Sep 19, 2009

Annals of Law: Bench Press : The New Yorker

by Jeffrey Toobin

September 21, 2009

Sonia Sotomayor may be a template for Obama nominations.

Sonia Sotomayor may be a template for Obama nominations.

The Obama Administration wanted to send a message with the President’s first nomination to a federal court. “There was a real conscious decision to use that first appointment to say, ‘This is a new way of doing things. This is a post-partisan choice,’ ” one White House official involved in the process told me. “Our strategy was to show that our judges could get Republican support.” So on March 17th President Obama nominated David Hamilton, the chief federal district-court judge in Indianapolis, to the Seventh Circuit court of appeals. Hamilton had been vetted with care. After fifteen years of service on the trial bench, he had won the highest rating from the American Bar Association; Richard Lugar, the senior senator from Indiana and a leading Republican, was supportive; and Hamilton’s status as a nephew of Lee Hamilton, a well-respected former local congressman, gave him deep connections. The hope was that Hamilton’s appointment would begin a profound and rapid change in the confirmation process and in the federal judiciary itself.

The power to nominate federal judges is one of the great prizes of any Presidency, and Obama assumed office at a propitious moment. After Democrats won control of the Senate in 2006, the new chairman of the Judiciary Committee, Patrick Leahy, of Vermont, significantly slowed down the confirmation process for George W. Bush’s appointees to the federal appeals courts. In addition, many federal judges appointed by President Clinton were waiting for the election of a Democratic President in order to resign. Now vacancies abound. Just eight months into his first term, Obama already has the chance to nominate judges for twenty-one seats on the federal appellate bench—more than ten per cent of the hundred and seventy-nine judges on those courts. At least half a dozen more seats should open in the next few months. There are five vacancies on the Fourth Circuit alone; just by filling those seats, Obama can convert the Fourth Circuit, which has long been known as one of the most conservative courts in the country, into one with a majority of Democratic appointees. On the federal district courts, there are seventy-two vacancies, also about ten per cent of the total; home-state senators of the President’s party generally take the lead in selecting nominees for these seats, but Obama will have influence in these choices as well. Seven appeals and ten district judges have been named so far. George W. Bush, in the first eight months of his Presidency, nominated fifty-two. But Obama, unlike Bush in his first year, has had the opportunity to place his first Justice on the Supreme Court, Sonia Sotomayor—and her confirmation has opened up another seat on the Second Circuit court of appeals. Justice John Paul Stevens, who is eighty-nine, has hired only one law clerk for the next Supreme Court term, so a second Obama appointment to the Court may be imminent as well.

“The unifying quality that we are looking for is excellence, but also diversity, and diversity in the broadest sense of the word,” another Administration official said. “We are looking for experiential diversity, not just race and gender. We want people who are not the usual suspects, not just judges and prosecutors but public defenders and lawyers in private practice.” Yet Hamilton and Sotomayor are the usual suspects—both sitting judges, who had already been confirmed by the Senate. Of Obama’s seven nominees to the circuit courts, six are federal district-court judges. The group includes Gerard Lynch, a former Columbia Law School professor and New York federal prosecutor, and Andre Davis, who was nominated to the Fourth Circuit by Bill Clinton. (At the time, Republicans blocked any vote on Davis.) Two of the seven are African-American; two are women; all but one are in their fifties. (None are openly gay.) The one non-judge is Jane Stranch, who has represented labor unions and other clients at a Nashville law firm and is nominated for the Sixth Circuit. They are conventional, qualified, and undramatic choices, who were named, at least in part, because they were seen as likely to be quickly confirmed.

But then, as the first White House official put it, “Hamilton blew up.” Conservatives seized on a 2005 case, in which Hamilton ruled to strike down the daily invocation at the Indiana legislature because its repeated references to Jesus Christ violated the establishment clause of the First Amendment. Hamilton had also ruled to invalidate a part of Indiana’s abortion law that required women to make two visits to a doctor before undergoing the procedure. In June, Hamilton was approved by the Judiciary Committee on a straight party-line vote, twelve to seven, but his nomination has not yet been brought to the Senate floor. Some Republicans have already vowed a filibuster. (Republican threats of extended debate on nominees can stop the Democratic majority from bringing any of them up for votes.)

“The reaction to Hamilton certainly has given people pause here,” the second White House official said. “If they are going to stop David Hamilton, then who won’t they stop?”

Republicans in the Senate have not allowed a vote on any of the other nominees, either. So far, the only Obama nominee who has been confirmed to a lifetime federal judgeship is Sotomayor. The stalemate provides a revealing glimpse of the environment in Washington. Obama advisers (and Democratic Senate sources) aver that all the nominees, even Hamilton, will be confirmed eventually, but contrary to the President’s early hope the struggle for his judges is likely to be long and contentious.

“The President did not set a good example when he was in the Senate,” Orrin Hatch, the senior Republican senator from Utah, told me, pointing to Obama’s votes against the confirmation of John G. Roberts, Jr., and Samuel A. Alito, Jr., to the Supreme Court. “You have to be a partisan ideologue not to support Roberts,” Hatch said. “There is a really big push on by partisan Republicans to use the same things that they did against us.” Hatch himself, who had voted for Ruth Bader Ginsburg, Stephen G. Breyer, and every other Supreme Court nominee in his Senate career, voted against Sotomayor. (The vote for her confirmation was sixty-eight to thirty-one.)

There is a certain irony in this, because Obama has long sought to define himself as something other than a traditional legal liberal. Starting about fifty years ago, after Earl Warren became Chief Justice, the concept of legal liberalism developed a clear meaning: a belief in what came to be called judicial activism. Liberals believed that the Constitution should be read expansively, and that the Supreme Court should recognize newly defined rights—the right, say, to attend an integrated public school, or, later, the right to choose abortion. Conservatives in this era believed in what they called judicial restraint, which suggested that courts should refrain from overruling decisions made by the elected parts of the government. Obama appears to be trying to move away from these old categories, which have, in any case, become scrambled in their meaning. Both sides now claim to embrace restraint and eschew activism.

Obama and his judge-pickers define their choices with the same post-partisan vocabulary that the President uses with most issues: excellence, competence, common sense. And so far Republicans have regarded Obama’s claims in this realm with the same skepticism that they have displayed for his arguments on the economy and health care. Still, this is not just a replay of the usual ideological debate. Obama’s choice of judges reflects ferment in the world of legal liberalism, which is tied ever more closely to the fate of Democrats in the executive and legislative branches of government. Liberals who once saw judges as the lone protectors of constitutional rights are now placing their hopes on elected politicians like Obama. At its core, Obama’s jurisprudence may rest less on any legal theory or nomenclature than on a more primal political skill—the ability to keep winning elections.

Last August, after Obama had clinched the Democratic nomination for President, a lawyer in New York received a confidential assignment from the transition team. Preeta Bansal, who was then a partner at the law firm Skadden, Arps and formerly a solicitor general of New York State, was asked to prepare a series of memorandums about how a President Obama might transform the federal judiciary. She projected the number of likely vacancies, examined the ethnic and professional backgrounds of current judges, and compiled the first list of possible nominees for the new President to consider.

Through the final weeks of the campaign, Bansal refined and expanded her memos, and after Obama’s victory she moved to Washington to work on the transition. There, joined by former campaign staffers, among them Danielle Gray and Michael Strautmanis, Bansal waded into the details of the project. Should Obama announce his first nominations as a group, as Bush did, or one at a time? (Obama chose one at a time.) Should the new Administration coöperate with the American Bar Association, which had traditionally rated nominees but which had been pushed out of the process by recent Republican Administrations? (Obama’s team decided to reëstablish the connection, but only after securing a pledge from the A.B.A. that the group would act quickly.) A statistical analysis showed that Republican judicial appointees tended, on balance, to be younger than their Democratic counterparts—a finding that interested the future judge-pickers. (Soon after the Inauguration, the authors scattered: Bansal became general counsel and senior policy adviser at the Office of Management and Budget; Gray joined the staff of Gregory Craig, the White House counsel; and Strautmanis serves as chief of staff to Valerie Jarrett, a senior aide to Obama.)

John Podesta, the White House chief of staff under President Clinton, who was running Obama’s transition process, arranged a few meetings for the President-elect to familiarize himself with judicial-selection issues. At one of these sessions, in the transition headquarters, on Sixth Street, the subject was possible Supreme Court vacancies, and Obama made a specific request. He wanted more information on a federal appeals-court judge in New York named Sonia Sotomayor.

It was no surprise that Sotomayor had caught Obama’s eye. First appointed to the district court by George H. W. Bush, on the recommendation of Senator Daniel Patrick Moynihan, she had been promoted to the Court of Appeals by Bill Clinton, in 1998. At the time, her confirmation was stalled by Republicans who were concerned, even then, that she might make an appealing Democratic appointee to the Supreme Court. Raised poor in the Bronx, Sotomayor had an inspiring life story, experience as both a prosecutor and a judge, and the potential to be the first Hispanic on the High Court. To those inside the White House who followed the search process after David H. Souter announced his resignation, this spring, Sotomayor was the front-runner all along.

In recent years, the introduction of a Supreme Court nominee has become a major political undertaking. By the time the President announced his choice of Sotomayor, on May 26th, “there were two story tracks—‘eminently qualified’ and ‘an American story,’ ” an official who was involved with the rollout said. “The first part related to her judicial experience, which was more time as a federal judge than any nominee in a hundred years, but we also raised as a subtext her experience as a big-city prosecutor”—early in her career, Sotomayor was an assistant district attorney in Manhattan. “You always have to worry that a Democrat is going to be called soft on crime, but it’s harder to do that if people know she was a big-city prosecutor.” The American story related to her childhood, in public housing, followed by her academic success at Princeton and Yale Law School. At the time, several White House officials noted the similarities between Sotomayor’s life story and that of Michelle Obama, who also had a working-class upbringing in an inner city and graduated from Princeton, nine years after Sotomayor.

