Tuesday, 6 March 2012

Macro Level Trends – The Falkland Isles – Determining an Innovative Alternative (Energy) Course from Re-Cycled Oil Funds.

Recent weeks have seen a perceptible build-up of irritation between Britain and Argentina over the sovereignty of The Falkland Isles. And because of historical precedence, possibly connotations regards the neighbouring region Southern Georgia and the Sandwich Islands.

The proposal by Buenos Aires to effectively boycott UK goods and services, soon after the docking prohibition of 2 British cruise-ships, is stated as a reaction to what it describes as 'militarisation' of the territory, including what is regards as the highly symbolic gesture by stationing Prince William on the Isles. This action described as effectively “entirely routine” by the Foreign Office.

Background -

'The Falklands' consists the 2 main islands of West and East Falkland, the capital Stanley located on the East, plus another 776 far smaller islands. Britain has held, inhabited and defended the archipelago since 1833 (and 1755 in South Georgia's case), 1982 the last evident re-assertion of its ownership.

The 1982 Falklands War is of course etched into the political and social memories of both countries, initiated when Argentina's then junta government, led by General Galtieri, ordered the invasion of both territories, and so impelling Britain to act.

Fringe voices at the time believed that the war served as a public distraction from both countries' economic woes. Whilst such an argument might be re-aired today, the central matter far beyond 'distraction stories' is that of natural resource wealth.

Resource Wealth -

Oil exploration is gaining greater interest, and so may add massive economic boost over and above the long-standing but lower value activities if fishing and farming. The possibility of such 'black gold' providing a far more local and UK national energy security at reduced cost and of course the foreign earnings income from oil exportation into Latin America and further afield .

Reuters provided succinct précis of the issue in mid February, when it highlighted that the 'upstream' oil exploration company Rockhopper discovered the 'SeaLion' field in 2010. Ongoing activity by Rockhopper appears to indicate positive exploratory signs, the reaction from one oil orientated investment research house being that it understood a 10-25% chance of successful strike within the 8 billion barrel field; possibly providing an oil income of $167bn over the following 20 years and so a tax & royalty provision of $10.5bn.

This would be partially used in defending the realm, partially adding to the UK's own central coffers and in itself suggests that any such additional income would revolutionise the lives of the 3,000 people who inhabit the territories.

Thus such revelations about the potential of oil has unsurprisingly created renewed intra-national relationship tensions. Britain seeking to subtly demonstrate its national commitment and re-assurance to the islanders, whilst Argentina seeks to gain favour with its calls on the UN to cite the UK as an aggressor.

UK press reports state that Argentina, with a much depleted trade surplus due to necessary imports of natural gas, is under increasing pressure to find new energy sources, the South Atlantic its hunting ground.

Talk of Renewed War -

UK national media speculation – typically narrow in debate given the sound-bite age - obviously reflects upon the victory of 1982, re-animates popular consciousness in the battle of Goose Green and seeks out quotes from retired Major-General's and 'national heroes' such as the much admired Simon Weston.

[NB Weston undoubtedly admired for his personal endurance and compassion by the public, as opposed to any notional 'war hero' status].

The popular newspapers abound then with a re-telling of the 1982 story and the given perspectives of 'talking head' politicians, diplomats and soldiers; a particular favourite item being the 'what if' scenario of renewed combat, the expectation of British success and the present 'capability gap' to ensure such success.

The popular press then highlights what appears the 'Hobson's Choice' of willingly waging a new war 30 years on, if indeed “jaw-jaw” diplomacy breaks-down, versus the idea of loosening sovereign ties to aid supposed goodwill with Argentina and Latin America.

The following provides a very basic and obvious outline of these two options. Critically it seeks to move the debate further by indicating a third option; one which combines a strengthening of Britain's South Atlantic position in The Falklands along with greater scientific and trade engagement with Argentina, Brazil, Chile and Peru and

Option 1 – Secured UK Sovereignty through New War
Option 2 – Shared Sovereignty regards Off-shore & On-Shore Rights
Option 3 – Secured UK Sovereignty UK investment and innovation

Option 1 – New War

Only one generation and well inside living memory the events of 1982 could be blamed for stirring what should be national pride into low-level jingoism, on both sides. Whilst arguably seeping nationalistic feelings into the minds of the mass populous, must also be recognised as very seperate from the actuality of planning for, and undertaking combat – whether reactive, or proactive. No doubt both countries are running hypothetical exercises based upon self and allied capabilities and so 'scenario planning' possible events and courses.

However, much like in 1982, the support of national allies looks doubtful indeed, this reasoning based upon the the inexactitude of the 'spoils' to be had, which in any case appear small by international standards.

This leaves Argentina and Britain as sole adversaries.

The mere scale of the UK defence force (2009 figures) was 198,000 troops in its standing army and 212,000 reservists. This versus Argentina's 73,000 strong standing army, no reservists, but 31,000 in paramilitary uniform. These then reflect man-power ratios of 2.7 to 1 in the UK's favour regards respective standing armies. And including reservist / paramilitary rises to near 4 to 1 in the UK's favour. Whilst the UK force has and is shrinking, Argentina recognises that its absorption in Iraq and Afghanistan are much diminished, and unlike 1982 the UK has far fewer troops stationed in the fixed positions, as was the case with Germany versus the Communist Eastern Bloc threat and in outposts such as Hong Kong.

In the meantime whilst Argentina obviously has the locational advantage, it also has a very lengthy border to patrol, greater social instability to contain if civil unrest does appear and cannot feasibly rely upon neighbours for support given the much desired internal and intra-national stability that has appeared in the region thanks to economic reforms, open markets and continued if slowed FDI.

