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The possibility of terrorists obtaining and using a nuclear bomb cannot be ignored, write CISAC's William J. Perry and Michael M. May and Ashton Carter, at Harvard, who co-directs the Preventive Defense Project with Perry. Their op-ed, "After the bomb," in the New York Times, argues the federal government should plan for how it would take charge, save lives, maintain order, and guide citizens in making evacuation decisions if such a disaster were to occur. The three experts on nuclear weapons and nonproliferation outline key considerations for planning an effective response to a terrorist nuclear attack -- a response that would preserve lives and democracy.

The probability of a nuclear weapon one day going off in an American city cannot be calculated, but it is larger than it was five years ago. Potential sources of bombs or the fissile materials to make them have proliferated in North Korea and Iran. Russia's arsenal remains incompletely secured 15 years after the end of the Soviet Union. And Pakistans nuclear technology, already put on the market once by Abdul Qadeer Khan, could go to terrorists if the president, Gen. Pervez Musharraf, cannot control radicals in that country.

In the same period, terrorism has surged into a mass global movement and seems to gather strength daily as extremism spills out of Iraq into the rest of the Middle East, Asia, Europe and even the Americas. More nuclear materials that can be lost or stolen plus more terrorists aspiring to mass destruction equals a greater chance of nuclear terrorism.

Former Senator Sam Nunn in 2005 framed the need for Washington to do better at changing this math with a provocative question: On the day after a nuclear weapon goes off in a American city, "what would we wish we had done to prevent it?" But in view of the increased risk we now face, it is time to add a second question to Mr. Nunn's: What will we actually do on the day after? That is, what actions should our government take?

It turns out that much could be done to save lives and ensure that civilization endures in such terrible circumstances. After all, the underlying equation would remain a few terrorists acting against all the rest of us, and even nuclear weapons need not undermine our strong societies if we prepare to act together and sensibly. Sadly, it is time to consider such contingency planning.

First and foremost, the scale of disaster would quickly overwhelm even the most prepared city and state governments. To avoid repeating the Hurricane Katrina fiasco on a much larger scale, Washington must stop pretending that its role would be to support local responders. State and local governments--though their actions to save lives and avoid panic in the first hours would be essential--must abandon the pretense that they could remain in charge. The federal government, led by the Department of Homeland Security, should plan to quickly step in and take full responsibility and devote all its resources, including those of the Department of Defense, to the crisis.

Only the federal government could help the country deal rationally with the problem of radiation, which is unique to nuclear terrorism and uniquely frightening to most people. For those within a two-mile circle of a Hiroshima-sized detonation (in Washington, that diameter is the length of the Mall; in New York, three-fourths the length of Central Park; in most cities, the downtown area) or just downwind, little could be done. People in this zone who were not killed by the blast itself, perhaps hundreds of thousands of them, would get radiation sickness, and many would die.

But most of a city's residents, being further away, would have more choices. What should they do as they watch a cloud of radioactive debris rise and float downwind like the dust from the twin towers on 9/11? Those lucky enough to be upwind could remain in their homes if they knew which way the fallout plume was blowing. (The federal government has the ability to determine that and to quickly broadcast the information.) But for those downwind and more than a few miles from ground zero, the best move would be to shelter in a basement for three days or so and only then leave the area.

This is a hard truth to absorb, since we all would have a strong instinct to flee. But walking toward the suburbs or sitting in long traffic jams would directly expose people to radiation, which would be the most intense on the day after the bomb goes off. After that, the amount would drop off day by day (one third as strong after three days, one fifth as strong after five days, and so on), because of the natural decay of the radioactive components of the fallout.

More tough decisions would arise later. People downwind could leave their homes or stay, leave for a while and then come back or leave and come back briefly to retrieve valuables. The choices would be determined by the dose of radiation they were willing to absorb. Except in the hot zone around the blast and a few miles downwind, even unsheltered people would not be exposed to enough radiation to make them die or even become sick. It would be enough only to raise their statistical chance of getting cancer later in life from 20 percent (the average chance we all have) to something greater--21 percent, 22 percent, up to 30 percent at the maximum survivable exposure.

Similar choices would face first responders and troops sent to the stricken area: how close to ground zero could they go, and for how long? Few would choose to have their risk of death from cancer go up to 30 percent. But in cases of smaller probabilities--an increase to 20.1 percent, for example--a first responder might be willing to go into the radiation zone, or a resident might want to return to pick up a beloved pet. These questions could be answered only by the individuals themselves, based on information about the explosion.