On the question of Sotomayor’s ideology—what she stood for—Administration officials used what may become the Obama template. A Supreme Court nomination, almost by definition, raises divisive social issues, like abortion and gay rights, but the White House tried to make Sotomayor sound like a post-partisan figure, much as Obama has tried to position himself. Part of Sotomayor’s appeal to Obama was that she was not a law professor or a legal theorist, and on the bench she had written opinions that avoided broad pronouncements and stuck closely to the facts of each case. “Her judicial philosophy was to follow the rule of law, apply it in each case,” the official said. “She was not going to be painted as an ivory-tower judge, but a real-world judge. I don’t think that she has an ideology—that’s what was so great about her.”

Obama himself speaks as if pragmatism were a substitute for ideology, or at least an improvement on it. As he said in an interview with the Detroit Free Press in 2008, during the campaign, “When I think about the kinds of judges who are needed today, it goes back to the point I was making about common sense and pragmatism as opposed to ideology. I think that Justice Souter, who was a Republican appointee, Justice Breyer, a Democratic appointee, are very sensible judges. They take a look at the facts and they try to figure out: How does the Constitution apply to these facts? They believe in fidelity to the text of the Constitution, but they also think you have to look at what is going on around you and not just ignore real life.”

Still, at times the post-partisan language of the White House sounded a lot like that of traditional judicial conservatism. In a set of talking points released before her confirmation hearing began, in July, the Obama team called Sotomayor “a nonideological and restrained judge.” The statement noted that Sotomayor “wrote expressly about the importance of judicial restraint” in her Senate questionnaire when she became a circuit-court judge, and that her opinions “reflect a keen understanding of the appropriate limits of the judicial role.”

Sotomayor elaborated on the theme when she testified before the Judiciary Committee. “It’s important to remember that, as a judge, I don’t make law,” she said in her answers to Leahy’s first round of questions. “And so the task for me as a judge is not to accept or not accept new theories; it’s to decide whether the law, as it exists, has principles that apply to new situations.”

Sotomayor’s words amounted to an acknowledgment that conservative rhetoric, if not conservative views, had become the default mode for Supreme Court nominees. In the hearings of the two Clinton nominees, Ginsburg and Breyer, in the early nineteen-nineties, both candidates said, essentially, that the meaning of the Constitution had evolved with the times. Ginsburg herself, in her career as a litigator, had been among the first to persuade the Justices to recognize that the Constitution required equal treatment for women. Sotomayor and the Democratic senators who supported her portrayed a much less dynamic process of constitutional change—a fact that was noted by conservative legal scholars. “If you took the hearings we just had, as well as the statements that are being made on the Senate floor, you see a very different dialogue taking place than we saw in connection with Ginsburg or Thomas or Bork or Rehnquist,” Leonard A. Leo, the executive vice-president of the Federalist Society, the conservative legal group, said. “It’s an acknowledgment of the fact that that’s the prevailing and conventional view of what the proper judicial role is in our democratic society. The Democrats said she was a non-ideological, restrained judge. They talked about her judicial modesty. That was language that the Bush White House coined to discuss John Roberts.”

Nor did Sotomayor (or her Democratic supporters) offer much more than a tepid defense of the use of racial preferences in affirmative action, another traditional liberal cause. “The Constitution promotes and requires the equal protection of law of all citizens in its Fourteenth Amendment,” Sotomayor told the senators. She went on:

To ensure that protection, there are situations in which race in some form must be considered; the courts have recognized that. It is firmly my hope, as it was expressed by Justice O’Connor in her decision involving the University of Michigan Law School admissions criteria, that in twenty-five years race in our society won’t be needed to be considered in any situation.

In the case that drew the most attention during the hearing, Sotomayor had ruled in favor of the city of New Haven, when it voided a promotion exam for firefighters; the results of the test left no African-Americans eligible for promotion, and the city feared a lawsuit charging that New Haven’s policies had a “disparate impact.” Scarcely any Democrats rose to Sotomayor’s defense on the New Haven case, except to say that she had followed existing precedent. “We spent in previous confirmation hearings a very considerable amount of time probing Republican nominees about the extent to which they would entertain disparate-impact claims in the civil-rights arena,” Leo said. “One has to assume that the calculation they made was that that is not an issue with which the American people are in agreement with them.”

To some degree, the use of conservative language by Sotomayor and her allies was merely an attempt to forestall Republican opposition. (In any case, more than three-quarters of the Republicans in the Senate voted against her.) And it is true that the new Justice appears likely to embrace some traditional liberal positions on legal issues; for example, there is nothing in her background that would suggest any hostility to Roe v. Wade or to abortion rights. In her first case as a Justice, in August, she voted with the Court’s three other liberals in an unsuccessful attempt to stop an execution. But the language and substance of Sotomayor’s testimony, and the White House’s advocacy for her, suggest that the progressive agenda in the Court is not the same as it once was. Not surprisingly, the change is best illustrated by the views and priorities of Barack Obama.

As the outgoing president of the Harvard Law Review, in 1991, Obama could have had his pick of judicial clerkships. “I asked him to apply to clerk for me,” Abner Mikva, a former federal appeals-court judge in Washington, told me. “I was a feeder. At the time, I was sending clerks to work for Brennan, Marshall, Stevens, and Blackmun. I don’t have any doubt that Obama would have got a Supreme Court clerkship if he wanted one.”

But Obama decided against taking any clerkship and instead moved back to Chicago, where he joined a small law firm, started teaching law at the University of Chicago, and laid the groundwork for a political career. “He had decided at that point to go back to work in the community that he had worked in as a community organizer,” Cassandra Butts, a law-school classmate of Obama’s and now his deputy White House counsel, said. “He was very, very clear on that path. He obviously had an incredible number of opportunities to diverge from that path, but he decided that that’s what he wanted to do.” As Mikva remembered, “He wanted to go back to Chicago, and he wanted politics to be part of the mix.”

David Strauss, who was a professor at the law school at the time, told me that Obama “didn’t see himself as much as a legal intellectual as a community organizer and a politician. Even when he was teaching at our law school and practicing law, he was a politician—but not in a cheap sense. That’s where he saw his future.” In 1996, five years after his graduation, Obama won election to the Illinois State Senate, though he kept up his adjunct teaching at Chicago.

In short, Obama chose politics over law. This was a matter of personal preference and temperament, but it also reflected the times. “He came of age at a time when confidence in the judiciary as a vehicle of social change was very low,” Geoffrey Stone, who was on the faculty at the University of Chicago when Obama taught there, said. “His generation of lawyers is much less confident of looking to the Court than an earlier one was. In the Rehnquist years, liberals didn’t have a lot of confidence in the Court.”

By the late eighties, the great activist years of the Warren Court had passed, and there appeared to be little prospect of a revival. When Obama moved back to Chicago, there was only one Democratic appointee on the Supreme Court—Byron White, hardly a liberal, who had been nominated by John F. Kennedy, in 1962. Obama believed that the Supreme Court wouldn’t be remaking American society—and probably shouldn’t be, either.

Over the years, Obama has expressed admiration for the great liberal Justices of the twentieth century, including William J. Brennan, Jr., and Thurgood Marshall, but he has nearly always distanced himself from their judicial philosophy. In the interview in Detroit last year, Obama described his view of the limits of judicial liberalism. “The Warren Court was one of those moments when, because of the particular challenge of segregation, they needed to break out of conventional wisdom because the political process didn’t give an avenue for minorities and African Americans to exercise their political power to solve their problems. So the court had to step in and break that logjam,” Obama said, adding, “I would be troubled if you had that same kind of activism in circumstances today.”

A traditional liberal might see Obama’s view of “that kind of activism” as heretical. Over the years, legal liberals in many respects have defined themselves by coming up with new rights for the Supreme Court to recognize. The most famous of these rights was the right to attend an integrated public school, which the Justices established in 1954 and then attempted, with mixed success, to enforce over subsequent decades. Later, thanks to Ginsburg and others, the Justices found that the Constitution generally forbade discrimination on the basis of gender. With Roe v. Wade, they recognized the right to obtain an abortion. Other claims were less successful. In an article in the Harvard Law Review, in 1969, Frank I. Michelman, a professor at Harvard, suggested that the Fourteenth Amendment might require a right to economic equality, not just freedom from discrimination. Some scholars posited a constitutional right to housing, or a right to health care. Many liberals tried for years to persuade the Supreme Court to step beyond desegregation orders and direct that public schools be funded equally. In an interview with Chicago public radio in 2001, Obama explained why he believed that approach had failed, citing the case of San Antonio Independent School District v. Rodriguez, in 1973. In Rodriguez, the Court found, by a 5-4 vote, that unequal funding of school districts in the same state did not amount to a violation of the equal-protection clause of the Fourteenth Amendment. As Obama described the decision, the Court “basically slaps those kinds of claims down and says, ‘You know what—we as a court have no power to examine issues of redistribution and wealth inequalities with respect to schools. That’s not a race issue, that’s a wealth issue, and we can’t get into this.’ ” The Court said that it was up to legislatures to make judgments about redistribution of wealth, not courts—which was fine with Obama. “Maybe I am showing my bias here as a legislator as well as a law professor,” he went on, “but the institution just isn’t structured that way.”

Nor has Obama shown much enthusiasm for the traditional civil-rights agenda, particularly when it comes to voting rights and affirmative action. Obama taught a course on election law at Chicago, and he used the manuscript of a textbook co-written by Richard Pildes, a law professor then at the University of Michigan and now at New York University. In the early nineties, and even today, most liberals in the field supported the creation of so-called “majority-minority districts”—legislative districts that were gerrymandered to help minority politicians win elections. According to Pildes, Obama was skeptical about African-Americans relying on these districts as the sole route to political success. “He was very different from most younger academics, who had very conventional ways of looking at issues like this one,” Pildes told me. “He was very interested in the facts on the ground, how this stuff was really playing out, rather than ideology.”

Like Sotomayor in her hearing, Obama has expressed little enthusiasm for group-based affirmative action, the kind practiced by the city of New Haven in the firefighter case. As he notes in his second book, “The Audacity of Hope,” “An emphasis on universal, as opposed to race-specific, programs isn’t just good policy; it’s also good politics.” Still, the President is a strong believer in redress for individual, as opposed to group, victims of discrimination; the first bill he signed in office, known as the Lilly Ledbetter Act, overturned a Supreme Court ruling that had restricted the statute of limitations for filing such cases.

