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The World Forum on Energy Regulation and Investment III will build upon the themes and key findings discussed during the 1st and 2nd Forums in 2000 and 2003. The 3rd World Forum will discuss recent developments in the energy industry, new trends in energy regulation, and selected sectoral and regional issues. The major themes of the conference will include economic regulation, environmental issues, regulation across international borders & regional market development, and regulatory independence along with other contempory issues in the field.

Washington, D.C.

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Gi-Wook Shin
Daniel C. Sneider
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North Korea's announcement this week of plans to test a nuclear weapon is hardly surprising. The six-party talks to negotiate an end to its nuclear program are dead, and the North faces escalating financial and economic sanctions by the United States and its allies.

Experts have long debated the real motivations of the North in developing nuclear weapons. Some contend that the nuclear program, even the latest pronouncement, is simply a bargaining chip to gain security guarantees and economic aid. Others see a long determination to become a nuclear state.

The North Korean leaders may have begun the nuclear program as leverage. But the U.S. invasion of Iraq seems to have hardened their conviction that the only way to protect their nation and their regime is to join the nuclear club. The North Koreans want to become a Pakistan rather than an Iraq.

Still, officials in Pyongyang hesitated to cross the provocative line of visibly demonstrating their capability. Pressure is being mounted to get them to back down from their pledge. But for a variety of reasons, they apparently believe the timing for a test is now optimal.

First of all, they hope to blame the Bush administration for their decision. In the statement issued this week, the North Korean government argued that alleged American war plans justify a nuclear test, a position that reflects the views of the North Korean military.

Second, the North anticipates the test will be successful. Although a plutonium weapon is more complicated than a uranium bomb, it is quite likely that the North now has sufficient confidence in a Nagasaki-style primitive bomb. This success would be an object of pride for an otherwise failing state, and bolster its claim to the status of a world-class military power.

Third, the North Koreans see their potential enemies tied down and unable to respond effectively. The Bush administration is locked into a disastrous war in Iraq, and about to be weakened even more if the Republicans lose the upcoming midterm elections. In South Korea, the government of President Roh Moo Hyun is already a lame duck and politically paralyzed.

Fourth, Pyongyang may bet that China and South Korea, the two principal sources of trade and economic aid, would not join the United States and Japan in any real sanctions against the North. The July missile tests by North Korea provoked international uproar and led to a U.N. resolution. But the real impact has been minimal.

Finally, the North may calculate that testing will facilitate Japan's efforts to become a "normal'' nation with a broader military role in the region. That prospect could increase tensions in Northeast Asia, especially between Japan and China, and that, the North may believe, is not necessarily bad for it.

The United States, South Korea and China must act together to show that these calculations are misguided and that the North will pay a painful price if it goes ahead. Certainly this severely tests the troubled American alliance with South Korea and the emergent partnership with China. But Pyongyang's miscalculations also offer an opportunity to repair the strained alliance and create a new structure of security cooperation in Northeast Asia.

It is no secret that Seoul and Washington have been at odds over how to deal with North Korea. But the test announcement has already accelerated a shift in South Korean opinion. Rather than holding the United States responsible for the current impasse, most Koreans now see North Korea as the instigator of crisis.

South Korean officials understand that without reinforcing the alliance now, no policy toward the North can be effective. The United States and South Korea should urgently agree on common action plans -- including a shutdown of investment and economic assistance from the South to the North -- and make those consequences clear to Pyongyang.

The planned visits of newly installed Japanese Prime Minister Shinzo Abe to Beijing and Seoul next week offer a similar opening to turn threat into opportunity. Abe intends to repair tattered ties to those Asian neighbors. Now the three Northeast Asian powers can demonstrate that a nuclear test will not lead to increased tensions but to the complete isolation of the North.

The danger of escalating actions that could lead, again, to war on the Korean peninsula is grave. The North Koreans should be assured that the door to a diplomatic solution remains open to them. But they must also understand that by profoundly misreading this moment, the North Korean leadership now stands completely alone in Northeast Asia.

