The link between volatility in financial markets and volatility in energy prices is poorly understood. Nevertheless, it is possible to understand certain aspects of the relationship between the two. First, we know that as cheap and easy access to conventional fossil fuel supplies diminishes due to rapidly rising demand in the majority world, the process of extracting resources from remaining reserves (or ‘provinces’) is prone to what the Industry Taskforce on Peak Oil and Energy Security has called ‘peaky behaviour’. The so-called peaky behaviour of lesser-known provinces is erratic and naturally less predictable than the usual behaviour of known provinces. This matters a lot in the case of oil extraction, as price stability in oil markets is predicated on understanding and making informed guesses about the rate at which oil can be brought to market.

As access to predictable supply declines and new sources are sought offshore in the deep seas, among Arctic ice or onshore in untapped kerogen rock, the ability of retailers and speculators to understand the oil market is hindered by an added layer of uncertainty. Experimenting with new methods of extracting oil lacks a historical track record, which normally provides a more stable framework for making sound decisions about supply and demand management – decisions which oil companies, traders and regulators are usually adept at making. Industry professionals must now cope with attempts to acquire a more nuanced understanding of the impact which erratic rates of extraction can have on oil markets. They must also cope indirectly with volatility in consumer demand for oil-based products.

Financing an oil shock?

Volatility in financial markets, due to unsustainable lending practices and the rise in use of exotic trading instruments, affects consumer demand for everyday products, particularly in oil-importing nations such as the United States and Britain. Because oil is the lifeblood of the modern industrial economy on which all businesses in the supply chain depend, when oil prices increase, so too do the prices of mainstay consumer goods. In the West, we are dependent on our thriving oil-driven economies, where the transport of goods and services are very closely linked to oil prices. So when global oil prices rise or fall, foreign and domestic businesses transfer the added costs downstream to consumers who feel the impact. Or, in cases where the added expense cannot be borne by consumers, businesses may either attempt to reduce wages or absorb the price shocks internally, which can lead to downsizing and layoffs. When the prices of consumer goods increase, we also use more of our income to pay for oil-derived products, and as a result our spending on other goods and services declines. This means that demand for many types of non-essential goods and services drops, including holiday travel, dining out, new cars, computers and more expensive homes. These impacts have a compound effect on prospects for a speedy economic recovery, making it more difficult for growth to be restored post-crisis and threatening longer-term stability.

Betting on volatility

It may be a coincidence that at the height of the most recent stock market crash in July 2008, oil prices skyrocketed to $147 dollars per barrel. However, it wouldn’t seem so on the basis of an article in the Guardian published one month earlier, in which billionaire hedge fund manager George Soros , predicted that the price of oil had become a bubble that could trigger a stock market crash. On 3 June, Soros informed the US Senate commerce committee that oil had been ‘pushed to its $135 a barrel mark’ – at that time a record high – by a ‘new wave of speculators’. Soros claimed that the doubling in the price of oil from 2006-08 was partly due to investment institutions, such as pension funds, channelling money into indexes that link to the cost of crude. Soros proceeded to warn the committee that, “there could be very serious consequences for global stock markets if the institutions suddenly began betting on a fall in the oil price.” Finally, he compared the speculative pressures being forced by institutional investors on oil prices in 2008 with the stock market crash of 1987, which was partly caused by a sudden rush of money into portfolio insurance – which institutions used to hedge themselves against a fall in share prices. According to Soros, institutional investors have been engaged in propping up one side of the market so as to give them sufficient weight to unbalance it if so decided. “If the trend were reversed and the institutions as a group headed for the exit as they did in 1987 there would be a crash”, he said.