Next comes the unpleasant fact that the first nuclear bomb may well not be the last. If terrorists manage to obtain a weapon, or the fissile material to make one (which fits into a small suitcase), who's to say they wouldn' have two or three more? And even if they had no more weapons, the terrorists would most likely claim that they did. So people in other cities would want to evacuate on the day after, or at least move their children to the countryside, as happened in England during World War II.

The United States government, probably convened somewhere outside Washington by the day after, would be urgently trying to trace the source of the bombs. No doubt, the trail would lead back to some government--Russia, Pakistan, North Korea or other countries with nuclear arsenals or advanced nuclear power programs--because even the most sophisticated terrorist groups cannot make plutonium or enrich their own uranium; they would need to get their weapons or fissile materials from a government.

The temptation would be to retaliate against that government. But it might not even be aware that its bombs were stolen or sold, let alone have deliberately provided them to terrorists. Retaliating against Russia or Pakistan would therefore be counterproductive. Their cooperation would be needed to find out who got the bombs and how many there were, and to put an end to the campaign of nuclear terrorism. It is important to continue to develop the ability to trace any bomb by analyzing its residues. Any government that did not cooperate in the search should of course face possible retaliation.

Finally, as buildings and lives were destroyed, so would the sense of safety and well-being of survivors, and this in turn could lead to panic. Contingency plans for the day after a nuclear blast should demonstrate to Americans that all three branches of government can work in unison and under the Constitution to respond to the crisis and prevent further destruction.

A council of, say, the president, the vice president, the speaker of the House and the majority leader of the Senate, with the chief justice of the Supreme Court present as an observer, could consider certain aspects of the government's response, like increased surveillance. Any emergency measures instituted on the day after should be temporary, to be reviewed and curtailed as soon as the crisis ends.

Forceful efforts to prevent a nuclear attack--more forceful than we have seen in recent years--may keep the day from coming. But as long as there is no way to be sure it will not, it is important to formulate contingency plans that can save thousands of lives and billions of dollars, prevent panic and promote recovery. They can also help us preserve our constitutional government, something that terrorists, even if armed with nuclear weapons, should never be allowed to take away.

William J. Perry, a professor at Stanford, and Ashton B. Carter, a professor at Harvard, were, respectively, the secretary and an assistant secretary of defense in the Clinton administration. Michael M. May, also a professor at Stanford, is a former director of the Lawrence Livermore National Laboratory.

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On April 28, 2004, the United Nations Security Council, acting under Chapter VII of the UN Charter, unanimously passed UNSC 1540. The resolution "decided that all States shall refrain from providing any form of support to non-state actors" attempting to obtain or use weapons of mass destruction, "adopt and enforce appropriate effective laws" to that effect, and "take and enforce effective measures to "prevent the proliferation of" WMD. To carry out its part of this mandate, the UNSC established and renewed a Committee, which has mainly and usefully assisted States in adopting "appropriate effective laws." This study, in collaboration with Committee members, has focused on implementation mechanisms and indicators of performance in border and exports controls, securing materiel and facilities, and adapting controls to State needs. We conclude that the most meaningful measures of implementation need to be more broadly adopted and that the 1540 Committee needs a more extensive staff in order to extend its role to disseminate States' experience with those measures. We also conclude that mechanisms need to be developed to facilitate information sharing between the Committee and the private sector.

Michael May is a professor emeritus (research) in the Stanford University School of Engineering and a senior fellow with the Freeman Spogli Institute for International Studies at Stanford University. He is the former co-director of Stanford University's Center for International Security and Cooperation, having served seven years in that capacity through January 2000. May is a director emeritus of the Lawrence Livermore National Laboratory, where he worked from 1952 to 1988, with some brief periods away from the Laboratory. While there, he held a variety of research and development positions, serving as director of the Laboratory from 1965 to 1971. May was a technical adviser to the Threshold Test Ban Treaty negotiating team; a member of the U.S. delegation to the Strategic Arms Limitation Talks; and at various times has been a member of the Defense Science Board, the General Advisory Committee to the AEC, the Secretary of Energy Advisory Board, the RAND Corporation Board of Trustees, and the Committee on International Security and Arms Control of the National Academy of Sciences. He is a member of the Council on Foreign Relations and the Pacific Council on International Policy, and a Fellow of the American Physical Society and the American Association for the Advancement of Science. May received the Distinguished Public Service and Distinguished Civilian Service Medals from the Department of Defense, and the Ernest Orlando Lawrence Award from the Atomic Energy Commission, as well as other awards. His current research interests are in the area of nuclear and terrorism, energy, security and environment, and the relation of nuclear weapons and foreign policy.