Reprinted by permission.

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National Security Consequences of U.S. Oil Dependency, a report by the Council on Foreign Relations Independent Task Force on Energy, concludes that the “lack of sustained attention to energy issues is undercutting U.S. foreign policy and U.S. national security.” The report goes on to examine how America’s dependence on imported oil—which currently comprises 60 percent of consumption— increasingly puts it into competition with other energy importers, notably the rapidly growing economies of China and India.

The task force was chaired jointly by James R. Schlesinger, a former secretary of defense and secretary of energy, and John Deutch, former director of Central Intelligence and undersecretary of energy, and drew from industry, academia, government, and NGOs. PESD Director David Victor directed the task force and FSI senior fellow by courtesy James Sweeney, director of Stanford’s new Precourt Institute for Energy Efficiency, served as a member.

The task force unanimously concluded that incentives are needed to slow and eventually reverse the growth in petroleum consumption, particularly in the transportation sector, but was unable to agree on which specific incentives—such as gasoline tax-funded energy technology R&D, more stringent and broadly applied Corporate Average Fuel Efficiency (CAFE) standards, and a cap-and-trade permit system for gasoline—would most effectively achieve this result.

The task force report included additional recommendations regarding the supply and consumption of energy including the following:

  • Encourage oil supply from all sources
  • Promote better management and governance of oil revenues
  • Remove the protectionist tariff on imported ethanol
  • Increase the efficiency of oil and gas consumption in the United States and elsewhere
  • Switch from oil-derived products to alternatives such as biofuels
  • Make the oil and gas infrastructure more efficient and secure
  • Increase investment in energy technology R&D
  • Promote the proper functioning and efficiency of energy markets
  • Revitalize international institutions such as the International Energy Agency (IEA)

The report stressed that the U.S. government must reorganize to integrate energy issues with foreign policy to address the threats to national security created by energy dependence. The task force offered a number of recommendations to better promote energy issues in foreign policy deliberations as follows:

  • Establish an energy security directorate at the National Security Council to lead an interagency process to influence the discussion and thinking of the NSC principals
  • Fully inform and engage the secretary of energy on all foreign policy matters with an important energy aspect
  • Include energy security issues in the terms of reference of all planning studies at the NSC, Defense, State, and the intelligence community

The task force restricted its inquiry to the challenges of managing U.S. and global dependence on imported oil and gas and did not address other important energy security issues such as nuclear proliferation and global warming.

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Council on Foreign Relations
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David G. Victor
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The history of groundwater in China is one of extremes, or apparent extremes. Before the 1960s, the story was one of neglect; only a small fraction of China's water supply came from groundwater (Nickum, 1988). Almost none of the Ministry of Water Resource's investment funds were allocated to the groundwater sector until the late 1960s. Certainly, to the extent that underground water resources were valuable, China was ignoring a valuable resource. Since the mid-1970s, however, the prominence of the groundwater sector has risen dramatically. Over the last 30 years, agricultural producers, factory managers and city officials, far from ignoring groundwater resources, have entered an era of exploitation (Smil, 1993; Brown and Halweil, 1998). Arguably, there have been more tube wells sunk in China over the last quarter century than anywhere else in the world. As a share of total water supply, ground water has risen from a negligible amount across most of China to being a primary source of water for agriculture, industry and domestic use in many of the nation's most productive regions. Unfortunately, the resulting fall in groundwater tables has been one of China's most serious environmental problems.

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Chapter in The Development, Challenges and Management of Groundwater in Rural China. Groundwater in Developing World Agriculture: Past, Present and Options for a Sustainable Future, Edited by Mark Giordano and Tushaar Shah, International Water Manage
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Scott Rozelle

From an unprecedented number of start-ups to a rising class of billion-dollar giants going global, high technology companies in China have a dramatically increasing need for effective leadership. Since 1999, founders have led 24 Chinese firms to IPOs on NASDAQ, ranging from portals such as Sina and AsiaInfo in 2000 to mobile hardware makers and service providers like Hurray!, Vimicro, and Techfaith in 2005.

