘90 and ‘91 Gulf War; or like the coalition that did what we did in the Balkans during the Clinton Administration.
Effective foreign policy embodies a continuum of action; a continuum of action from private demarche to military action. In short, I guess the point I’m making is that one size does not fit all when it comes to foreign policy. And this is especially true today, as we confront those twin threats that I’ll mention one more time: international terrorism and the proliferation of weapons of mass destruction. We need a comprehensive approach. Military action has got to be part of it; but it is quite evident I think, that military action alone cannot be the solution.
Sixth, we need to be prepared to change course if necessary. Now, we’re doing just that now in our Iraq policy. We are talking with Iran and Syria; we’re talking with Iran at a lower level. We need to be talking to them, frankly, at a little bit higher level. But we’re talking to Syria in a more meaningful way than we were a few months ago, and anyway we’re talking to both those countries.
And we’re actively pursuing peace between Arabs and Israelis, something that we were not doing last year, before the Report. And we are changing course by surging our military posture in Iraq, and doing so with quite a degree of success. We can only hope that the success we are seeing, the increased stability, will last, as it will ultimately have to do to begin to responsibly draw our troops down.
So we are changing course. But that maxim is very important: we need to be prepared to change course when the circumstances require it. You can argue that consistency is an important element of foreign policy, and it is because it permits you to move beyond crisis management and it facilitates the development of long term strategies. Consistency can also foster stability by reassuring allies and by setting down clear markers for potential adversaries. But when events change, we really need to be prepared to change with them.
Best example I can give you is the rise of Mikhail Gorbachev in the Soviet Union in the latter years of the Cold War. That marked a dramatic shift in the world’s view of the Soviet leadership; and therefore it was only right that Washington under Ronald Reagan reach out to Moscow in ways that were unimaginable just years before that.
Number seven: We need to recognize and accept that the United States must sometimes deal with authoritarian regimes. In a perfect world we could perhaps work only with other democracies. But unfortunately, this is not a perfect world, and there is absolutely no sign that it’s going to become perfect any time soon. To be very blunt about it, sometimes we have no choice but to work with governments that fall short when it comes to Democratic practices, or the protection of human rights.
The most striking example I can cite for you, from history, was our World War Two alliance with Stalin’s Soviet Union. This was one of the most murderous regimes in the history of mankind. Given the immediate and deadly threat posed by Nazi Germany, we really had no alternative.
During the Cold War, we made common cause with authoritarian regimes in Latin America, in Asia and elsewhere. Even today you look around our allies, some of our strong allies in the war on terror include countries in the Middle East and Central Asia that bear scant resemblance to Jeffersonian democracies. Now, I can’t pretend that this is a satisfying state of affairs; it isn’t. But it’s reality. And there is simply no alternative to it.
Number eight: We need to be prepared to talk to our enemies. I’ve often said that you don’t negotiate peace with your friends; you negotiate peace with your enemies. And I don’t say this because talking per se is a good thing, although I suppose there is something to be said for maintaining a bilateral dialog, if only to avoid misunderstanding and missteps. And I don’t say this because talking alone is a strategy; it’s not. That is not a strategy. No, the fundamental reason we should be prepared to speak to our enemies is that it is in our interest to do so. We’re doing that today. President Bush just wrote a letter to one of the biggest thugs in the world community, Kim Jong-il of North Korea. We didn’t talk to him for six or six-and-a-half years; now we have something going. Whether it will pay off or not, we don’t know. But at least there’s something going there, we have some hope, might give us an opportunity to end the North Korean nuclear program. And it would never have occurred unless we had started talking to North Korea.
So we need to talk to our enemies because it is in our interest to do so, and not do so in a weak way or in a way seeking appeasement, but do so in a tough and strong and knowledgeable way. This is why we maintained an embassy in Moscow, for the 40 years of the Cold War. And this is why even so staunch an anti-Communist as President Reagan was prepared to negotiate with the Soviets. Nobody ever accused the Gipper of being squishy when it came to the Soviet Union. Talking to hostile states, whether it was the Soviet Union during the Cold War, or Syria today, is simply not appeasement; don’t let anybody tell you it is. It was and it is good foreign policy.
Number nine: We should be mindful that values are very important to U.S. foreign policy. But they are not the only thing. Promoting democracy and free markets is the paradigm of our foreign policy. Promoting democracy and free markets is rightly central to U.S. foreign policy. And that’s because a freer, more prosperous world is a better world, for our own citizens and for people everywhere.
But we should not be deluded into thinking that progress towards democracy and free markets is either inevitable or without its own strains. The example of World War I is very sobering. It followed immediately on the heels of a period of unparalleled economic integration, that some called the First Golden Age of Globalization. One of the most influential books of the prewar period, Norman Angell’s, The Great Illusion, argued that general war had become impossible because of the economic advantages to peace. We know there are economic advantages to peace and stability, but this book argued that general war had become impossible because of that. Yet we know what followed. What followed that book was one of the bloodiest periods in human history.
So what’s the lesson? I think the lesson is that we should be very wary when talk turns to inevitability. Because what man creates, man can destroy. Moreover, both democracy and free markets can be decidedly mixed blessings in the long run or in the short run. Economic reforms can lead to strains that prompt populist backlashes. Nor can elections be counted upon to produce stable and responsible regimes. The popular success, for instance, of Hamas, among Palestinians and Hezbollah in Lebanon are cases that are directly on point.
You are probably wondering if I am arguing that we should not support democracy and free markets, and the answer is, of course not. We absolutely should. They should remain the paradigm for our foreign policy; they should remain the ideal for our foreign policy. But that should not be the beginning and the end of our foreign policy. We should be especially careful of underestimating the difficulties that countries can face as they embark on the path to democracy. And above all, my friends, we should remember that in foreign policy, stability is not a dirty word.
Tenth and last: We must always remember that domestic political support is vital to any successful American foreign policy. And that’s because the will of the American people is the final arbiter of foreign policy in our democracy. Generating and sustaining domestic support for foreign policy is in every way as important as the policy itself. Without that support, specific policies risk repudiation at the polls, or public disenchantment with foreign engagement in general. Ladies and gentlemen, let me make one thing very clear. I am anything but a declinist when it comes to the United States; because I am absolutely convinced that our country’s future is a very, very bright one. I am convinced that we have the leadership, and the determination and the grit to tackle our energy problems just as we tackle other global challenges. We have demonstrated that leadership and that determination and that grit throughout our history. But to do so, I have suggested to you an approach that does not fall easily into the traditional categories of foreign policy; that is, either realism on the one hand, or idealism on the other.
This idea of mine contains the best elements of both. It embodies one of our most distinctive national characteristics. We Americans are a practical people. We are less interested in ideological purity than we are in solving problems. Whether we’re talking about promoting Mideast peace, expanding liberalized trade and investment, or addressing the problems associated with rising petroleum prices.
What I propose in these ten maxims that I’ve mentioned to you this morning, I think could be called pragmatic idealism. While it is firmly grounded in values, it appreciates the complexity of the real world, a world of hard choices and painful tradeoffs. But such an approach does, I am convinced, offer our surest guide and best hope for navigating this great country of ours safely through this precarious period of unparalleled opportunity and risk, in world affairs.
Thank you all for being here this morning; it’s been a delight to be able to speak to you.