There is another reason for Obama’s skepticism about court-ordered change: that it distracts liberals and progressives from the hard work of winning elections. In the 2001 interview, he said that one of “the tragedies of the civil rights movement was because the civil rights movement became so court-focused—I think there was a tendency to lose track of the political and community-organizing activities on the ground that are able to put together the actual coalitions of power through which you bring about redistributive change. And in some ways we still suffer from that.” Five years later, as a senator and all but declared Presidential candidate, Obama wrote in “The Audacity of Hope” that he had been reluctant to enter the political brawl over President Bush’s judicial nominees. “I wondered if, in our reliance on the courts to vindicate not only our rights but also our values, progressives had lost too much faith in democracy,” he wrote. “Elections ultimately meant something. . . . Instead of relying on Senate procedures, there was one way to ensure that judges on the bench reflected our values, and that was to win at the polls.”

Notwithstanding Obama’s protestations, his brand of pragmatism is an ideology, and his reconsideration of what it means to be a judicial liberal has come at the same time as some in the legal academy are examining the same questions. One prominent effort in this vein, which began before Obama even became a candidate for President, has led to a complementary approach to that of the new President.

“The liberal-activist model of the nineteen-sixties and nineteen-seventies said that the Supreme Court would declare that there are rights, and then order the political branches to enforce them,” Jack Balkin, a professor at Yale Law School, told me. That approach seemed both unattainable and undesirable to Balkin and Reva Siegel, a colleague at Yale, so they decided to try to rethink the liberal legal agenda. They were inspired in part by a series of memos and speeches that Edwin Meese III, as Ronald Reagan’s attorney general in the eighties, had commissioned to articulate a conservative vision for the courts; over the years, the ideas in several of these memos have found their way into Supreme Court precedent. It was Meese, for instance, who first called Washington’s attention to the view that the Constitution should be interpreted according to the “original intent” of the Framers, an approach that Antonin Scalia and Clarence Thomas have brought to the Supreme Court.

The main result of Balkin and Siegel’s collaboration is a book, “The Constitution in 2020,” published earlier this year, which includes contributions from more than a score of leading progressive law professors—some of whom now work in the Obama Administration. At the core of Balkin and Siegel’s concept is the notion that “judges don’t own the Constitution.” By that, they mean that the Constitution, at any given point in history, is shaped by a broad array of forces, including elected officials, activists, and voters. “The Court decided Brown in 1954, but that didn’t settle what ‘equal protection of the laws’ meant,” Balkin said. “Politicians and the civil-rights movement shifted the meaning. Martin Luther King changed it. The Civil Rights Act changed it. The organized right changed the meaning when it reacted to busing. The history of race relations in this country is organized around each side claiming the mantle of Brown. But no one ever has the last word.”

As proof of this hypothesis, the authors point to the history of the Second Amendment and gun control. The first clause of the amendment refers to the need for “a well regulated Militia” and the second states that “the right of the people to keep and bear Arms, shall not be infringed.” For many decades, into the nineteen-eighties, it was widely agreed among judges and scholars that the right to bear arms belonged only to militias, and thus the Second Amendment imposed no limits on the ability of states and localities to enact gun-control laws. Warren E. Burger, the former Chief Justice (and no liberal), said that any other view of the law was a “fraud,” and Robert Bork, the conservative hero, said much the same thing. But Meese and his allies in the National Rifle Association were indefatigable in pushing an opposing interpretation, and their position became widely adopted, first in the Republican Party and then among many Democrats. Finally, in 2008, the Supreme Court, in an opinion written by Antonin Scalia (who was appointed while Meese was attorney general), struck down a District of Columbia gun-control law as a violation of the Second Amendment. A fringe position—a “fraud”—two decades earlier had become the law of the land. To Balkin, this is an entirely appropriate example of what he, Siegel, and Robert Post, the dean of Yale Law School, call Democratic Constitutionalism. “Conservatives convinced other people that their vision of the Constitution was a better one, they won elections, they appointed their people to the Court,” Balkin said. “This is not lawlessness. This is how the system works.”

In a way, Democratic Constitutionalism goes back to the origin of the activism-vs.-restraint debate. In the late nineteenth century, a conservative majority on the Supreme Court embraced a kind of activism when it struck down several state and local measures intended to regulate the economy or to protect workers. In the nineteen-thirties, a conservative majority on the Supreme Court struck down several early New Deal measures; in these cases, the Justices ruled that Congress lacked the constitutional authority to launch such federal initiatives as the National Recovery Administration. Franklin D. Roosevelt initially responded to these defeats with his infamous court-packing plan, but in time he was able to appoint Justices who deferred to legislative judgments about how best to address the Depression. In other words, in that era liberals believed in restraint, and conservatives were the activists. (That flipped in the Warren era.) Notably, when Sotomayor was asked her favorite Supreme Court Justice, she named Benjamin Cardozo, who was a leader in fighting the conservative activism of the thirties on the Court.

“What you’ll get with Obama is basically Carolene Products—‘Leave me alone on economic issues and protect me on civil rights,’ ” Richard Epstein, the conservative legal scholar who was interim dean of the Chicago Law School when Obama taught there, said. Carolene Products was a 1938 decision, involving skim milk spiked with non-milk fat, in which the Court set up a structure that would shape constitutional law for the next several generations. The Justices gave the elected branches a more or less free hand on economic issues but exercised greater scrutiny of measures that affected minorities. “Obama has nothing much he wants from the courts,” Epstein told me. “He wants them to stay away from the statutes he passes, and he wants solidity on affirmative action and abortion. That’s it.”

As David Strauss observed, “Fighting over the courts is not going to be a high-priority issue for Obama or the Democratic coalition. The Republican coalition cares a lot more about it at this point, because they want the Court to change on issues like abortion, affirmative action, school prayer, gun rights. If the courts stay right where they are, that’s fine with the Democrats. The Democratic agenda is more democratically focussed on legislation.”

In recent years, thirties-style conservative judicial activism, targeting federal legislation, has been returning to the Court. As Cass Sunstein, a former professor at Harvard Law School, writes in the “2020” collection, “Increasingly, conservatives have been drawn to ‘movement judges’—judges with no interest in judicial restraint, with a willingness to rule broadly and a demonstrated willingness to strike down the acts of Congress and state governments. Movement judges have an agenda, which, as it happens, overlaps a great deal with the extreme wing of the Republican Party.” Sunstein notes that the Rehnquist Court struck down more than three dozen federal enactments between 1995 and 2004—“a record of aggressiveness against the national legislature that is unequaled in the nation’s history.”

Last week, after a long delay, Sunstein was confirmed as director of the Office of Information and Regulatory Affairs in the Office of Management and Budget. Dawn E. Johnsen, another contributor, has been waiting for months for a Senate vote on her nomination as an assistant attorney general. Harold Hongju Koh, who was the dean of Yale Law School and another writer in the collection, was recently confirmed, also after a long delay, as legal adviser to the State Department. The trouble that these outspoken academics have had in winning confirmation for Administration posts offers another augury of major battles ahead if Obama nominates any of them, or anyone like them, for judgeships.

The Roberts Court, in addition to striking down the D.C. gun-control law, invalidated school-integration plans undertaken by local governments in Seattle and Louisville, and rejected part of the McCain-Feingold campaign-finance law. In an oral argument last week, in a case involving a film critical of Hillary Clinton, the Court appeared poised to strike down another part of the same law. An Obama Court would almost certainly defer more to congressional and other legislative judgments. “You start with the premise that the political branches are the first line of defense of constitutional rights,” Balkin said. “If you think that health care is a very important right that people should enjoy, you think that the best way to enforce it is for Congress to pass a law and the President to sign it. This is a very different model from the late sixties.” Obama’s ambitious legislative agenda, combined with his stated devotion to judicial restraint, signals an approach in synch with this ideology.

During the campaign, Obama criticized George W. Bush for his aggressive use of the powers of the Presidency, particularly regarding the treatment of military detainees. Obama and other liberals saluted the Supreme Court’s decisions, in the Hamdan and Boumediene cases, which rejected Bush Administration proposals regarding Guantánamo Bay. But, like most Presidents, Obama has now embraced a more robust conception of executive power than some traditional liberals would prefer. He has issued signing statements, noting his objections to certain legislation on constitutional grounds; he has expressed a willingness to create a system for trying detainees that offers fewer protections than criminal trials do; and his Administration has invoked the state-secrets privilege to keep information away from torture victims who have filed lawsuits. In these areas, Obama has taken less aggressive positions than the Bush Administration did, but the difference is of degree, not of kind.

In some respects, Democratic Constitutionalism, or the Obama version of it, still looks much like traditional liberalism. The deference to the will of the people will go only so far. If, for example, a state legislature were to ban all abortions, there would be little hesitation on the part of most liberals to strike that action down. Same-sex marriage, which many liberals favor, presents a similar dilemma, although Balkin can fit the current struggles into his template. “Same-sex marriage right now is a collaboration, where sometimes courts are leading, like in Massachusetts, and sometimes in other states the courts are teeing up the question and forcing the attention of the polity on it,” he said. “But courts can only push so far out against what the people believe. They can lead, but they have to get some degree of take-up from the legislature, or nothing is going to change.”

As Obama has said, the role of the Court is sometimes specifically to confront—not ratify—the will of the majority. “One of the roles of the courts is to protect people who don’t have a voice. That’s the special role of that institution,” Obama said in Detroit. “The vulnerable, the minority, the outcast, the person with the unpopular idea, the journalist who is shaking things up. That’s inherently the role of the court. And if somebody doesn’t appreciate that role, then I don’t think they are going to make a very good justice.”

This is the paradox of the judiciary—that unelected judges must protect democratic values. Obama’s belief that judges reflect the prevailing political environment raises a paradox of its own. He is launching his nominees into an atmosphere that is so poisoned that scarcely anyone can get confirmed. As one of his advisers said, “Post-partisanship has not yet arrived in judicial selection, or in anything else.