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Innovative financial instruments are being created to reward conservation on private, working lands. Major design challenges remain, however, to make investments in biodiversity and ecosystem services economically attractive and commonplace. From a business perspective, three key financial barriers for advancing conservation land uses must frequently be addressed: high up-front costs, long time periods with no revenue, and high project risk due to long time horizons and uncertainty. We explored ways of overcoming these barriers on grazing lands in Hawaii by realizing a suite of timber and conservation revenue streams associated with their (partial) reforestation. We calculated the financial implications of alternative strategies, focusing on Acacia koa ("koa") forestry because of its high conservation and economic potential. Koa's timber value alone creates a viable investment (mean net present value = $453/acre), but its long time horizon and poor initial cash flow pose formidable challenges for landowners. At present, subsidy payments from a government conservation program targeting benefits for biodiversity, water quality, and soil erosion have the greatest potential to move landowners beyond the tipping point in favor of investments in koa forestry, particularly when combined with future timber harvest (mean net present value = $1,661/acre). Creating financial mechanisms to capture diverse ecosystem service values through time will broaden opportunities for conservation land uses. Governments, nongovernmental organizations, and private investors have roles to play in catalyzing this transition by developing new revenue streams that can reach a broad spectrum of landowners.

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Proceedings for the National Academy of Sciences
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Pamela Matson
Rosamond L. Naylor
Peter Vitousek
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Daniel C. Sneider
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Iran has climbed to No. 1 on the Washington crisis hit parade. The question of how to stop Iran's nuclear program has unleashed a torrent of punditry. Advocates of diplomacy and a military strike spar on television and in op-ed pages.

Iran's nuclear ambitions deserve our attention. But even by the most alarmist estimates, Iran is years away from being able to build a nuclear warhead.

Meanwhile, over in Northeast Asia, North Korea now has enough fissile material for five to seven weapons and is quietly churning out enough plutonium to build at least one warhead a year, according to rough intelligence estimates. More ominously, work is moving ahead on a new reactor that could potentially produce enough separated plutonium for up to 10 weapons a year.

Somehow this danger prompts no sense of urgency in Washington. After a promising breakthrough last September, the six-party talks to halt the program have lapsed into a stalemate that is close to total collapse.

The Bush administration seems unconcerned. Diplomacy has ground to a halt. The North Koreans refuse to return to the six-party talks. The White House has barred its chief negotiator from talking directly with them, despite Pyongyang's desire to meet and the urging of our six-party partners.

Administration officials have recently floated a report that they are considering a new initiative to negotiate a peace treaty with North Korea. This is a smoke-screen to conceal an empty North Korea policy. According to administration officials, the peace treaty idea has been kicking around for months without going anywhere. South Korean officials tell me that they have been waiting, so far in vain, for any serious detailed discussion of this proposal.

It is the president himself who opposes direct negotiations with Pyongyang, over anything, including a peace treaty. He sees direct talks with North Korea or Iran as an act of weakness. "Somehow,'' he said last month, "the world ends up turning the tables on us.''

In reality, the administration is content to pursue a strategy of going after North Korean counterfeit currency and production of amphetamines and cigarettes, hoping to cut off the flow of funds from these activities. According to administration officials, Under Secretary of State Robert Joseph, the driving force behind this policy, gleefully talks about ``turning out the lights'' in Pyongyang.

Administration officials claim they are drying up slush funds that North Korean dictator Kim Jong Il uses to buy the loyalty of his subordinates. Some even suggest this could trigger a coup against Kim, with the Chinese pulling the strings.

But American intelligence experts who monitor North Korea closely see little evidence to support the conclusion that North Korea is being brought to its knees. Even if the measures are drawing blood, it is self-delusional to believe that this will bring down a regime that has already proven it is willing to starve its own population to stay in power.