Chaim Braun is a vice president of Altos Management Partners, Inc., and a CISAC science fellow and affiliate. He is a member of the Near-Term Deployment and the Economic Cross-Cut Working Groups of the Department of Energy (DOE) Generation IV Roadmap study. He conducted several nuclear economics-related studies for the DOE Nuclear Energy Office, the Energy Information Administration, the Electric Power Research Institute, the Nuclear Energy Institute, Non-Proliferation Trust International, and others. Braun has worked as a member of Bechtel Power Corporation's Nuclear Management Group, and led studies on power plant performance and economics used to support maintenance services. Braun has worked on a study of safeguarding the Agreed Framework in North Korea, he was the co-leader of a NATO Study of Terrorist Threats to Nuclear Power Plants, led CISAC's Summer Study on Terrorist Threats to Research Reactors, and most recently co-authored an article with CISAC Co-Director Chris Chyba on nuclear proliferation rings. His research project this year is entitled "The Energy Security Initiative and a Nuclear Fuel Cycle Center: Two Enhancement Options for the Current Non-Proliferation Regime."

Allen Weiner is an associate professor of law (teaching) at the Stanford Law School, as well as the inaugural Warren Christopher Professor of the Practice of International Law and Diplomacy, a chair held jointly by FSI and the Stanford Law School. He is also an affiliated faculty member at CISAC. His expertise is in the field of public international law and the foreign relations law of the United States. His work focuses on the effect of positive international law rules on the conduct of foreign relations and other implications for the behavior of states, courts (both national and international), and other international actors. Current research interests focus on international law and the response to the contemporary security threats of international terrorism and the proliferation of weapons of mass destruction. He teaches courses in public international law and international criminal law at Stanford Law School. Before coming to Stanford, Weiner served for 12 years as a career attorney in the U.S. Department of State. He served in the Office of the Legal Adviser in Washington, D.C. (1990-1996) and at the U.S. Embassy in The Hague (1996-2001), most recently as legal counselor, in which capacity he served as the U.S. Government's principal day-to-day interlocutor with the international legal institutions in The Hague, including the International Court of Justice, the International Criminal Tribunal for the Former Yugoslavia, and the Iran-United States Claims Tribunal. He received a BA from Harvard College and a JD from Stanford Law School.

Roger Speed is a physicist formerly with the Lawrence Livermore National Laboratory and now an affiliate of CISAC. He has also worked at the National Academy of Sciences, at R&D Associates, and, as a Peace Fellow, at the Hoover Institution, where he wrote a book on strategic nuclear policy. He has served on a number of defense-related committees, including ones for the Office of Undersecretary of Defense for Policy, the American Physical Society, the U.S. Navy (Non-Acoustic ASW Panel), the National Academy of Sciences, and the Air Force Space and Missile Systems Organization. He has conducted a broad range of national security studies for the Department of Defense, Department of Energy, and Central Intelligence Agency in such areas as arms control, strategic deterrence, nuclear war, ballistic missile defense, nuclear weapons safety, and the survivability of strategic systems.

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Michael May is Professor Emeritus (Research) in the Stanford University School of Engineering and a senior fellow with the Freeman Spogli Institute for International Studies at Stanford University. He is the former co-director of Stanford University's Center for International Security and Cooperation, having served seven years in that capacity through January 2000.

May is a director emeritus of the Lawrence Livermore National Laboratory, where he worked from 1952 to 1988, with some brief periods away from the Laboratory. While there, he held a variety of research and development positions, serving as director of the Laboratory from 1965 to 1971.

May was a technical adviser to the Threshold Test Ban Treaty negotiating team; a member of the U.S. delegation to the Strategic Arms Limitation Talks; and at various times has been a member of the Defense Science Board, the General Advisory Committee to the AEC, the Secretary of Energy Advisory Board, the RAND Corporation Board of Trustees, and the Committee on International Security and Arms Control of the National Academy of Sciences. He is a member of the International Institute on Strategic Studies, and a Fellow of the American Physical Society and the American Association for the Advancement of Science.

May received the Distinguished Public Service and Distinguished Civilian Service Medals from the Department of Defense, and the Ernest Orlando Lawrence Award from the Atomic Energy Commission, as well as other awards.

His current research interests are nuclear weapons policy in the US and in other countries; nuclear terrorism; nuclear and other forms of energy and their impact on the environment, health and safety and security; the use of statistics and mathematical models in the public sphere.

May is continuing work on creating a secure future for civilian nuclear applications. In October 2007, May hosted an international workshop on how the nuclear weapon states can help rebuild the consensus underlying the Nuclear Non-Proliferation Treaty (NPT). Proceedings and a summary report are available online or by email request. May also chaired a technical working group on nuclear forensics. The final report is available online.