A more recent example of energy market manipulation on a regional scale is that of Barclays’ involvement in manipulating California power markets. The U.S. Federal Energy Regulatory Commission has recently proposed a total $470 million fine on Barclays for its actions – the largest ever by the agency – revealed partly on the basis of communications by four traders at Barclays’ West Coast power desk. The trading activity allegedly took place over two years from late 2006, in which the team exchanged messages explaining how they would ‘crap on’ prices in one market in order to profit in another. The traders stand accused of having wilfully manipulated energy prices, i.e. ‘driving up or down physical power prices to make money with their financial swap positions’. Their actions, if proven true, may have resulted in losses for other traders amounting to $139 million, netting Barclays gains upwards of $34.9 million.

Unsustainable finance and the threat to energy security

The critical importance of predictable access to reliable energy supplies to meet electricity and fuel demand have been well documented in previous articles published by SustainableSecurity.org contributors. Economic recession, while potentially offsetting oil demand, could stand to make diminishing supplies last longer, buying time for other alternative clean energy sources to comprise a wider portion of overall generation. But economic recession also has another more subtle impact on energy production – it rattles investor confidence in innovative technologies that might otherwise stand to make oil-dependent economies more energy secure. Currently, a hot debate is raging in the UK and US on the future of conventional oil and gas, as well as nuclear energy, in curbing global demand for fossil fuels. This added uncertainty deters renewable energy investments while forecasts for economic recovery remain dismal. General volatility in financial markets, fuelled by irresponsible lending and trading practices, has an effect on oil prices as well, which further stifles economic growth. While the complexity of global markets demands wider investigation into the causes and effects of finance in relation to oil prices, evidence of market manipulation is unsettling. A sustainable and secure future, where a wider energy mix has been developed to meet rising demand, will no doubt require a more sustainable financial system which can service the real needs of citizens.

Phillip Bruner is Founder of the Green Investment Forum and a guest lecturer in global political economy at the University of Edinburgh

Image source: Heatingoil

Like its neighbours in the northern triangle (El Salvador, Honduras and Guatemala), Belize has a high murder rate that is closely connected to the strong presence of gangs – but the character of gang activity in Belize is quite different from its Central American neighbours. Belize has pioneered some innovative solutions to the problem it is facing. But it will need to overcome the challenges of internal resistance and an acute lack of resources in order to address the political, economic and social issues that marginalise Belize’s large youth population.

Belize’s gangs have been a persistent feature of the insecurity facing this tiny and sparsely populated country, which sits straddling Central America and the Caribbean, one foot in each but not completely in either. Murders have risen above 40 per 100,000 inhabitants in recent years, around a third of which are gang affiliated according to official police statistics. The murder rate in Belize City, home to an overwhelming concentration of gangs, peaked at 180.2 in 2012.

While the red and blue associated with the Crips and Bloods of LA (from which Belize’s gangs originated in the 80s and 90s) are seen elsewhere, the gangs remain a primarily urban phenomenon. In particular, they are symptomatic of the deep-rooted structural challenges that are most starkly present in the Southside of Belize’s former capital. There, large, marginalised and impoverished families live in a situation of social isolation and neglect, blanketed by the stigmatisation that results from the social prejudices and intolerances surrounding ‘Southside issues’. What’s more, youth living in the area must contend with a continuous exposure to often extreme and graphic violence, be it in the family or community environment.

Gang activity in Belize is not as well organised as in its Spanish-speaking neighbours, where links with organised crime are much stronger and crimes of extortion and large-scale drug trafficking activities more prevalent. In Belize the gangs are also more highly fractured. They are typified by smaller groups whose ‘turf’ often extends no more than a couple of streets and whose members may number little over a dozen. Personal conflicts, often-stretching back generations, fuel aggression and revenge attacks.

Beyond a driver of insecurity, the gangs are a symptom of the more deep-rooted structural challenges facing Belize, where social injustices, challenging socio-political conditions, and an acute lack of government resources have combined with an increasingly youthful population (69.8% under the age of 35) to create a large pool of marginalised youth lacking in opportunities.

It is only by targeting these root causes, rather than simply repressing the gangs themselves, that the issue can be successfully addressed, and elements of Belize’s approach to youth and insecurity deserve to be widely lauded in this respect.