The administration seems intent as well on pressing China and South Korea to curb their trade and investment with the North. The administration's special envoy on human rights in North Korea, Jay Lefkowitz, seems to spend most of his time attacking the South for setting up an industrial park in Kaesong in the North. He portrays it as exploiting slave labor. The South Koreans defend it as a vehicle to bring capitalism into the communist North.

The Bush administration's combination of attempted coercion and diplomatic freeze has only two visible effects so far.

First, it lends credence to North Korean claims that the United States, contrary to the joint statement issued last September, is still intent on overthrowing their regime.

Second, it undermines gains made by allowing chief envoy Christopher Hill to hold direct talks with his North Korean counterparts. That demonstrated a flexibility and confidence that disarmed critics, particularly in South Korea, and isolated the North. It strengthened coordination with China and South Korea, the two players with the most leverage over the North.

Now officials in both those capitals again question American readiness to seriously negotiate. Beijing and Seoul are even more convinced that pushing market reforms is the only route to bring the North to give up its nuclear option. Next month former South Korean President Kim Dae Jung will revisit his historic summit with the North Korean leader in 2000.

This growing gap with our allies and partners is deadly. Even if we wanted to opt for coercion, the United States can't do so alone. For that reason, it is urgent that the United States regains the diplomatic upper hand.

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In the view of many policy-makers, as well as the popular media, the alliance between the United States and South Korea is suffering from an unprecedented crisis of confidence. Anti-American views, particularly among the young, are widespread in South Korea. On an official level, there are constant tensions over the role of U.S. troops based in Korea and resistance to demands to open the Korean economy to foreign investment. Most seriously, there is a stark divergence in the approach of both countries toward North Korea.

This portrait of an alliance in crisis is often contrasted to a previous golden age in U.S.-Korean relations. According to this view, the alliance enjoyed a long period of harmony during much of the Cold War, when anti-Americanism was not a problem. The military alliance was secure and Korea's economic development was in harmony with the global policies of the United States. The two countries enjoyed a strategic convergence in their response to the threat of North Korea.

This view of the Cold War past has some elements of truth. But it is largely a myth that obscures a history of constant tension and even severe crisis in the alliance relationship. The clash between Korean nationalism and American strategic policy goals has been present from the beginning of the Cold War. Differences over the response to North Korea have been repeatedly an issue in the relationship. And anti-Americanism has been a feature of Korean life for decades.

Daniel Sneider will explore the myth of this golden age. He will focus on what may have been the most dangerous decade in US-Korean relations, from 1969-79, a period ranging from the Guam Doctrine to the assassination of President Park Chung Hee. It is a time when South Korean doubts about the durability of the alliance prompted the serious pursuit of nuclear weapons and the two countries clashed over North Korea policy, economic goals, human rights and democracy. Finally, he will look at how the myth of a golden age creates a distorted view of the current tensions in the alliance.

Daniel Sneider is a 2005-06 Pantech Fellow at the Walter H. Shorenstein Asia-Pacific Research Center and the foreign affairs columnist of the San Jose Mercury News. He is currently writing a book on the U.S. management of its alliances with South Korea and Japan. His column on foreign affairs, looking at international issues and national security from a West Coast perspective, is syndicated nationally on the Knight Ridder Tribune wire service, reaching about 400 newspapers in North America. Previously, Sneider served as national/foreign editor of the San Jose Mercury News, responsible for coverage of national and international news until the spring of 2003. He has had a long career as a foreign correspondent. From 1990-94, he was the Moscow Bureau Chief of the Christian Science Monitor, covering the end of Soviet Communism and the collapse of the Soviet Union. From 1985-90, he was Tokyo Correspondent for the Monitor, covering Japan and Korea. Previously he served in India and at the United Nations.

