Looks like Gates will stay as SECDEF for at least a year.

You saw the trends here. Good news for us.

The Economist surveys the troubles faced by the Russian economy. Most significant part of the story: the graph showing that that Russia’s foreign-exchange reserves have fallen to the same level they were at in January. That is to say that it only took a few months to erase the roughly $200 billion in foreign exchange reserves Russia accumulated during the summer’s price spike.

The Economist discusses how anarchy in Somalia has lead to the surge in piracy in the Gulf of Aden, with serious consequences for global trade.

At the risk of flogging a dead horse, this demonstrates once again the need for a SysAdmin capability. Eradicating the pirate threat requires denying them the sanctuary of lawless Somalia - a mission that there is no international body currently prepared or able to tackle. It is an opportunity to gather the economic powers of our era together to start forging the great power alliances of the 21st Century.

The International Chamber of Commerce has a nice google maps mashup visualizing pirate attacks in 2008. On the Gulf of Aden front, there is an incredibly detailed google map showing the relevant shipping routes, suspected resupply points and key ports.

One way to view all of this is as the frayed edges of the global maritime transport infrastructure. It represents an opportunity to develop a more resilient global platform - there is a sizable foreign policy and profit payoff for whoever figures out effective improvements to the platform.

Goldman Sachs cuts forecasts and closes all oil trading recommendations.

The bank lowered its old demand growth forecast for next year to 100,000 barrels a day, from 300,000 barrels a day. It also cut estimates for supply expansion outside the Organization of Petroleum Exporting Countries by 50 percent to 200,000 barrels a day, because of slower production recovery in the Gulf of Mexico and Azerbaijan.

Note especially the demand consequences:

Although the worst of the commodity demand weakness in OECD economies is likely already behind us, the outlook for non- OECD demand is more uncertain

Combine this with the latest IEA report that placed the entirety of demand growth over the next 20 years in the developing world, and the consequences of non-OECD demand destruction becomes clearer.

The perversity in all of this is that it harms renewable start-ups that are trying to displace oil consumption, but on the other hand the Economist recently argued that a brief downturn would trim the green energy bubble and the industry would ultimately weather the disruption well. This, by the way, is a big reason why real options analysis need to be a standard practice when assessing alternative energy (and energy conservation) investments. One needs to consider price volatility, not just high price scenarios, to fully account for the value of alternative energy options.

TNR on Chinese Instability.

(H/T Shloky)

China has built its first major hospital ship.

As I’ve spoken about before (for example Is SysAdmin the right work for the military? and Not, decidedly, a 20th Century arms race), the underlying platforms for SysAdmin-type missions are shaping up to be critical swing assets in the future security environment.

The PRC isn’t discussing contingency plans with the US, but this indicates that it’s still worried about containing the potential wave of humanity that could wash over its border if the DPRK regime falls apart.

Stratfor (subscription required) connects this with some other moves in the region to argue that the neighboring powers are all thinking about the possibility of a collapse. Note that this is contingency planning, not a prediction.

Run, do not walk, over to SWJ to read LtCol Nagl and Col Gentile’s point-counterpoint on the Army’s future security environment and force planning.

Over the weekend, the Nerpa (K-152), an Akula II class sub, experienced an accident that killed 20.

My condolences to the victims and their families.

Information Dissemination has a good wrap-up. All I want to add is that the Akula class is an established platform for the Russians, so the accident raises questions regarding Russian retention of institutional knowledge, quality control and the current state of Russian shipbuilding. I haven’t seen any substantive information adequate to answer those questions, so they’ll just hang there for the moment.