In April 2007, May in cooperation with former Secretary of Defense William J. Perry and Professor Ashton Carter of Harvard hosted a workshop on what would have to be done to be ready for a terrorist nuclear detonation. The report is available online at the Preventive Defense Project. A summary, titled, "The Day After: Action Following a Nuclear Blast in a U.S. City," was published fall 2007 in Washington Quarterly and is available online.

Recent work also includes a study of nuclear postures in several countries (2007 - 2009); an article on nuclear disarmament and one on tactical nuclear weapons; and a report with Kate Marvel for the American Academy of Arts and Sciences on possible game changers in the nuclear energy industry.

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Allen S. Weiner is senior lecturer in law and director of the Stanford Program in International Law at Stanford Law School. He is also the co-director of the Stanford Center on International Conflict and Negotiation. He is an international legal scholar with expertise in such wide-ranging fields as international and national security law, the law of war, international conflict resolution, and international criminal law (including transitional justice). His scholarship focuses on international law and the response to the contemporary security threats of international terrorism, the proliferation of weapons of mass destruction, and situations of widespread humanitarian atrocities. He also explores the relationship between international and domestic law in the context of asymmetric armed conflicts between the United States and nonstate groups and the response to terrorism. In the realm of international conflict resolution, his highly multidisciplinary work analyzes the barriers to resolving violent political conflicts, with a particular focus on the Israeli-Palestinian conflict. Weiner’s scholarship is deeply informed by experience; for more than a decade he practiced international law in the U.S. Department of State, serving as an attorney-adviser in the Office of the Legal Adviser and as legal counselor at the U.S. Embassy in The Hague. In those capacities, he advised government policy-makers, negotiated international agreements, and represented the United States in litigation before the Iran-United States Claims Tribunal, the International Criminal Tribunal for the Former Yugoslavia, and the International Court of Justice. He teaches courses in public international law, international conflict resolution, and international security matters at Stanford Law School.

Weiner is the author of "Constitutions as Peace Treaties: A Cautionary Tale for the Arab Spring” in the Stanford Law Review Online (2011) and co-author (with Barry E. Carter) of International Law (6th ed. 2011). Other publications include “The Torture Memos and Accountability" in the American Society of International Law Insight (2009), "Law, Just War, and the International Fight Against Terrorism: Is It War?", in Intervention, Terrorism, and Torture: Contemporary Challenges to Just War Theory (Steven P. Lee, ed.) (2007), ”Enhancing Implementation of U.N. Security Council Resolution 1540: Report of the Center on International Security and Cooperation” (with Chaim Braun, Michael May & Roger Speed) (September 2007), and "The Use of Force and Contemporary Security Threats: Old Medicine for New Ills?", Stanford Law Review (2006).

Weiner has worked on several Supreme Court amicus briefs concerning national security and international law issues, including cases brought involving "war on terror" detainees.  He has also submitted petitions before the United Nations Working Group on Arbitrary Detention on behalf of Vietnamese social and political activists detained by their governing for the exercise of free speech rights.

Weiner earned a BA from Harvard College and a JD from Stanford Law School.

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On 8 February 2007, at the Kellogg Conference Center at the Columbia University School of International and Public Affairs (SIPA), the Journal of International Affairs and the Middle East Institute hosted a live debate between Scott Sagan and Kenneth Waltz. The two political scientists revisited their classic debate on nuclear weapons, addressing recent developments in Iran and possible global responses. Richard K. Betts moderated the event. Dean Lisa Anderson delivered opening remarks. This article is a transcript of the discussion.

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The row over U.S. intentions to deploy elements of its missile defense system in Poland and the Czech Republic has the potential of bringing U.S.-Russian relations--not to mention bilateral arms control--to a new low. Russia has disapproved of the scheme ever since the United States first went public with the system about two years ago. But despite sounding angry, Russia remained calm, arguing that it already possessed the technology to deal with the interceptors the United States planned to place in Eastern Europe.

Recently, however, Moscow decided to up the ante. Clearly inspired by the assertive and rather confrontational presentation given by President Vladimir Putin at a conference in Munich on February 10, Russian generals started painting a picture of a much harsher response to the possible deployment.

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Developments during the last several weeks seem to suggest that Russia is reconsidering its nuclear cooperation with Iran. Just months ago, Moscow pledged with great fanfare that the Bushehr reactor would be ready for the first shipment of fuel in March and would reach criticality in September 2007. But in February, Russia backtracked, claiming it had to delay the fuel delivery because of missed payments. As for the reactor's launch, the only thing that's certain is that it will not happen in September. The situation became even more puzzling after reports that Russia warned Iran that Moscow might suspend the project if Tehran does not stop its enrichment program and that some Russian technical specialists are returning home.

Are we seeing a radical turn in Russian policy? Probably not, but the situation is more complicated.