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Very, Very Lost in Translation - By Raymond Stock | Foreign Policy

How the Egyptian literary czar who wants to lead the world's top cultural body got caught up in his own country's rabid anti-Semitism.

BY RAYMOND STOCK | SEPT. / OCT. 2009

To say that Farouk Hosni doesn't much like Israel is putting it lightly. According to the Anti-Defamation League, he has called it "inhuman," and "an aggressive, racist, and arrogant culture, based on robbing other people's rights and the denial of such rights." He has accused Jews of "infiltrating" world media. And in May 2008, Hosni outdid even himself, telling the Egyptian parliament that he would "burn right in front of you" any Israeli books found in the country's libraries.

What's shocking is not just that Hosni has said these things, but that he is Egypt's culture minister -- and even more scandalous, that he is the likely next head of UNESCO, the arm of the United Nations sworn to defend cultural diversity and international artistic cooperation. Less surprising but also sadly true is that Hosni's opinions about Israeli culture are par for the course among Egypt's intelligentsia, for whom 30 years of official peace with the Jewish state, the longest of any Arab country, have done virtually nothing to moderate its rampant Judeophobia. If anything, the opposite might be true.

This affair has sparked protests from prominent intellectuals and politicians in Israel and around the world. And the only reason Hosni even has a shot at the UNESCO job, which he'd be the first Arab to hold, is because, in a major reversal, Israeli Prime Minister Benjamin Netanyahu recently lifted his country's opposition to the Egyptian's candidacy. How this came to pass remains shrouded in mystery. All that's known is that on May 11, Netanyahu met with Egyptian President Hosni Mubarak and was convinced not to block the culture minister's candidacy in return for some unpublicized conditions. A few weeks later, Farouk Hosni penned an apologetic article in Le Monde, retracting his statement on book burning. Soon after that, he pledged that Egypt's culture ministry would translate literary works by two Israelis, Amos Oz and David Grossman. This seemed like a significant concession because official Egyptian policy mostly bars translation from Hebrew to Arabic -- or at least any dealings with Israeli publishers.

But what appeared to be signs of positive change in Egypt's literary elite were actually just reflections of its deep-seated hostility to Jewish and Israeli culture. Hosni was quickly and widely attacked as "courting Zionist influence" by his fellow members of the Egyptian intelligentsia. In fact, Gaber Asfour, the head of Egypt's National Translation Center, immediately denied any link between the translations and Hosni's UNESCO campaign. He clarified that there would be no translation of the Israeli authors from Hebrew at all, but rather from existing European translations, so as not to have to actually deal with the Israeli rights-holders themselves. Although there are certainly a lot of books about Israel on the market in Egypt -- most of them full of conspiracy theories or tendentious views of Jewish history -- Egypt's head translator said he wanted to publish more, if not directly from the Hebrew. For his justification, he quoted an Arabic proverb: "Who knows the language of a people is safe from their evil."

This whole imbroglio only serves to highlight the Egyptian literati's generally hateful and hidebound views of Israel, which are often more virulent than those of the Egyptian public at large. To this day, Egyptian cultural figures and academics are professionally barred from contacts with Israelis. Even the faculty senate at the American University in Cairo passed a resolution urging a boycott of Israeli scholars and schools. In July, the longtime management of the Atelier du Caire, the main gathering place for the city's artists and writers, fell to a coup mounted by a group of disgruntled members; the charge was incompetence and catering to Israelis. And Egypt's greatest modern writer, the late Nobel laureate Naguib Mahfouz, was nearly expelled in 2001 from the Egyptian Writers' Union simply because many of his books had been published in Israel.

Indeed, this only confirmed what Mahfouz once told me in the early 1990s: "The intellectuals who grew up under Nasser will never accept Israel," he said. "They imbibed hatred of Israel with their mothers' milk -- it is deep in their blood."

So why do Egyptian intellectuals fear Israeli influence so intensely? The constantly invoked explanation is that Egyptian intellectuals, the self-styled conscience of the country, cannot accept Israelis in the absence of a comprehensive Arab-Israeli peace, and especially not as long as Israel "oppresses" Palestinians. Although this rationale usually includes a pro forma reference to "occupied lands" and "Israeli aggression," what most of them mean is that Israel's existence itself is the barrier to peace in the region. Few Egyptian intellectuals (unlike many ordinary Egyptians) acknowledge Israel's right to exist, and even Mahfouz, whose books and films were banned in many Arab countries because of his support of peace talks with Israel, admitted he originally did so because he realized that military victory was not likely (though he greatly admired Israel's literary culture, technology, and its democracy -- however flawed).

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The Egyptian generation that has grown up under Mubarak -- who has worked for peace while often fostering resentment of Israel with his rhetoric at home -- may be just the same. Then again, most of these Egyptians are not listening to Mubarak, but are following those in the media trained under Nasser or inspired by the semi-tolerated opposition group the Muslim Brotherhood and its offshoots in al Qaeda and beyond, even the militant Lebanese Shiites in Hezbollah.

These more extremist influences might seem to sit uneasily beside other equally popular ones. There is, for example, a lingering euphoria among Egypt's cultural elite from U.S. President Barack Obama's June 4 address in Cairo (though tempered, of course, with irritation at his references to the Holocaust and his reaffirmation of America's bonds with Israel). Seeming incongruities like this one can also be seen in the many Egyptians who mourn Michael Jackson while downloading chanted Koranic verses for their cellphone ring tones, and who watch racy clips of Lebanese singer Haifa Wehbe while cheering on Hamas. But these apparent contradictions shouldn't lull anyone into thinking that the Egyptian cultural elite is thawing in terms of Israel. Indeed, the Hosni brouhaha is just the most recent demonstration of the extreme paranoia against Jews that exists in Egypt.

Should Hosni's bid to be head of UNESCO succeed, as is likely, it could obscure the truly virulent prejudice that passes for cultural understanding among the Egyptian intelligentsia. Despite his apology for offering to burn books, Hosni told the Egyptian station Dream TV in July that he will oppose normalization with Israel until "two states exist" and the "Palestinian people get their right." And whatever the United Nations decides in the end, his gut feelings about Israel and the Jews are not likely to change.

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Sep 18, 2009

The great pipeline opera - By Daniel Freifeld | Foreign Policy

Inside the European pipeline fantasy that became a real-life gas war with Russia.

BY DANIEL FREIFELD | SEPT. / OCT. 2009

When Joschka Fischer's lucrative new job as the "political communications advisor" to a consortium of European energy companies was leaked to a German business publication this summer, there was one comment that stood out. "Welcome to the club," said Gerhard Schröder, an even more highly paid advocate for the other side in Europe's increasingly politicized energy war.

Schröder's remark was short, snide -- and very much to the point. For eight years, the two men had led Germany together, with Schröder ruling as its center-left chancellor and Fischer as his foreign minister. Their long-running partnership had survived a particularly complicated era in post-Cold War Europe, and publicly Fischer had always been supportive, even telling Der Spiegel that Schröder "will go down in the history books as a great chancellor."

But since their coalition government collapsed in 2005, Schröder's controversial work has led to an ever-more-public breach between the former allies. Less than one month before leaving the chancellorship, Schröder used his office to guarantee a $1.4 billion loan (later turned down) for a Kremlin-backed natural gas pipeline that would connect Russia to Germany via the Baltic seabed. Then, just days after stepping down, Schröder accepted a senior post with the pipeline consortium run by Russia's state gas monopoly Gazprom. The deal was a huge scandal inside Germany, where Schröder had already been known for years as Genosse der Bosse -- "comrade of the bosses."

The chancellor's move to the Kremlin energy payroll inspired a wave of alarm in Europe over its potentially dangerous dependence on Russia for natural gas. Moscow supplies about a third of the European Union's gas -- Europe's preferred heating source -- and some of its countries are 100 percent dependent on Russia. What's more, Europe's annual gas consumption is set to rise 40 percent by 2030, further stoking those fears about Russia. Several times in recent years, the Kremlin has abruptly cut off gas deliveries after disputes with key transit countries such as Ukraine, leaving millions of Europeans shivering in the winter cold.

Schröder had been reliably pro-Russia while in office, even famously calling the KGB-spy-turned-president Vladimir Putin a "flawless democrat." Although Fischer did not criticize his boss publicly at the time, more recently he has been openly dismissive. Schröder's idea of Putin as a democrat, Fischer told the Wall Street Journal, "was never my position." Asked later by Der Spiegel what he found "most objectionable" about Schröder's tenure, Fischer replied succinctly: "His position on Russia."

This summer, Fischer made the breach with Schröder official: He signed up with a rival consortium -- energy companies from Turkey, Bulgaria, Romania, Hungary, and Austria that have joined together to build the $11 billion Nabucco natural gas pipeline. Nabucco would bring gas from Middle Eastern and Caspian fields across Turkey's Anatolian plateau, and north into Europe. The pipeline is backed and partly funded by the EU and is strongly supported by the United States. Perhaps most importantly, Nabucco would completely bypass Russia. Such an energy strategy, Fischer has argued, is urgently needed to stop Moscow's "divide-and-conquer politics."

Moscow, not surprisingly, is pulling out all the stops to scuttle the project. It is seducing pliant politicians and resorting to old-fashioned bullying, especially in the states that Nabucco transits. It is acquiring stakes in European energy companies, often through questionable shell companies, that could complicate Nabucco's completion. It is buying up natural gas in Central Asia and the Caspian, even paying up to four times more than in previous years, to deny supplies to Nabucco. And it has proposed a rival pipeline, called South Stream, which would flow from Russia across the Black Sea to Bulgaria and the Balkans and fork, with one spur running west to Italy and the other north to Austria.

ACT ONE
Eighty percent of natural gas from Russia travels to Europe through Ukraine, but the desire to do something about it only materialized with the gas disputes that broke out between Ukraine and Russia after the 2004 Orange Revolution.