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Stanford University
Encina Hall, Room E301
Stanford, CA 94305-6055

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Lecturer in International Policy at the Ford Dorsey Master’s in International Policy
2011_Dan_Sneider_2_Web.jpg MA

Daniel C. Sneider is a lecturer in international policy at Stanford's Ford Dorsey Master’s in International Policy and a lecturer in East Asian Studies at Stanford. His own research is focused on current U.S. foreign and national security policy in Asia and on the foreign policy of Japan and Korea.  Since 2017, he has been based partly in Tokyo as a Visiting Researcher at the Canon Institute for Global Studies, where he is working on a diplomatic history of the creation and management of the U.S. security alliances with Japan and South Korea during the Cold War. Sneider contributes regularly to the leading Japanese publication Toyo Keizai as well as to the Nelson Report on Asia policy issues.

Sneider is the former Associate Director for Research at the Walter H. Shorenstein Asia-Pacific Research Center at Stanford. At Shorenstein APARC, Sneider directed the center’s Divided Memories and Reconciliation project, a comparative study of the formation of wartime historical memory in East Asia. He is the co-author of a book on wartime memory and elite opinion, Divergent Memories, from Stanford University Press. He is the co-editor, with Dr. Gi-Wook Shin, of Divided Memories: History Textbooks and the Wars in Asia, from Routledge and of Confronting Memories of World War II: European and Asian Legacies, from University of Washington Press.

Sneider was named a National Asia Research Fellow by the Woodrow Wilson International Center for Scholars and the National Bureau of Asian Research in 2010. He is the co-editor of Cross Currents: Regionalism and Nationalism in Northeast Asia, Shorenstein APARC, distributed by Brookings Institution Press, 2007; of First Drafts of Korea: The U.S. Media and Perceptions of the Last Cold War Frontier, 2009; as well as of Does South Asia Exist?: Prospects for Regional Integration, 2010. Sneider’s path-breaking study “The New Asianism: Japanese Foreign Policy under the Democratic Party of Japan” appeared in the July 2011 issue of Asia Policy. He has also contributed to other volumes, including “Strategic Abandonment: Alliance Relations in Northeast Asia in the Post-Iraq Era” in Towards Sustainable Economic and Security Relations in East Asia: U.S. and ROK Policy Options, Korea Economic Institute, 2008; “The History and Meaning of Denuclearization,” in William H. Overholt, editor, North Korea: Peace? Nuclear War?, Harvard Kennedy School of Government, 2019; and “Evolution or new Doctrine? Japanese security policy in the era of collective self-defense,” in James D.J. Brown and Jeff Kingston, eds, Japan’s Foreign Relations in Asia, Routledge, December 2017.

Sneider’s writings have appeared in many publications, including the Washington Post, the New York Times, Slate, Foreign Policy, the New Republic, National Review, the Far Eastern Economic Review, the Oriental Economist, Newsweek, Time, the International Herald Tribune, the Financial Times, and Yale Global. He is frequently cited in such publications.

Prior to coming to Stanford, Sneider was a long-time foreign correspondent. His twice-weekly column for the San Jose Mercury News looking at international issues and national security from a West Coast perspective was syndicated nationally on the Knight Ridder Tribune wire service. Previously, Sneider served as national/foreign editor of the Mercury News. From 1990 to 1994, he was the Moscow bureau chief of the Christian Science Monitor, covering the end of Soviet Communism and the collapse of the Soviet Union. From 1985 to 1990, he was Tokyo correspondent for the Monitor, covering Japan and Korea. Prior to that he was a correspondent in India, covering South and Southeast Asia. He also wrote widely on defense issues, including as a contributor and correspondent for Defense News, the national defense weekly.

Sneider has a BA in East Asian history from Columbia University and an MPA from the John F. Kennedy School of Government at Harvard University.

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Despite chatter about "the Chinese threat" during Chinese President Hu Jintao's recent visit to Washington, neither China nor the United States seeks to confront the issues plaguing their complex relationship. Pantech fellow and San Jose Mercury News foreign affairs columnist Daniel Sneider considers the muscular side of "China's peaceful rise."