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On Oct. 9, 2006, North Korea conducted a nuclear test and proclaimed itself a world nuclear power. The explosion yield was less than one kiloton, much less than the first nuclear test of other states and even less than the expected yield of four kilotons that North Korean officials forecast to their Chinese counterparts.

Nonetheless, the test demonstrated Pyongyang's mastery of the nuclear fuel cycle and at least rudimentary nuclear-weapon design and manufacturing capabilities.

On Feb. 13, North Korea signed a six-party agreement to take initial actions to implement a Sept. 19, 2005 Joint Statement for the eventual abandonment of its nuclear weapons program. While this is welcome news, the road to the abandonment of North Korean nuclear weapons and capabilities will be long and arduous, and success is far from guaranteed. Its nuclear program still poses significant risks to international security, the most serious of which is the export of nuclear materials, expertise or technologies to states such as Iran and the potential for subsequent proliferation to terrorists.

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Alisa Carrigan (speaker) is a PhD candidate in the War Studies Department at King's College, London and a predoctoral fellow at CISAC. For the past three years, she has been researching nuclear non-proliferation policy, with special focus on the training and movement of nuclear human capital under the current non-proliferation regime. At CISAC, Carrigan is working on a project entitled "Strengthening the WMD Non-Proliferation Regime." Carrigan earned her master's degree in international security from the University of St. Andrews (UK), and her BA in government and psychology from Claremont McKenna College. As an undergraduate, she interned at Lawrence Livermore National Laboratory.

Alex Montgomery (respondent) was a postdoctoral fellow at CISAC in 2005-2006 and is now an assistant professor of political science at Reed College. He has published articles on dismantling proliferation networks and on the effects of social networks of international organizations on interstate conflict. His research interests include political organizations, social networks, weapons of mass disruption and destruction, social studies of technology, and interstate social relations. His current book project is on post-Cold War U.S. nonproliferation policy, evaluating the efficacy of policies towards North Korea, Iran, and proliferation networks.

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Michael M. May, Michael A. McFaul, Scott D. Sagan, David G. Victor, and John P. Weyant talk to Stanford magazine for the November/December cover story on energy security. It's not our oil dependence that's the problem, say these scholars - it's our vulnerability to oil producers who use revenues for political purposes that work against our own. In this discussion, these five FSI scholars talk about the dynamics of an energy security threat that's more serious than supply disruption, the risks of isolationist solution-seeking instead of collective action, and why we need to come up with good economic incentives for alternative-energy research.

Every day, the United States burns through 20.7 million barrels of oil. China, the world's second largest consumer, uses about 6.9 million barrels a day. Although the United States is the third leading oil producer in the world (behind Saudi Arabia and Russia), its appetite is so enormous that it overwhelms the country's production capacity. Its known reserves, about 21 billion barrels, would supply only enough to keep the country running at full speed for about three years.

So when STANFORD gathered five faculty members to talk about the implications of U.S. dependency on foreign oil, we expected grave declarations of alarm. But their concern did not square with the growing chorus of citizens and elected officials about why reducing this dependency is so important.

On the next five pages, faculty from political science, economics, law and engineering explain why the debate about energy security is missing the point, and what they think needs to be done.

STANFORD: How would you frame the issue of dependency on foreign oil? What should we be concerned about?

David Victor: The problem is not dependence per se. In fact, dependence on a world market produces enormous benefits, such as lower prices. Nor is the problem that energy's essential role in the economy means that dependence must be avoided. The real problem is that energy - oil, especially - doesn't operate according to normal market principles. Something like 75 percent of the reserves of oil and gas are controlled by companies that are either wholly owned or in effect controlled by governments, and there's enormous variation in how those companies perform. Some of them are just a disaster, like [Mexico's state-owned oil company] Pemex, and others can work at world standards, like Saudi Aramco or Brazils Petrobrás. Some of these governments, such as Venezuela, use oil revenues for political purposes that undermine U.S. influence. High prices do not automatically generate new supply or conservation, partly because suppliers can drop prices to undercut commercial investment in alternatives. Second, we have what has become known as "the resource curse." There'sa lot of evidence that the presence of huge windfalls in poorly governed places makes governance even worse. Revenue that accrues to oil-exporting governments is particularly prone to being misspent, often in ways that work against U.S. interests.