A community building approach

An event at a high school in Belize City organised by RESTORE Belize. Source: RESTORE Belize

Located within the Office of the Prime Minister, RESTORE Belize was launched in 2010 at the behest of the Government to lead a community-building approach to the restoration of law and order. It seeks to target the social roots of crime and violence and promotes a strategic and comprehensive cross-sector effort involving state institutions, the private sector and civil society, as well as implementing its own programs in the area. It coordinates closely with other institutions, including the police, and forms part of an effort to improve relations between the Belizean State (of which the police are the foremost visible representation) and the population.

Through its Community Action for Public Safety program, for example, it engages in human development activities focused on the Southside of Belize City, developing infrastructure including recreational and social facilities for youth as well as rehabilitation facilities for youth offenders. Similarly, its Metamorphosis Program engages young people deemed to be at-risk of school dropout and gang affiliation in an intensive program that involves counselling, weekend retreats, drug and alcohol therapy, as well as parenting classes and home visits by social workers.

Belize has also sought to increase its capacity to engage in conflict resolution. In cooperation with the United States, mediators have been trained to work in schools, youth facilities and the prison service as well as directly in local communities. The Conscious Youth Development Program, for example, has a team of mediators that are deployed as first responders following incidents of gang violence in order to calm the immediate situation and prevent escalation.

These community building approaches seek to cultivate change in the individual while providing tangible improvements to their personal and community environments. Furthermore, by engaging with them as individuals as opposed to ‘gang members’ they aim to foster their trust and confidence in the Belizean state and society. This is especially important because large segments of the Belizean population hold negative views of youth, who in turn resent being characterised as a source of the ills affecting society.

Resistance

One of the major challenges to these approaches – and a standard by which their progress can be judged – therefore, is overcoming resistance from those that favour more draconian policies. As an example, some schools in Belize, many of which are independently run, are strict, conservative, elitist and intolerant of ‘Southside problems’. Youth from such areas are often earmarked from the outset if their family members have been affiliated with gangs, while strictly enforced uniform codes work to further ostracise those from poorer backgrounds who often struggle to meet the financial costs. Given that free schooling is available only until the age of 12, many drop out prior to embarking on secondary education, despite it being a legal requirement up until 14 years of age. While interventions such as RESTORE Belize’s scholarship program assist in this regard, the stigmatisation and institutional marginalisation of such youth requires deep-rooted changes in attitudes and institutional cultures. Liaison efforts are being pursued to this end, but the autonomous nature of many of these schools means progress is often slow and hard fought. Meanwhile, with a national dropout rate of 8.4%, rising as high as 19.5% in certain schools in Southside Belize City, the scale of the challenge that remains is clear.

Stigma and repression

The issue of stigmatisation of youth is furthermore evident in the contradictory nature of other policies. For example, the Crime Control Act criminalises gang membership, meaning that by taking part in programs aimed at gang members and their leaders, these individuals are in essence incriminating themselves. Similarly, just as RESTORE Belize was launched, the Ministry of National Security rolled out Operation Jaguar, a hard-line approach involving military and police checkpoints and stop-and-search operations that had been developed and planned in isolation.

Perhaps the starkest example, however, is that of the Gang Suppression Unit (GSU) – an elite police unit whose raison d’etre is the repression of gang activity. Widely perceived to operate beyond the law, the GSU is suspected of involvement in a number of high profile political and human rights abuses. While ‘harder’ approaches may be required to compliment ‘softer’ interventions, the lack of transparency and accountability surrounding the unit and allegations of their involvement in such offenses undermines efforts to build trust and confidence and to transform the perceptions of marginalised youth towards the state. The placement of RESTORE Belize within the Office of the Prime Minister was specifically designed to aid in efforts to mould a strategic cross-agency approach, but it is clear that a silo mentality continues to impede progress on this front.