In many ways, Schröder and Fischer personify the intense struggle -- some call it a war -- over Europe's energy future. On one side are those countries most worried about their dependence on Moscow, especially the former communist countries of Central and Eastern Europe. On the other are countries such as Italy and Germany and leaders such as Schröder, who see closer ties with Russia as both a mercantilist opportunity and a strategic imperative. When I caught up with Schröder at a conference in Houston earlier this year, he was quick to brush aside concerns about Moscow. "There is no reason to doubt the reliability of Russia as a partner," Schröder said. "We must be a partner of Russia if we want to share in the vast raw material reserves in Siberia. The alternative for Russia would be to share these reserves with China."

This gas war is especially hard-fought because of the physical nature of the prize itself. Unlike oil, which can be put onto tankers and shipped anywhere, gas is generally moved in pipelines that traverse, and are thus tethered to, geography. Because a pipeline cannot be rerouted, producers and consumers sign long-term agreements that bind one to the politics of the other, as well as to the transit states in between. In this way, today's gas war is a zero-sum conflict similar to the scramble for resources that divided Eurasia in the 19th century. And now, as then, commerce is taking a back seat to politics.

That is what I found when I set out this spring to travel the pipeline routes, encountering along the way a rogue's gallery of cynical politicians, murky middlemen, insistent executives, and innumerable technocrats, each eager to shape the decision. But the real question that will determine Nabucco's future -- a question vividly on display in every country the pipeline will touch -- is whether Europe has the stomach to fight as hard for its interests as Russia does for its own.

Liberetto: Today's gas war is a zero-sum conflict similar to the scramble for resources that divided Eurasia in the 19th century. Planned pipeline Nabucco would carry up to 1.1 trillion cubic feet of natural gas a year from the Caspian Basin to Vienna, traversing many a former Soviet satellite along the way. A competing Russian project, South Stream, would flow from Russia across the Black Sea and ultimately terminate in Italy and Austria.

One evening in 2002 in Vienna, a small group of Austrian energy executives took their colleagues from Turkish, Hungarian, Bulgarian, and Romanian firms to see a rarely performed Verdi opera. It recounted the plight of Jews expelled from Mesopotamia by King Nebuchadnezzar. The officials had spent the day sketching out a plan for a 2,050-mile pipeline that could transport up to 1.1 trillion cubic feet of natural gas every year across their countries and into European markets. The sources of this gas would not be Russia, but Azerbaijan, maybe Iran one day, and with a U.S.-led war against Saddam Hussein looking increasingly likely, possibly the gas fields of northern Iraq. The opera they attended that night was called Nabucco, and that is the name they gave their pipeline.

The original impetus for the project was just business: The Turks and Austrians saw it as a way to get new supplies of gas from the Caspian and Middle East -- not to mention lucrative transit fees for moving it across their territories into Europe. But politics soon entered into it, as Nabucco won early moral support from Russia skeptics in Central and Eastern Europe. They saw the pipeline as a historic opportunity to build a new lifeline to the West while weakening Russia's grip on them. Many worried, as former Estonian Prime Minister Mart Laar wrote, that "Russian leaders regard their energy assets as tools of foreign-policy leverage and envisage a future in which resource competition may be resolved by military means." The main energy firms in Bulgaria, Romania, and Hungary -- all countries that would host Nabucco -- signed on to help build the pipeline.

ACT TWO
Without Azerbaijan, Nabucco is a non-starter. For the project to be initially viable, Azerbaijan will need to provide 283 billion cubic feet of gas per year, roughly a quarter of the pipeline's capacity.

The big powers of Western Europe, however, were less dependent on Russian gas and far less willing to antagonize Moscow by bringing non-Russian gas into Europe through former Soviet satellites. Italy, under Silvio Berlusconi, and Germany, under both Schröder and his successor Angela Merkel, dragged their feet on Nabucco. France, with its nicely diversified supply of energy, had little appetite for changing the status quo. Together, these countries blocked any effort within the European Union to allocate funding for Nabucco or even make support for the pipeline a common policy. This resistance infuriated the European Union's newest members, and it still rankles. "The EU role has been weak," Mihaly Bayer, Hungary's special representative for Nabucco, told me. "The EU coordinator for Nabucco, Jozias van Aartsen, simultaneously serves as the mayor of The Hague!" Bayer thundered when we talked in his Budapest office. "When I assumed my post, I sent him multiple letters offering my assistance. I even spent two days in The Hague trying to meet with him. He ignored me."

This east-west deadlock held until 2006, when events started to push in Nabucco's favor. The reason had everything to do with Ukraine, which has clashed repeatedly with Russia in recent years.

Eighty percent of natural gas from Russia travels to Europe through Ukraine, across an energy infrastructure built by the Soviet Union after the 1956 Hungarian uprising. The main pipelines converge in Ukraine before fanning out into Eastern Europe, and were key to the Kremlin's strategy of controlling its Warsaw Pact satellites. The route went through Ukraine because Soviet planners never imagined a day when Ukraine would not be ruled by Moscow. But when that day did arrive, on Aug. 24, 1991, Russia's hold on Ukraine did not end. It just grew more complex, and gas remained a central means of control.

How this unfolded was explained to me in Kiev by Bohden Sokolovsky, an energy advisor to Ukrainian President Viktor Yushchenko, over a breakfast of vodka, blintzes, and cigarettes. It all came down to two things, Sokolovsky said, "Otkat and deriban" -- roughly translated, kickbacks and theft. As Soviet assets and state-run energy companies were privatized in Ukraine in the 1990s, apparatchiks and businessmen on both sides of the border concocted elaborate schemes to get in on the action. They manipulated prices and parceled out kickbacks. The deals were "obviously corrupt," recalled a senior advisor to former Ukrainian President Leonid Kuchma. "But it was a great deal for Ukraine."

Many Europeans disliked their dependence on Ukraine. "The very basis of the gas business in Ukraine is graft," Vaclav Bartuska, the Czech Republic's ambassador at large for energy security, told me. But the desire to do something about it only really materialized with the gas disputes that broke out between Ukraine and Russia after the 2004 Orange Revolution. Ukrainian protesters had just successfully contested an election marred by fraud and voter intimidation, ultimately preventing the Kremlin-favored candidate from taking power. Soon after, the new president, Yushchenko, sought to steer Ukraine into a Euro-Atlantic orbit. This was a direct threat to Russia's influence over its main point of entry into European gas markets. So Putin countered that if Ukraine wanted to be a Western country, it would have to pay the far higher Western price for gas. When Kiev refused to pay those higher prices in the winter of 2006, Moscow shut off gas shipments to its neighbor for four days, denying fuel to millions of other Europeans as well.

"It wasn't until the 2006 gas crisis that the rest of Europe actually started to care about what was going on in Ukraine," recalled Bartuska, who mediated yet another dispute between Russia and Ukraine this January. Many more Europeans began to view Russia not as a reliable supplier of gas but as an aggressive petrostate that privileged its political organizations over its commercial obligations.

Almost overnight, support for Nabucco grew dramatically throughout Europe. But the gas shut-offs also added new impetus to Nabucco's Russian-backed rival, South Stream. Whereas Nabucco's supporters saw warning signs in Ukraine about Russian aggression, others saw a corrupt, untrustworthy transit state disrupting Russia's reliable supply of gas. As Dmitry Rogozin, Russia's ambassador to NATO, put it: "It's clear that if Europe wants to have guaranteed natural gas supplies, as well as oil in its pipelines, then it cannot fully rely on its wonderful ally, Mr. Yushchenko." The Italian energy company Eni led the way, signing on to South Stream in 2007.

And then, of course, there is Germany, where Gerhard Schröder is hardly Russia's only friend. At the same Houston conference where I saw Schröder, I attended a small breakfast for energy company officials and experts. At the first mention of transit security, Reinier Zwitserloot, a spry German of about 60, shot up and shouted, "The most reliable transit state is the Baltic!" He went on: "As far as I am concerned, Nabucco is nothing but an opera!" I later learned that Zwitserloot had recently been awarded the Order of Friendship of the Russian Federation, Moscow's highest honor for non-Russian citizens.

In this opera, Turkey has been cast in one of the leading roles. With its indispensable geographic position between the oil and gas reserves of Iraq, Iran, and the Caspian, it is an absolute certainty that Turkey will host major pipelines sooner or later. If Nabucco succeeds, Turkey could be the biggest winner, both economically and geopolitically -- a fact not lost on Russia or Europe. Or Turkey.

Until the gas wars began, Turkey had a weak hand: It had been rebuffed for EU membership and depended on Russia for a majority of its natural gas. But now, with the country's gas demand skyrocketing and Turkish supply contracts with Russia set to expire, Turkey has not been shy in reminding Europe that it has options. "What is important is to gain natural gas," said Taner Yildiz, Turkey's minister of energy. But doing it through Nabucco, he added, "is not obligatory." Turkey's ambassador to the United States has pointedly called the EU "the biggest impediment to progress on Nabucco's development."

When I sat down in late April with Cuneyd Zapsu, a founding member of Turkey's ruling Justice and Development Party and a longtime counselor to Prime Minister Recep Tayyip Erdogan, he was openly frustrated with Europe's wavering about the pipeline. "Turkey has been ready to sign the deal," he told me. "But every time the consortium agrees, [our Nabucco partners] throw a new term in."

Zapsu understands Turkey's delicate but fortuitous position. "Everyone is trying to make Turkey the enemy," he said. But shifting his gaze out the window and down onto the Bosporus where Europe and Asia meet, Zapsu just smiled. "Everyone loves us."

The mood is less one of love than of fear in several other countries where Nabucco would run, as Russia has aggressively stepped up its efforts to block the pipeline. Next door to Turkey in Bulgaria -- the poorest member of the EU and a transit state for both the Nabucco and South Stream pipelines -- Ognyan Minchev, head of the Institute for Regional and International Studies, told me how Moscow threatened the Bulgarians in 2006. Scrap an agreement with Gazprom and sign a new contract with higher prices for Russia and lower transit fees for Bulgaria, they were told, or else the gas would be cut off. "The Bulgarian government is obedient to Russia," Minchev said. "Bulgaria has put the entire energy system in Russian hands."