Scott Sagan: I agree that calling the problem "energy dependence" and therefore seeking energy independence is the wrong way to think about this problem. Talking about energy independence feeds the xenophobic impulse that occurs all too easily in American politics. And it suggests to other countries that they should seek independence rather than a more cooperative approach. I see very negative consequences politically in the signal that attitude sends. Think about the current nuclear crisis with Iran. Iran claims that it needs independent uranium enrichment capabilities to have "energy sovereignty." Such uranium enrichment production could be used, however, for civilian nuclear power or for making a bomb, creating enormous nuclear weapons proliferation problems. We're feeding into that kind of thinking when we use the same language about independence when referring to oil. And it produces uncooperative effects elsewhere. The Chinese, for example, cut a deal with Sudan as a means of creating energy security for themselves. It inhibits efforts of the international community to encourage that government to behave responsibly.

John Weyant: There is a distinction between dependence, meaning how much of the oil the United States consumes is imported, and vulnerability, meaning how at risk our economy and our social order are to oil-supply disruptions. That vulnerability is defined by how much of the total supply of oil in the world market comes from unreliable sources. So you have to look at oil supply on a global scale, not just in the United States. It's the instability of the supply that affects price.

Victor: I like John's term "vulnerability," and it leads us to various kinds of actions to reduce our vulnerability to the market rather than trying to make us completely independent. One of them has been around since the '70s - building and coordinating strategic stockpiles so that they are supplied into a single world market. Traditionally that could be done by the major Western countries because they were the major oil consumers. One of the big challenges for policy makers today is how to get India and China to think about the operation of this world market in the same market-based way that we think about it, and to get them to build up those stockpiles and coordinate them with our own. There's some evidence that that kind of coordination can reduce our vulnerability.

Weyant: There's this fallacy among the public that if we don't import so much oil, other oil-exporting countries are going to be hurt and we will be unaffected if oil supplies are cut off. But these countries are sometimes major trading partners of allies, and asking those allies to take a hit on our behalf just leads to other economic problems. If the economies in China and Europe and Japan, who are all major trading partners, go down, it affects how much they can buy from us. It's another reason we can't be xenophobic and just look inward on an issue like this. You get these international trade flows outside the energy sector that could be pretty devastating.

STANFORD: Last summer we saw crude oil prices hit $70 a barrel and gas prices went well above $3 per gallon nationwide. That momentarily changed consumer behavior, and reduced demand. Are high prices a good thing?

Michael May: The key factor in normalizing market conditions is assuring the market that high prices are here to stay. Major oil companies like Exxon and bp have been putting their money to other uses than exploration. They have been buying back shares and increasing returns to stockholders because that's the way Wall Street drives them. That might change if prices stayed high. It probably won't be $70 a barrel, but even $50 a barrel as a base price is almost twice the historic average. The extent to which investors become convinced that that's going to be the future average will have some bearing as to how much money they spend on exploration. Toyota and General Motors and others can make hybrids or much more efficient cars, but it takes billons of dollars of investment, and if the price of gasoline goes down, they have less incentive. When gas is cheap, driving an SUV is not such a big deal.

Victor: The reason some of these companies are buying back the shares is not just because of Wall Street but because they don't have a lot of truly attractive opportunities for investing in new production. Most of the oil reserves are either legally off limits for the Western oil companies or international oil companies generally, or they're de facto off limits because they're in places where it's so hard to do business. Although the public is seized by the high price of energy, the major energy companies are seized by concerns that prices are going to decline sharply. If there is a recession, which would dampen demand for energy, or the capacity to produce oil around the world improves, then prices will decline. It has happened in the past. That fear really retards a lot of investment because these investments have a very long capital lifetime, and you need to protect them against low prices over an incredibly long time horizon.

Michael McFaul: It's very important to understand that oil companies owned and operated by governments are not necessarily profit-maximization entities. Take Gazprom, the gas company of Russia. It is closely aligned with state interests, so profit isn't its only motivation. It will use its money for strategic purposes as defined by Vladimir Putin, not as defined by the shareholders of Gazprom. For instance, early in 2006, Gazprom cut off gas supplies to Ukraine, mostly for geopolitical reasons. Why is Hezbollah so well armed? Because of Iran, which uses oil revenue for strategic purposes; it is not used for investing in a company or investing in the market per se. This is part of the problem of the "resource curse" David referred to. If oil is discovered in a country before democratic institutions are in place, the probability of that country becoming democratic is very low. In countries where the state does not rely on the taxation of its citizens for its revenues, it doesn't have to listen to what its citizens want to do with that money. So instead of building roads or schools or doing things that taxpayers would demand of them, they use their money in ways that threaten the security of other countries, and, ultimately, their own.