An uphill task

Beyond attitudinal resistance, the country is also facing an acute shortage of resources which affects all security and justice institutions, greatly undermining state capacity in these sectors, as well as more widely. As an example, the National Forensic Science Service struggles to perform even the most basic functions: a lack of DNA analysis capabilities, training and equipment means they are often unable to verify matches between suspects and evidence found at crime scenes. Even where sufficient evidence can be brought to take a case to trial, the lack of public prosecutors further undermines the state’s judicial functions. With only eleven public prosecutors it is no surprise that impunity is high and prosecutions for major crimes often face severe delays, especially when it is considered that there were 145 murders in 2012 alone. Add this to a police force lacking in vehicles and even basic equipment and the scale of the task becomes even more daunting.

Belize thus faces an uphill task in overcoming the challenges provided by gang violence. The approach followed by instances such as RESTORE Belize and the Conscious Youth Development Program are highly commendable for their recognition that youth, including those involved in gang activity, should not be treated as a plague on society that can simply be exterminated through repressive actions. But for their full value to be achieved there is a need for wider changes. Youth must be provided with greater opportunities to thrive, while state capacities need bolstering in order to improve its ability to provide security and justice to its citizens. Such changes, however, require significant resources that Belize is lacking. Furthermore, support to engage in these inherently longer-term efforts will be tested by the attitudes of those that continue to see Belize’s youth in a negative light, or that become impatient, and understandably so, with the immediate threats to their security.

Matthew Budd is a security analyst at RESDAL (Latin American Security and Defence Network), where he specialises in public security issues, and is also studying for a Masters in Conflict, Security and Development at King’s College London. He is currently working on the second edition of RESDAL’s Public Security Index, which is the only existing resource to provide information on the public security context and institutional responses to them in the Central American region. The upcoming edition will incorporate the case of Belize alongside those of Spanish-speaking Central America.

Featured image: A Belize City high school. Source: Flickr | Carsten ten brink

The European Union (EU) has recently emerged as an international peace meditator, but emerging challenges, including the potential exit of the UK from the EU, may prevent it from strengthening its ability to mediate conflicts.  

Mediation is an instrument of international conflict management through which third parties seek to contribute to a peaceful resolution of (violent) conflicts. While states are the dominant and most frequent providers of mediation, international organizations are not far behind. Recently, the European Union (EU) has emerged as a relatively new player in the field, acting both as a mediator itself and as a member of collective coordination mechanisms to support peace processes such as UN Contact Groups and Groups of Friends. Current initiatives such as the EU-facilitated dialogue between Belgrade and Pristina have demonstrated the EU’s potential as peace mediator.

However, external and internal crises may prevent the EU from further strengthening its institutional capacities and resources for mediation. Externally, challenges to European security such as the civil war in Syria, the threat posed by the so-called Islamic State and the armed conflict in Eastern Ukraine in the context of rising tensions between NATO and Russia could lead to a shift in the EU’s foreign and security policy back towards a more traditional, “hard security” approach that focuses on the development of military instruments and defence cooperation. Internally, the results of the UK referendum on 23 June 2016 and a potential exit of the UK would certainly open up a debate on the future of EU foreign and security policy without one of its most influential member states. The fact that the EU’s long-awaited Global Strategy on Foreign and Security Policy will be published a week or two after the UK referendum suggests that the EU is well prepared to take the potential effects of a ‘Leave’ vote on this policy field swiftly into account. However, it is nevertheless plausible to assume that a ‘Brexit’ would push the EU towards a decisive crossroads as regards to the future development of its foreign and security policy, also potentially affecting its engagement in the field of peace mediation.

 The EU’s track record in peace mediation

Image by Rock Cohen via Flickr.