Further along the Nabucco route, in Hungary, Laszlo Varro has similar fears. At dawn one day in April, the tall Hungarian led his small dog around a hilltop park overlooking Budapest, recounting how the Russian energy giant Surgutneftegaz had recently acquired a decisive stake in the Hungarian energy firm MOL, where Varro is head of strategy. "It is one of the least transparent energy companies -- in Russia," he said. Varro's concern, he explained, is that no one really knows who is behind Surgutneftegaz -- or rather, he quickly added, that "everyone knows who is behind the company since no one knows." Others in Hungary suspect the same, and one major newspaper spelled it out in a recent headline: "Mr. Putin, Declare Yourself."

Surgutneftegaz is run by Vladimir Bogdanov, an oligarch who managed Putin's 2000 presidential campaign in western Siberia. The secretive Surgutneftegaz has offered almost twice the market value for its shares in MOL. Varro and others see a sinister reason for this seemingly illogical behavior: MOL is a Nabucco consortium member, and by buying this stake, Surgutneftegaz can cut off funding for the pipeline and cripple it in Hungary.

Russian firms are making similar acquisitions in Austria, which is the proposed end of the road for both Nabucco and South Stream. Centrex Europe Energy & Gas, an opaque gas trading firm with ties to Gazprom, makes its money buying cheap gas from Russia and reselling it for profit in Austria. The German magazine Stern recently traced Centrex's profits back to a company registered to a phony address at a drab Soviet-style housing block in Russia. And yet, Centrex recently entered into a partnership with Gazprom Germania to take a 20 percent stake in Austria's Baumgarten trading platform and storage facilities, where the two rival pipelines will literally terminate. Considering that Gazprom already holds a 30 percent share in Baumgarten, this means that Russia's state-run energy company now controls half of the most important gas storage and distribution system in central Europe -- and the future terminus of Eurasia's competing southern pipelines.

Not every country in Europe is so concerned about Russia, however. In Serbia, I was installed at the far end of a conference table opposite Mrakic Dusan, the state secretary for energy and mines. After an initial back and forth, Dusan interrupted me. "Where are the hard questions?" he demanded. So I asked him if Serbia is inviting unacceptable risks by signing a partnership with Gazprom. "We have a great contract with Russia," Dusan insisted. I asked him if he worries that Gazprom has an unsound financial and strategic position. "After 2030, only Russia, Qatar, Iran, and Turkmenistan will still have gas. With Russia in control, this 'gas-OPEC' will control world supplies." Dusan rubbed his chin as he spoke, revealing a large fancy watch. I asked where he got it. Smirking, he responded before the translator could finish.

"Putin."

For the last few years, veteran U.S. diplomat Steven Mann, the State Department's coordinator for Eurasian energy diplomacy, watched as Americans and Europeans struggled to turn Nabucco from grandiose idea to gas-delivering reality. But when he finally left the job earlier this year, he told author Steve LeVine to beware "Nabucco hucksterism" -- a condition he defined as occurring when political enthusiasm for an energy deal gets out too far ahead of its commerical viability. "There have been quite a number of officials who know very little about energy who have been charging into the pipeline debate," Mann told LeVine. "Nabucco is a highly desirable project, don't get me wrong. But there are other highly desirable projects besides Nabucco," he added. "And the overriding question for all these projects is, Where's the gas?"

For Nabucco to be initially viable, most energy experts agree, the gas will need to come from the former Soviet state of Azerbaijan -- 283 billion cubic feet of gas per year, to be precise, roughly 25 percent of the pipeline's capacity. Indeed, without Azerbaijan and its major natural gas supplies, Nabucco is a non-starter.

Russia knows this too, so it has been doing everything in its power to deny Nabucco gas from Azerbaijan, buying it to replenish Russia's declining production. In April, Russian President Dmitry Medvedev hosted Azeri President Ilham Aliyev in Moscow to discuss Russian purchases of Azerbaijan's gas. And then in June, they inked an agreement in which Azerbaijan promised to sell Russia up to 500 million cubic feet of gas -- at well over market rate -- from its offshore gas field, Shah Deniz.

If there were still any doubt about how far Russia would go to fight for its interests in the Caucasus, Azerbaijan need only look at Georgia, which is still reeling from Russia's invasion last summer. It is the key transit state between Azerbaijan and Turkey, hosting two pipelines that bring oil and gas from the Caspian to Turkey. By attacking its small neighbor, Russia effectively warned not only Georgia but the whole neighborhood.

But in recent months, Nabucco's European supporters have started to get their acts together, and Azerbaijan has begun to take notice of that, too. In May, the EU signed a deal of its own with Azerbaijan, which committed to building energy and trade links directly with Europe. This was arguably a more valuable agreement than the one Azerbaijan later signed with Gazprom, which offered not money but only vague pledges that may or may not be met.

ACT THREE
In recent months, Nabucco's European supporters have started to "confound the skeptics," as a top official put it, and it now seems distinctly possible that a pipeline named after Nebuchadnezzar, the ancient ruler of Babylon, might owe its success to Iraq.

Then, on July 13, beneath the crystal chandeliers of an Ankara hotel ballroom, the prime ministers of Turkey, Bulgaria, Romania, Hungary, and Austria signed a Nabucco treaty describing exactly how the pipeline would operate and how tariffs would be calculated. Several days after the announcement that Nabucco had hired Joschka Fischer, who is beloved by many in Turkey for his passionate support for its EU membership, Turkey had dropped a major demand that it had insisted on for months, and the path to the deal was cleared. This was a major breakthrough, and it led Natig Aliyev, Azerbaijan's energy minister, to remark: "I am sure that the project will be realized successfully." When that day comes, Azerbaijan will enjoy both higher prices for its gas and a lifeline to the West.

Also in attendance in Ankara was Iraqi Prime Minister Nuri al-Maliki, whose country looks increasingly likely to play a large role in supplying Nabucco -- possibly larger than that of Azerbaijan. By some estimates, Iraq could provide more than 500 billion cubic feet of natural gas per year by 2014, when Nabucco is expected to be up and running. All of the major players -- Arab Iraqis, Kurdish Iraqis, and the Turks next door -- want to see Iraqi gas heading north through Turkey and into Europe. Recently, a Hungarian and an Austrian energy firm, both Nabucco consortium members, made deals to take 10 percent apiece in the $8 billion Pearl Petroleum gas project in Iraqi Kurdistan. It now seems distinctly possible that a pipeline named after Nebuchadnezzar, the ancient ruler of Babylon, might ultimately owe its success to Iraq.

When Gerhard Schröder signed on with Gazprom in 2005, the smart money in the gas war was on Moscow. Now that picture is changing, if slightly. There is a sense that the Kremlin overplayed its hand both in the gas shut-offs to Ukraine and in the Georgia war last summer. Indeed, U.S. Vice President Joe Biden recently echoed this view of Russia's energy power play. "[Russia's] actions relative to essentially blackmailing a country and a continent on natural gas, what did it produce?" he pointed out. "You've now got an agreement [Nabucco] that no one thought they could have." At the same time, the global recession has hit Russia particularly hard, and Gazprom's profits fell 84 percent in the fourth quarter of 2008, making it Russia's biggest debtor, rather than the world's biggest company, as it once bragged it would become.

And Nabucco's European supporters finally seem to be taking their own side in this fight. They now have a heavyweight rainmaker in Fischer, who is going toe to toe with his old boss Schröder in the struggle for influence in the path of the pipelines. The recent EU agreement with Azerbaijan and the fanfare-laden treaty signing in Turkey are contributing to the sense that Europe is leveling the playing field with Russia. "We have started to confound the skeptics, the unbelievers," European Commission President José Manuel Barroso said in July. "Now that we have an agreement, I believe that this pipeline is inevitable rather than just probable."

And yet, if recent experience teaches anything, it is not to count Russia out, especially when so much is at stake. When I raised this issue with Russian Energy Minster Sergei Shmatko at a meeting in Bulgaria in April, he shot me a threatening glare and cautioned against planning for an energy future without Russia, unless the Europeans were fully prepared to deliver it. "We have an expression in Russia," Shmatko told me. "Don't sell the skin off a bear before you kill it."

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Scenes from the violent twilight of oil - By Peter Maass | Foreign Policy

It succors and drowns human life. And for the last eight years, oil -- and the people and places that make it -- was my obsession.

BY PETER MAASS | SEPT. / OCT. 2009

Across the globe, oil is invoked as an agent of destiny. Oil will make you rich, oil will make you poor, oil will bring war, oil will deliver peace, oil will shape our world as much as the glaciers did in the Ice Age.

But how?

Oil is not a machine that can be disassembled or schematized for comprehension. It is a liquid. How do you coax secrets from a liquid? To know a person, you talk to him. To know a country, you visit it. To know a religion, you study sacred texts. Oil defies these norms of interrogation. It is a commodity that is extracted, refined, shipped, and poured into gas tanks with few people seeing it. It has no voice, body, army, or dogma of its own. It is invisible most of the time, but like gravity, it influences everything.

Over the course of eight years, I tried to solve this puzzle by talking with people who worked in the industry, visiting people who were touched by its operations, and taking a look not only at oil fields but the battlefields they have spawned. I met with oilmen in Houston, princes in Riyadh, lobbyists in Washington, roughnecks in Baku, warlords in the Niger Delta, leftists in Caracas, billionaires in Moscow, environmentalists in Quito, generals in Baghdad, traders in Manhattan, wildcatters in Midland, and diplomats in London. If you have conversations with people such as these, the topics you discuss include not just politics and economics but history, geology, geography, chemistry, engineering, physics, climatology, ecology, accounting, law, corruption, culture, psychology, anthropology, greed, envy, disease, ego, and fear. The world of oil is an intellectual as much as a physical space, and my years of journeying took me through a crude world that is as dark and amazing as the liquid that casts a spell on all of us.

NIGERIA

The canoe that carried me into the Niger Delta had an outboard engine that conked out several times before reaching Tombia, which was then the latest target in Nigeria's long-running oil war. Tombia was a shambles, half its homes burned or bombed beyond repair. A dozen survivors came to the creek, and their manner was not warm. They were young men, fighters, some with soiled bandages. Fingers and hands were missing; limbs were swathed in pus-caked gauze. Government forces had attacked Tombia in the brutal way they usually do, with helicopter gunships strafing anything that moved and speedboats disgorging soldiers who shot their way through town. A dozen people were reported killed, and most of the town's population was too frightened to return -- but in any event, there was not much to return to.