The visit of China's President Hu Jintao to the United States this week is yet another opportunity for chatter about the "Chinese threat.'' In the lead-up to his arrival, we have heard rising voices from Congress and from the administration on everything from China's currency manipulation and piracy of intellectual property to its military buildup.

Do not be deceived. There is no real appetite in either Washington or Beijing for confrontation over any of these issues, much less a serious exploration of the challenge that China presents to American global leadership.

Neither government can afford an escalation of tensions. Economically, we are too intertwined. Strip away the packaging on the $200 billion trade deficit with China and you will find American companies running global assembly lines that begin in Ohio, pass through Malaysia, and end up in southern China.

Strategically, the United States is painfully dependent on China to try to cope with the greatest security challenge in northeast Asia: North Korea's nuclear program.

Beijing is wedded to its doctrine of "China's peaceful rise.'' First formulated three years ago, it aims to keep things calm with the United States and most of its neighbors, buying time to manage the tightrope act of continuing high growth while preserving domestic stability.

In any case, Washington is too bogged down in the Middle East to do more than bark now and then about China.

"At the strategic level, the United States is really focused like a laser on the Middle East,'' and the Chinese like it that way, said Asian security expert Kurt Campbell. "They appreciate the fact that with the U.S. attention focused elsewhere, it allows China to play a larger role in Asia as a whole,'' he told a gathering last week at the Center for Strategic and International Studies in Washington.

Typically, while Washington is focused on Hu's visit, the Chinese defense minister is in the midst of an unprecedented Asian tour that will take him to North and South Korea and to Singapore, Malaysia and Vietnam. China's prime minister has just finished a swing through Australia, New Zealand, Fiji and Cambodia.

In my own travels through Asia recently, from South Korea and Japan in the northeast down to Singapore, Vietnam and Hong Kong in Southeast Asia, I found a stunning growth in China's influence. The question of how to deal with China's rise is high on every agenda.

Everywhere people are looking over their shoulder, worried about China's burgeoning strength and presence. They are equally fearful that the United States is abandoning the field to China. But they also don't want to choose between these two powers.

That is even true in Japan, where the popular media and politicians are full of talk about the Chinese threat. But look a little closer and you will also find a growing counter-movement, particularly in elite policy circles, warning against becoming separated from the rest of Asia. The battle for succession to Prime Minister Junichiro Koizumi, who is stepping down in the fall, is now being shaped around this issue.

The China-Japan rivalry tends to reveal the more muscular side of China's "peaceful rise,'' one that Americans rarely glimpse. In Vietnam, senior foreign policy officials recounted what happened when the Japanese came courting to gain Vietnam's backing for a resolution to give them permanent membership in the U.N. Security Council, a key goal of Japan's foreign policy. Japan is Vietnam's largest aid donor and a major source of foreign investment.

China and Vietnam have a long and stormy history as neighbors, including wars that go back centuries and -- more recently -- a brief invasion in 1979 that ended in defeat for the Chinese. Relations these days are relatively good, however, fed by growing trade, heavily in China's favor.

Hu, in his role as leader of the Chinese Communist Party, sent a special envoy to talk to the leadership of the ruling Vietnamese Communist Party. Sometimes, a Vietnamese official told me, the Chinese can be very indirect. Not this time. The message was simple: "Don't do it!'' The ``or else'' was left unspoken.

The Vietnamese compromised, supporting Japan's membership but refusing to co-sponsor the resolution. China was not pleased, but apparently accepted it.

For the Vietnamese, a senior official explained, they must engage in a "lot of fine balancing.'' Vietnam "can't stop engaging China'' but wants to make sure China becomes a "predictable'' power.

In Washington, when the cloud of rhetoric clears, that formula pretty much sums up the reality of U.S.-China relations, too.

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