Although the number of EU mediation efforts is still relatively marginal compared to UN mediation involvement, the EU has nevertheless established a considerable track record as mediator in the past ten to fifteen years. During High Representative (HR) Javier Solana’s terms of office, mediation became an increasingly important element of the EU’s foreign and security policy toolbox. For example, in August 2001 the EU together with the US managed to broker the Ohrid Framework Agreement settling the conflict between the Macedonian government and the Albanian minority in 2001. A few months later, the High Representative and his team became involved in a mediation process between Serbia and Montenegro, which led to the Belgrade Agreement on the formation of a state union in March 2002. While the Western Balkans certainly remained one of HR Solana’s key priorities, the EU also played an important role in the multilateral effort to mediate the political crisis in Ukraine in the context of the country’s ‘Orange Revolution’ in 2003 and was a key supporter of the efforts by the Finnish NGO Crisis Management Initiative (CMI) to broker a peace agreement to the conflict in Aceh, Indonesia in 2004-5.

While the EU had already been very active in the field of mediation when Javier Solana served as High Representative (1999-2009), it sustained its mediation activities during HR Catherine Ashton’s term of office (2009-2014) and continues to be involved in mediation processes since HR Federica Mogherini has taken over. In particular, the EU-facilitated dialogue between Belgrade and Pristina stands out as the most prominent example of EU mediation. Less publicly recognized are the EU’s efforts as co-mediator in the Geneva International Discussions (GID) on Georgia’s Territorial Conflicts that were initiated in October 2008 following the EU Special Representative for the South Caucasus and Crisis in Georgia together with OSCE and UN Special Representatives/Envoys  serving as co-chair in the talks between representatives of Georgia, South Ossetia, Abkhazia, Russia and the US. Apart from its direct involvement as mediator, EU actors have been engaged in a number of mediation support initiatives, often been less visible to a wider public. Examples include the EEAS Mediation Support Team’s efforts to assist Myanmar democratic transition and the EU Delegation’s organizational and financial support to the National Dialogue Conference in Yemen.

The EU’s institutional framework for mediation

The increase in EU mediation activities has been accompanied by the evolution of a more strategic and systematic EU approach to mediation, particularly in terms of policy development and capacity-building. A key development in this regard has been the adoption of the Concept on Strengthening EU Mediation and Dialogue Capacities. In this document, the EU formulated the plan to systematically enhance its existing mediation capacities and to strengthen its overall ability to engage in non-military conflict prevention and crisis management missions. It also spells out different roles and guiding principles of EU mediation, thereby addressing the need for greater internal coherence and closer cooperation with its international partners. A major role in mediation is ascribed to the EU Special Representatives, whose mandates often include mediation-related activities and which are often the key EU actors on the ground in the conflict region.

To implement the Concept and to promote a more systematic approach to mediation, the Mediation Support Team (MST) within the EEAS was established in 2011 and has become a key hub of mediation knowledge and expertise. However, the MST is not the only institutional innovation that followed-up on the 2009 Concept. The establishment of the European Parliament Mediation Support Service to assist mediation initiatives undertaken by Members of the European Parliament and the creation of the European Institute of Peace illustrate that mediation remains a vibrant field of EU foreign policy.

Is the EU an effective mediator?

To what extent the EU is effective in its mediation efforts is an issue which still has to be comprehensively addressed in peace and conflict studies research. The answer to the question of EU effectiveness also depends on how one conceptualizes effectiveness and success in international mediation. A brief comparison of the EU-facilitated dialogue between Kosovo and Serbia with the EU’s role as co-chair in the Geneva International Discussions on the conflicts over South Ossetia and Abkhazia may illustrate this. In terms of conflict settlement, the EU-facilitated dialogue between Kosovo and Serbia has been relatively effective, given that it has led to several agreements between the parties, including compromises on previously heavily contested issues such as Kosovo’s participation in regional fora, freedom of movement and trade, and the governance of Northern Kosovo. Most importantly, the EU brokered the First Agreement of Principles Governing the Normalization of Relations in April 2013 that has been widely applauded as ground-breaking and historic. Although the parties are lagging behind when it comes to the implementation of some agreements, the Belgrade-Pristina dialogue still is a success story which can, at least partly, be attributed to the EU’s leverage vis-à-vis with the conflict parties due to their aspirations for EU accession and its mediation strategy that draws on this leverage to move parties toward agreement through the use of positive incentives.