Victor: It's important that we not overstate the extent to which users of energy are going to respond automatically to high prices, and the personal vehicle is a great example. Fuel accounts for about 20 percent of the total cost of operating a vehicle. Traditionally it's only been 10 or 15 percent, but we are much wealthier today than we were three decades ago when we had the [first OPEC oil embargo]. I think that helps explain a lot of the sluggishness in response in the marketplace. People are buying smaller, more fuel-efficient cars, but that trend will only go so far because there are other factors that determine what kinds of vehicles people purchase. In the United States and most advanced industrialized countries, most oil is used for transportation, where oil products have no rival. It is hard to switch. In most of the rest of the world, oil gets used for a variety of other purposes, including generating electricity. Those markets are probably going to be more responsive to the high price of oil because they're going to have opportunities to switch to other fuels. The United States used a lot of oil to generate electricity in the early 1970s and when that first oil shock came along, essentially all of that disappeared from our market. That's part of the reason why the U.S. energy system responded fairly quickly to the first oil shock, and why changes in behavior are harder to discern in the current crisis. There is no easy substitute for gasoline.

May: If we generally agree that high oil prices, on the whole, are a good thing because they cause investment in more production and more efficient uses of oil, then it would follow that the rapid growth in consumption in China is also a good thing and we should welcome it, right?

Victor: I disagree with that. In effect what we have right now is a "tax" that's been applied to the oil market due to the various dysfunctions of the way it operates and to unexpectedly high demand in the United States and China. The revenue from that tax is accruing to the producers, and if we think about how to get out of the mess here, then what we want to do is in effect apply a tax to the oil products. If we raise the price of these products to reflect the real total cost of our vulnerability to the world oil market, those companies have an incentive to go off and look for alternatives.

May: So you're saying the same thing: that high oil prices, whether from this tax or otherwise, are a good thing.

Weyant: It depends significantly on who is collecting the tax.

McFaul: Yes, the fundamental question is how the money is being spent. If I had high confidence that the money was going to reinvestment, then I could agree that high prices are good, but that's not what is happening. The Soviet Union's most dangerous adventures in the Third World correlated with the high oil prices in the 1970s. You can see the direct effect. And when the prices came down, the Soviet Union collapsed. The same is true with Iran today. They are being very aggressive in the region - in Iraq, in Lebanon, in Afghanistan - trying to become the Middle East hegemon. This would not be happening if they didn't have all these clients - Hezbollah, Hamas, their friends in Iraq - that they can support with millions of dollars. Going back a few decades, where did Osama bin Laden come from? Where did support for the Taliban come from? It came from this tax that David is talking about. If we're talking about security issues and oil, this is much more serious than supply disruption to the United States.

Victor: I agree with Mike 100 percent. If you look at where the revenues are going from Iran, Venezuela and so on, there's a long list of folks who are doing things that are contrary to our interests with the money that ultimately is coming out of the pockets of American consumers. Dealing with that is job one.

STANFORD: So how would you counsel American policy makers? What needs to happen to reduce our vulnerability over the long term?

Sagan: The vulnerabilities we have today should provide an incentive to make some critical investments and to change our thinking, but we're not really doing that. I was quite surprised at how much I agreed with one aspect of the second Bush inaugural address. [He said] let's start talking about our addiction to oil and all the problems associated with that, but I've been completely disappointed with the lack of follow-through. And part of the problem is this notion of energy independence. We need diversity in our research and development spending across the board, on a variety of technologies. We're going to produce energy security to a large degree by finding cooperative solutions that are efficient and secure for many countries working together. We need to see our national security as being very dependent on others and that's not entirely a bad thing.

Victor: There is one cluster of technology that's going to be exceptionally important - electric vehicles. The all-electric vehicle has been kind of a disaster. We tried to do that in California without much success at all. The new set of pluggable hybrid vehicles, which you plug in at night and charge up, are more promising. If such technologies make it feasible to reduce some of the transportation dependence on oil, then markets will be forced to become more "normal" and more responsive. Electric cars and other technologies can help to keep prices lower and ultimately help make the transition completely away from oil over a period of 30 or 50 years.

Weyant: We only think about energy as a nation when prices are high, and so there's a short attention span on the issue. That makes it really hard to sustain a policy that would be rational over the long term. If we're going to have a big R&D program, for example, you need to invest in technologies and sustain the investment over a long time horizon. If you couple this short attention span with our aversion to taxes, at least historically, you end up with policies that are almost designed from the outset to fail. The political tide is turning a little bit so a well-designed tax might be possible. Maybe you don't raise taxes now but you assure that the price of a [hybrid] car won't go below a certain level and that'll help create a little more confidence with the marketplace. If you just focus on research and development without getting the economic incentives right, you come up with all kinds of great gizmos that no one will actually make or use.