The leader of these survivors, whose nickname was Prince, angrily pointed out the town's destruction with the stump of what used to be his right hand. Even the Lutheran cathedral, St. Stephen's, was destroyed. Its timid pastor, living in a shack and shivering from malaria or fear of the bitter youths who now ruled this wasteland, said it had been constructed by British missionaries in 1915. A sign by the church declared in English, "Tombia is dedicated to God. Jesus the King over the land. Holy ghost in charge."

A boy who looked 12 years old and was blind in one eye stood in front of a house that had burned to its concrete foundation. His older brother had been killed, he said, and the town was now dead and his river was dead too, tainted by oil. Because of the pollution, he could not possibly catch enough fish to nourish himself and his dead brother's family. He was angry and hopeless; the result was listlessness. The government, the Army, Royal Dutch/Shell, the warlords, the writer who would leave in a few minutes -- they would not help. His only hope was, it seemed, the Holy Ghost.

I returned to the canoe and it was not long, just an hour or so, before I reached Oro Sangama. Its defining feature was apprehended on first inhalation -- a heavy odor of sewage that had fused with humidity to form a fecal mist. It existed because Sangama's residents relieved themselves in a creek just a few steps from their homes; the creek was dead, or nearly so, as was the sickly jungle around it.

Oro Sangama had another peculiar feature: There was a steady roar around it, like the sound of a giant flamethrower. Across the fetid creek stood a natural gas plant operated by Shell. The village was in the shadow of its largest flare, which shot into the air a plume of fire. As darkness fell, Sangama became illuminated by the flare's reddish glow and remained lit in this fashion until the sun rose in the morning. The Martian light was deadly rather than helpful because the flare spews into the air a cocktail of toxic substances.

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Soon I was greeted by King Tom Mercy, leader of the local Ijaw community. He wore a T-shirt and a frown. "This is where the oil and gas comes out," he said. "They could give us water, give us light, give us scholarships, give us jobs. We would not quarrel with anyone again. We have tried everything, used lawyers and dialogue, and we see there is no way. The next thing is violence. We don't care if everyone dies; we will burn it."

Aboard his canoe the next day, we moved through mangrove creeks in which there was no screeching of monkeys, no hippos or crocodiles in the water, no butterflies floating in the air. Between the war and the pollution, this was both a dead zone and a killing zone. At some spots, the shoreline was shaved of vegetation and fenced off, to protect flares and pits that burned off excess oil and gas. The earth in these places was, quite literally, on fire.

This journey required, for comprehension, the imagination of a science fiction devotee. We passed a small island known as Little Russia. The origin of its name was not clear, but the island served a distinct purpose -- it was where prostitutes lived, servicing the needs of soldiers and oil workers. On its shore, young women stood in the shade of shacks fronted with empty beer bottles and off-kilter picnic tables. The girls waved.

The smell of oil was strong, even when wells or flares were not visible. Where did it come from? I looked down and saw a film of oil on the river. At a flow station where fluids dripped into the water from a tangle of metal pipes that had the appearance of industrial art, a Shell sign said, "Keep Nigeria Safe and Clean." The canoe stopped in front of six wellheads coated in oil that fell, drop by drop, into the water. If a match was thrown into the river, we would be engulfed in flames.

"How can we expect to catch fish?" King Tom asked.

His anger was no performance.

"Let's go," he ordered.

We soon passed a patrol boat with unsmiling soldiers.

"You see how we live."

HOUSTON

One evening I joined more than a thousand oil executives in a Houston ballroom that was large enough for a jumbo jet or two. The pinstriped diners were served plates of mixed salad, grilled salmon, and chocolate mousse by overworked waiters whose service was as gentle as cowboys heaving bales of hay to livestock. This was the gala evening of an annual oil conference at the Westin hotel. Drawn from across the globe, the men and just a few women in the chandeliered cavern constituted an oilpalooza.

The attraction on this February evening in 2003 was a chemical engineer from South Dakota. Since 1963 he had worked for just one company, eventually becoming its chairman and chief executive. He made everyone else in his hard-bitten industry seem gentle. He was gruff even to members of Congress and scoffed at global warming long after scientists proved it. Greenpeace called him the "Darth Vader of global warming." He was superficially unappealing too, with a misshapen lip, an ample belly, and a set of jowls that cartoonists would judge absurd. But in the oil industry you do not need to be pretty or kind to succeed, and this oilman had succeeded beyond anyone's imagining. Lee Raymond had turned ExxonMobil into the largest and most profitable corporation in the United States. He was rewarded with an astounding $686 million in compensation during his 13-year tenure as chief executive, which breaks down to about $144,000 a day, or more than $6,000 for every hour he worked, slept, ate, or golfed.

But Raymond was nearly unknown outside the environmental lobby that despised him, the financial industry that swooned over him, and the oil industry that feared him (Exxon's executive suite was known as "the God Pod"). Think of the tycoons who are part of the contemporary lexicon -- Gates, Murdoch, Buffett, Jobs -- and realize that absent from their ranks is the man who oversaw one of the most profitable multinationals of the 20th century. I wanted to see him on this evening because he was not just at the highest echelon of his industry's ruling class, but seemed its epitome.

After the mousse plates were cleared, Raymond lumbered onto the ballroom stage. The crowd offered a round of applause that was more akin to a handshake than a hug. In this industry, there was no need to feign love; grudging respect would do. His speech was an industrial mission statement. His listeners, who included ministers, princes, and CEOs, were reminded of how vital their work was, how underappreciated they were, how they must labor harder than ever, how the future will be grander than the already-blessed present. A video screen enlarged Raymond's presence to superhuman proportions. It was part Tony Robbins, part Billy Graham, with a whiff of a mumbling Leonid Brezhnev.

Invoking a sacred industrial purpose, Raymond recited his version of the inspirational commandments of the oil world:

"We all have a tremendous opportunity and a responsibility to improve the quality of life the world over. Virtually nothing is made without our energy and our products.

"Our industry's best years lie ahead, surpassing even the greatest achievements of the century gone by.

"We condemn the violation of human rights in any form and believe our stand on human rights sets a positive example for countries where we operate."

The audience's reaction was ritualized, less a genuine wave of applause than an obligatory simulation. I was reminded that in this brutal business, it was best to save your enthusiasm for crushing a rival rather than congratulating him.

VENEZUELA

Venezuela, which has the world's seventh-largest oil reserves, is a classic example of what economist Joseph Stiglitz calls "a rich country with poor people." Caracas, the capital, is surrounded by coils of barrios; voters from these impoverished areas are the electoral base for President Hugo Chávez, who promises to create true prosperity from the oil riches. I stopped by Miraflores, the presidential palace, to see how Chávez was performing the trick that eluded so many of his predecessors.

The Miraflores event was part of the great game of our times -- the superpower search for steady supplies of energy. China, which didn't import much petroleum until 2000 yet is now the second-largest importer after the United States, was doing whatever it could to win the friends and resources it needed. To woo Caracas, China had just agreed to help launch a communications satellite on favorable terms. In a conference hall at the palace, Chávez was getting ready to break this news to the world. Onstage, several executives from the China Great Wall Industry Corporation sat beside the stout Venezuelan president.

After the Chinese and Venezuelan anthems were sung, Chávez launched into a speech of the sort that is his trademark -- a presidential stream of consciousness. He congratulated the Chinese for being clever at math and saluted their women for being so beautiful. He thanked the Chinese government for training Venezuelans in satellite technology, saying they were teaching Venezuela "how to fly." As a visual aid, he flapped his arms like wings. He added that the Chinese had learned to fly under "the great Mao Zedong," and because Chávez drew inspiration from Mao's one-party, one-truth pedigree, he smiled broadly and exhorted, "Long live the Chinese revolution!"

The Chinese businessmen, as rigorously mercantilist these days as John Rockefeller was in his time, gazed at Chávez. They didn't seem to know whether the desired response was sardonic smiles or clenched fists, but their expressions veered toward the safe harbor of nodding approval. One of them adjusted the volume on his translation headset as Chávez said, "We don't want to earn money out of this. We're not capitalists. This is about the survival of our country and the destruction of capitalism. Capitalists are generating death!"

Yet capitalists are still buying oil from Venezuela, and lots of it; most of Venezuela's oil exports go to the United States. A president can flap his arms in Caracas and hold his nose at the United Nations and promise to remake his nation, but reality is crude in many ways. There is a saying that Venezuela does not have good or bad presidents, just presidents who serve at times of high or low oil prices. Chávez, running for president in 1998 as the main political parties all but collapsed from decrepitude, had the great luck of being elected when oil sold for $12 a barrel. As his presidency began, prices started climbing, on their way to more than $140 by 2008. Venezuelans had seen this before -- presidents who became popular by increasing public spending and who became unpopular when the oil boom ebbed. Chávez's announcement at Miraflores -- indeed, his entire presidency -- had the feel of what Venezuelan scholar Fernando Coronil described as a state limited to "magic performances, not miracles."

Magic can obscure reality but not make it disappear.

SAUDI ARABIA

When our paths crossed, Mohammed Ibrahim Abdul Aziz was 20 years old. He seemed young for his age -- his sparse facial hair gave him the look of a teenager. He had studied at King Saud University in Riyadh but had not been inspired by his teachers and had not been hopeful of finding work after graduation. The paradoxes of Saudi Arabia include the fact that it has oceans of oil but not an economy that offers jobs its citizens want. This is one of the problems of the oil industry: It generates lots of cash but very little work. Mohammed dropped out of school and like many Saudi youths spent his spare time cruising the Internet. When I asked which fundamentalist Web sites he'd visited, Mohammed couldn't remember precisely because there were so many, all extolling the glory of doing battle against infidels.