Based on these very simplistic facts, the break-out of war looks unlikely. Indeed, the very fact that the UK cannot deploy an aircraft carrier as it did 30 years ago – to fore-shorten the war - indicates that hostilities would be a lengthy war of attrition.

Option 2 – Shared Sovereignty

One more irreverent political discussion programme opened the debate to a wider context, inviting a guest to offer the counter argument of sharing the isle's sovereignty. So as to also be recognised as Islas Malvinas.

It was stated that the UK (in words to such effect) “ought to realise its much diminished global role and capabilities” given the rising economic and political power of Latin America itself. The argument set-out being that that such a move of 'shared sovereignty' would provide the UK with greater links with the giant that is Brazil via Argentina as an intermediate.

This counterpoint certainly has a simplistic appeal in offering (potentially economically costly) goodwill. Yet in reality it could be seen as a sign of 'cowering' to Argentina and thus instigate greater 'give-aways' in other political and commercial terms with the region. And thus critically very probably provides little 'real politik' reward relative to the UK's relationship with Latin America.

Moreover, the history of the 180 year British rule over the islands, the ancestry of the indigenous population, the price paid in 1982, the national scientific interests in the notionally 'near-by' South Georgia (ie the British Antarctic Survey), plus the latter possibility of striking oil essentially dictate that the very idea of sharing of the isles, nor in-shore waters, nor off-shore waters will not be entertained by the British government on behalf of its people.

There could however, be an alternative method for substantiating British rule and simultaneously create better relations with Argentina and Latin America. And this would be by fundamentally altering the 'value-adding role' The Falklands plays.

Option 3 – UK (& EU) Investment and Innovation

The title of this web-blog is 'Determining an Innovative Alternative (Energy) Course from Re-Cycled Oil Funds'.

Its double-fold message being that an alternative path may be created which circumnavigates the threat of future war by nurturing The Falklands to become a highly regarded global centre of excellence for alternative energy capture and exploitation.

Te initiative to be substantively financed by any latter-day successful oil-field finds, after initial direct investment by the British government and allied eco-tech orientated British industry; consisting of companies both with and without Northern European subsidiaries and parents.

[NB Here government liquidity should be funnelled via the Green Investment Bank – within or additional to its £3bn set-up fund – with perhaps a dedicated Falklands division. The BIS to appropriate a portion of its start-up funding].

Thus in effect investment-auto-motives' proposal calls for the creation of an eco-tech 'landing-stage' in the Falklands for UK and Northern European sourced eco-tech and eco-models, the islands then utilised as a trade 'spring-board' for Latin America expansion.

[NB It is expected that Northern European partners would also exploit this route to market, either as a primary avenue, or as a complimentary strategy].

Thus providing for far stronger philosophical co-interests via R&D and commercial trade links between the UK and its Overseas territory and in turn better business connectivity with Scandinavia, Germany etc.

Which in turn creates far more meaningful and regionally influential British reach across the Strait of Magellan. To ideally provide both 'thought leadership' and act as a new enterprise hub which integrates itself into Latin American technical and ecological ambitions, so positively influencing economic development.

Thus developing the Falkland activity base beyond its historical leaning toward primary industries and associated 'orbital' value-chain linked businesses, into areas that are future-forward, so as to evolve its very perception to the outside world; including world agencies such as the UN.

This is not to say that the islands would be completely transformed into a kind of politically motivated, Disney-esque technological business park Far from it, its origins, history are ever present in Falklander's lives and surroundings, so far too important to loose. Instead its past should serve as inspiration.

[NB. That physical reflection of the “Falkland persona” married with with other intrinsically British vernacular architecture, typified by the Arts & Crafts movement].

This new secondary activity layer of 21st century eco-R&D and eco-commercialism, would be naturally woven into the original “fishing & farming” heartland. It would itself parallel and indeed be partially underpinned by the 'self-sufficiency', non-materialistic heartland which is central to Falkland persona.

[NB. It seems that The Falkland's remoteness has somewhat protected it from modern-day influence, and as a result it still enjoys the positive values and charms of 1950s Britain. To such an extend that former Governor-Generals drove an old London Black Cab right up until the vehicle's 'retirement' in late 2010. This as both a directly euphemistic link to London, to espouse the 'Best of Britain' and so that it might be easily serviced and repaired]

Moreover, such an important UK ambition which fosters trade and so averts war could possibly be an adapted extension of the 'non-threatening' ethics and principles reflected with the Antarctic Treaty System, which has seen such great international co-operation.

Eco-projects and commercialisation would span eco-habitation, eco-mobility and eco-industry; agriculture obviously forming a cornerstone.

[NB investment-auto-motives expects that such cross-fertilisation between eco-sectors would have immense ramifications for the automotive world, especially so for the small and medium sized agricultural enterprises that deal in higher value crops (such as cocoa) in much of 'hilly' developing Latin America. (In contrast to the heavily mechanised 'pampas' of Brazil and Argentina].

So, to conclude, the present challenge that is the The Falklands should instead be viewed as a critical 21st century opportunity by both the UK and Argentina. No side seeks “gun-boat diplomacy, let alone out-right war, especially so in today's fragile global economic climate.

Instead both nations should see an alternative, long-horizon outcome that serves both interests. And The Falklands, serving as the eco-tech and eco-commerce bridge between Europe and S.America in 'safe& secure' British hands is that very solution.

investment-auto-motives sincerely wishes that this alternative outlook assists in the avoidance of spilling both sides blood, both today and in the years to come.