McFaul: We've been talking mostly about how to manipulate the market to change people's behavior and I think that's quite right. I can't tell you how many people I saw come out of a Palo Alto theater after seeing Al Gore's movie [An Inconvenient Truth] and jump into their gas-guzzling machines. I would like to tax those machines; use economic tools to change people's behavior in a way the movie didn't. This has to become a public policy issue. It's not right now. Think about the way the market for cigarettes worked in this country 50 years ago, and think of how it is structured now. We have not just taxes but regulation - they can't be advertised on television - and a national campaign trying to educate people about the health concerns. We need a similar effort on this issue.

Sagan: When you watch the Super Bowl you don't see advertisements for cigarettes, but you do for Hummers. There's no attempt at all to educate people about the relationship between these longer-term problems and what you do individually. And that takes decades.

Victor: One of the acid tests for whether the nation is pursuing a coherent energy policy is our policy on ethanol. Ethanol is important because it is a partial substitute for oil-based gasoline. In this country, almost all of the ethanol that is delivered to the marketplace is made from corn, which is economically inefficient. But we do that because the corn grows in the heartland, such as Iowa - an important state electorally. There have been lots of proposals to, for example, erase the tariff on imported ethanol. Brazil produces ethanol from sugar cane and it's much cheaper and more efficient. But the farm lobby always intervenes and these proposals languish, with the result that the U.S. ethanol industry never faces the rigors of world competition. So long as energy is bouncing around lower on the list of priorities, it will be difficult to have a coherent policy.

Weyant: It would be far better if people were willing to bite the bullet and say this is a problem and it's not going to be painless to solve it, but if we play our cards right it's not going to reduce our standard of living much. Convincing the public is really one thing that might be worth some more effort. It's a cacophony to them.

STANFORD: What is your greatest hope and your worst fear with regard to demand for oil?

Victor: My greatest hope is that inside the Chinese government and inside the Indian government people know that this independence view of the world energy market is completely wrongheaded. Maybe that will create an opportunity for the United States and India and China along with other major oil consumers to collectively manage this issue, and the consequences of doing that will spill over onto other areas of cooperation. My greatest fear, in addition to the things we've already discussed, is that the United States will use the oil issue to beat up on the Chinese and the Indians, and that our relationship with those countries, which is already fragile, will make it harder to work together on other things that also matter.

May: My greatest hope is that the United States, China, India and other major countries work together towards a more hopeful future, including improving the global environment, providing a counterbalance to mischief in the Middle East, and promoting a transition to modernization and away from extremism. My greatest fear is that the little termites who are nibbling at what is currently a somewhat sensible Chinese policy will have their way, either because the country's economy slows down - which it will inevitably - or for some other reason, and we'll wind up fighting each other or destroying each other's capabilities.

McFaul: My greatest sense of optimism comes from this discussion, and about what my colleagues in this discussion said about China, because from the surface it looks like there's a much more pernicious policy of China going its own way. I've learned today that in fact there are very reasonable voices within the Chinese government, and I hope that there will be in my own government. My greatest fear is that there will continue to be politicians who control oil revenues who do things that do not serve international security, and I'm speaking not only of Iran. My nightmarish scenario is that 10 years from now Iran, Iraq and, God forbid, Saudi Arabia are controlled by hostile governments that want to use the revenues that we pay them for their oil to harm us. I give that a low probability, but in terms of things that worry me about our security, it's the instability of those oil-exporting regimes.

Sagan: The hope is that this current crisis will provide the right set of incentives to encourage investment in a diverse set of energy R&D programs across the board, and will encourage cooperation between countries in energy research and development. That would help educate and change the culture of the United States away from a gas-guzzling, governor-in-the-Hummer culture. The fear is that this will become yet one more excuse to move to a more xenophobic policy that discourages cooperative international policies.

Weyant: Remember David Stockman, the erstwhile head of the Office of Management and Budget? I ran into him in Washington and he literally said to me, "Don't worry about oil security and disruptions or any of that stuff. We've got battleships to take care of this problem." That shocked me to no end, and my response was "Do you really want to be in that position, where that's your only option?" Your whole response is "We're best in the battleship field and you shouldn't mess with us?" This type of attitude is what worries me the most.

Sagan: We were earlier talking about the resource curse, and this strikes me as an example of the hegemon's curse. To not take the necessary steps on economic policies or energy policies because you think you've got a military backup solution. If our military strength causes us to be passive or uncooperative on the economic or energy front, it will have a boomerang effect that will really hurt us.

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Authors
David Laitin
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Among the most publicized recommendations of the Iraq Study Group is that the United States talk with its adversaries Iran and Syria in seeking peace in the Middle East. Talking with its allies may be a more difficult proposition, CISAC's David Laitin asserts in this New York Newsday op-ed. The Bush administration has alienated once-strong U.S. allies, and winning back their trust could take years, Laitin writes.
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