I met Mohammed in Samarra, Iraq, where he had gone to fight Americans in 2005. He had been captured a few days before our encounter, and he had certainly seen better days. He was wearing a green frock covered in mud and his eyes were bloodshot. He had been interrogated almost nonstop. A soiled bandage was wrapped around his head; he said he was injured when the car he was traveling in, with two members of his insurgent cell, was attacked by Iraqi soldiers. It was just as probable that he had been roughed up but did not want to say so. We talked in an office in a library that had been converted to a detention center. A desk in our midst had bloodstains down its side. From parts of the detention center I was not allowed to visit, I could hear prisoners screaming and retching.

Mohammed's career as a holy warrior had lasted a few weeks. He had no skills to offer the insurgency because he had never fired a weapon or built a bomb, did not know his way around Iraq, and could not even blend into a crowd because his Saudi accent gave him away. When he realized his insurgent cell was led by a man who seemed more interested in stealing cars than killing Americans, he wanted out. His capture came as a relief, which is why he had not been tortured to the edge of death -- he was more than happy to tell everything he knew.

"I made a mistake," Mohammed said. "I just hope I will be allowed to go back to Riyadh. I want to leave."

He would not be going home soon. A U.S. military advisor, dressed in jeans and with a pistol strapped to his thigh, was monitoring my talk with Mohammed. The Iraqi who interpreted, also with a pistol on his hip, was an overweight police official. The Saudi, the American, and the Iraqi in this room were in a deep mess, as were their homelands. There were many reasons, and a core one was evoked when Mohammed ventured a guess as to why Iraq had been invaded.

"The Americans want to control Iraq's resources," he said. "They came here for oil."

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Subpriming the pump - By Mahmoud A. El-Gamal and Amy Myers Jaffe | Foreign Policy

Oil wealth used to hurt only those who had it. Now, it's hurting everyone.

BY MAHMOUD A. EL-GAMAL, AMY MYERS JAFFE | SEPT. / OCT. 2009

The resource curse has gone global.

For years, oil wealth was mostly a danger to those, paradoxically, who possessed it. Resource-rich Middle Eastern countries, and their labor-exporting neighbors, failed for decades to invest adequately in their people or to diversify their economies. A massive influx of oil receipts and worker remittances discouraged investment in sectors conducive to steady long-term growth, fostered corruption and patronage, inflated regional real estate and stock markets, and provided irresistible incentives for governments to spend with wasteful, shortsighted abandon.

But today, the Middle East's resource curse is spilling over into the international financial system. Unanticipated petrodollar flows are fueling financial bubbles, financing a Middle Eastern arms race, and damaging the global economy through speculative oil-price feedback loops. All the elements of previous boom-and-bust cycles in the 1970s and 1980s and again in the past decade remain in place.

What's happening is both comfortingly familiar and terrifyingly new. Sudden surges in oil-revenue flows to and from the Middle East -- known as "petrodollar recycling" -- have certainly been a problem before. But in the last few years, they have become critically destabilizing. Today's Great Recession has generally been understood as a story about real estate excesses and regulatory shortcomings. But it's also a cautionary tale about the increasingly pernicious role that oil is playing in the global economy.

Into the middle of this decade, economists' worries were focused on global imbalances between China and the United States. For Harvard University economist Lawrence Summers, now a top White House advisor, the world was caught in the grip of "a balance of financial terror." Deutsche Bank researchers argued that this temporary imbalance, wherein Chinese excess savings financed excess consumption in the United States, constituted nothing less than an informal sequel to the Bretton Woods international financial system, one they thought would be sustainable for a few more years.

But this optimistic analysis overlooked a major piece of the global economic puzzle: oil receipts. Leading into 2006, the capital exiting Saudi Arabia and Kuwait alone matched the funds leaving China (approximately $200 billion per year). For five years, from 2003 to 2008, the Middle East's massive petrodollar outflows, combined with excess liquidity due to low interest rates and a voracious appetite for credit risk, fueled bubbles in global financial markets, including real estate, credit derivatives, and ultimately commodity prices. The investment frenzy pushed markets into what the late economist Hyman Minsky called "Ponzi finance." Unsustainable serial financial bubbles distorted incentives toward the financial sector and away from investments more conducive to long-term economic growth, such as infrastructure and research and development, especially for alternative-energy fuels.

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In this way, interconnected financial markets have globalized the resource curse, and all countries with relatively open economies and limited capital controls are now exposed to energy-market risks as a result -- even ones as diverse as Britain, Russia, and the United States, which are blessed with their own plentiful supply of fuels. As we saw last year in spectacular fashion, financial contagion feeds back and amplifies demand-driven spikes in oil prices, exacerbating the eventual real-economy slowdown that economist James Hamilton and others have noted.

How did this happen? Capitalist economic systems, as Minsky, Charles Kindleberger, and other economists have argued, are intrinsically unstable. Prolonged periods of economic growth invite growing appetites for risk, as optimism about rising profits and lower rates of bankruptcy lull investors into a false sense of security. Optimism ultimately grows into euphoria, which former U.S. Federal Reserve Chairman Alan Greenspan famously called "irrational exuberance," as investors bid up asset prices with ever increasing leverage. Meanwhile, financial-sector lobbyists convince legislatures to ease or underexpand prudential regulations and "unleash the power of laissez-faire capitalism." Myopically, the seeds for financial disaster are sown.

During boom times, as we saw in the years leading up to 1973 and again after 2002, the rise in oil demand strengthens oil producers, which reap massive profits by intentionally underinvesting in oil-production capacity. Oil prices continue to rise, filling their treasuries with a sudden influx of capital that cannot be absorbed at home. Petrodollars flow out, seeking returns in already inflating financial markets and pushing bubbles to dangerous levels.

As the business cycle turns, the euphoria begins to wane. Investors assess financial risks more accurately. Interest rates rise, further feeding the downswing. The irrational exuberance that amplified the boom quickly reverses course, accelerating the bust. Demand for oil collapses, causing oil prices to crash. Petrodollar flows dry up, hitting financial markets and real-sector growth still harder. Then, reduced liquidity and credit prevent oil exporters from investing sufficiently in productive capacity during the recession, and our story eventually repeats, each time more dramatically than before.

The geopolitical component of this megacycle is equally insidious. As oil-producing countries amass substantial financial reserves, they tend to allocate investment and expenditure disproportionately less to oil-production capacity and more toward areas that benefit the ruling elites. In the Middle East, significant portions of oil receipts have been spent on arms purchases, which protect the ruling class from both external threats and internal challenges -- indirectly, by appeasing military leaders who might pose a threat, and directly, by stifling opposition through robust internal security spending. (Military personnel as a percentage of the labor force is a very high 3 percent in the Middle East and North Africa, and military expenditures as a percentage of GDP are also consistently high, for example 9 percent in Saudi Arabia.)

Oil-importing advanced economies such as France and the United States, which eagerly sell weapons as a means of recycling petrodollars, cannot escape their own complicity in this game. Middle Eastern arms races boost not only the arsenals of national militaries, but also of subnational militias and even terrorist organizations. Iran's long-standing support of Hezbollah, for example, is well documented. The flow of weapons increases geopolitical risks, once again increasing oil prices as fears grow that military conflict or terrorist threats will disrupt supplies. Put bluntly, a little bit of terrorism is good for oil exporters.

And the links between oil and terrorism don't stop there. As oil exporters mimic the consumption behavior of advanced economies during booms, young populations develop highly unrealistic expectations, premised on a sense of entitlement to oil wealth. It's these frustrated expectations that drive youth toward radical and militant ideologies, not poverty per se. In Saudi Arabia, for example, real per capita income in the early 1980s was higher than that of the United States. Saudi nationals were accustomed to free housing, guaranteed incomes, and subsidized electricity and gasoline until low oil prices caused budget cutbacks in the mid-1990s. The Sept. 11, 2001, hijackers, after all, were mainly educated middle-class men. They were undoubtedly influenced by the arguments of Osama bin Laden, who in the 1990s was raging against "the greatest theft in history," arguing that the real price of oil in late 1979 should have persisted for the next two decades.

Needless to say, military spending, distribution of oil rents to favored segments of society, and the resulting culture of consumerism do little to ensure long-term economic development. When oil revenues shrink in the downturn of the cycle, unemployment and reduced rent redistributions feed anger, just when the state's ability to spend on security and population appeasement is waning.

How can we escape the global oil curse? Diversifying and developing Middle Eastern economies to create employment opportunities and absorb occasional petrodollar flows is crucial. Oil exporters also need to think more strategically by investing in oil-production capacity during recessions and amassing aboveground reserves when prices are low to sell when prices are high.

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Oil consumers also have long-term options. Large economies such as the United States, Japan, and China can reduce their oil consumption by investing in alternative energy, fuel-efficient technology, and public transportation. They can also wield their strategic oil stockpiles as a cudgel against speculators -- as U.S. President Bill Clinton did with success in the 1990s. During economic downturns, they can restock those reserves to stabilize oil revenues for producers, in the process selling high and buying low. Careful regulation of oil derivatives markets can help to curb harmful speculation.

These sorts of technocratic policy fixes, however, are not nearly enough to address the larger problem. We need high-level international coordination, in part through platforms such as World Trade Organization and G-20 summits. Over the past 50 years, oil importers and exporters have repeatedly sought temporary advantage by treating their mutual relationship as a repeated zero-sum game. Major consuming countries limit access to refining, marketing, and retail fuel outlets and lecture producers on the virtues of free markets when prices are low. In turn, producers invoke nationalism and curb supply when prices are high (while giving the same lectures on the virtues of free markets). Invariably, however, as the cycle has continued to rage on, the resulting gains for one side or the other have been fleeting. Worse, globalization has ensured that economic, geopolitical, and security problems in one part of the world now spill quickly into others, further negating any short-term benefits of myopic self-interest.

Without a change, the next phase of the cycle could be catastrophic. The next banking crisis, for example, might be accompanied by a currency crisis for the U.S. dollar, which has been the linchpin of the international financial system since World War II. Or conventional Middle Eastern arms races could easily turn into unconventional ones, increasing the chances that terrorists will get their hands on weapons of mass destruction.

Today's problems will look trivial in comparison.

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