In case of the Geneva International Discussions, the EUSR and his team have been considerably less effective in brokering agreements between the parties compared to the Kosovo-Serbia case. Apart from the establishment of Incident Prevention and Response Mechanisms to facilitate exchange of information on security incidents at the administrative boundary line (ABL) between South Ossetia/Abkhazia and Georgia proper, the discussions have not resulted in any tangible results yet. However, a focus on conflict settlement alone would not be sufficient to make a comprehensive judgement on the EU’s effectiveness as a co-mediator in this case. The fact that the EU has managed to keep the parties at the negotiation table and stay committed to the mediation process is in itself an achievement, given the fact that the space for compromise between the parties seems to be very limited. In addition to the EU’s effort to stabilize the security situation on the ground through the EU Monitoring Mission (EUMM), the EU’s leading role in the GID has contributed to a stabilization of a conflict which was prone to escalation not that many years ago.

What can we learn from this comparison about EU effectiveness in mediation? There are at least two lessons that could be drawn here. First, the Kosovo-Serbia case illustrates the great potential of the EU as a mediator in contexts where EU memberships serves as a huge incentive for compromise solutions. Second, the EU’s involvement in the Geneva International Discussions demonstrates that in less favourable contexts – due to a lack of EU leverage or a limited willingness to compromise from the conflict parties – the EU may not be able to achieve more than preserving the status quo and committing the parties to confront one another peacefully in negotiations rather than through violent means. Thus, there may be certain limits to what the EU is able to achieve, but this does not mean automatically that the EU is ineffective. Rather, the main task for the EU will be to fully exploit the potential it has, given the specific circumstances and context of the conflict in which it decides to engage.

If the EU is able to further strengthen its profile as an international mediator, it will depend on the political will of the Member States. Although EU mediators such as EU Special Representatives enjoy a certain degree of leeway, it is the EU member states who decide on their mandates and the EU’s approach towards a particular conflict more generally. Moreover, individual Member States may provide EU mediation efforts with additional weight. In the Kosovo-Serbia case, for example, the UK and Germany have played a key role in moving Belgrade to compromise in the dialogue with Pristina by making it a condition for further progress on its path towards EU accession. While Germany has been the key driver behind the efforts of putting more pressure on Serbia to move forward in the implementation of agreements reached in the context of the EU-facilitated dialogue at different levels, the UK has played a key role in backing this policy publicly and through diplomatic channels. Given that the UK has been a firm supporter of the EU’s further enlargement, one potential effect of a ‘Brexit’ could be that in cases where enlargement is the key ‘carrot’ the EU can offer to conflict parties, there might be more reluctance to draw on this leverage due to a change to the EU’s internal balance between enlargement supporters and skeptics among the Member States. Thus, although a potential ‘Brexit’ may not inevitably affect and change the EU’s approach to mediation, it may have a long-term negative impact on the EU’s ability to use both pressure and political/economic incentives to spur agreement between conflict parties.

Julian Bergmann is a research fellow with the Chair of International Politics at the Johannes Gutenberg University Mainz, working on a PhD thesis on the EU’s effectiveness as a peace mediator in secessionist conflicts. Together with Arne Niemann, he is also conducting a research project entitled “A Peacemaker in the Making? The European Union as an Actor in International Mediation”, funded by the German Foundation for Peace Research. Recent publications include Mediating International Conflicts: the European Union as an Effective Peacemaker? (Journal of Common Market Studies 2015, with Arne Niemann) and Reputation, Credibility and Manipulative Negotiation Style – Attributes of Successful Peacemakers? (Zeitschrift für Friedens- und Konfliktforschung 2014; in German).