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The Countries Most at Risk for Energy Security

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Achieving a stable energy supply in times of political upheaval, overpopulation, dwindling traditional resources and a transition to a low carbon world is downright challenging. And for some countries that challenge seems nearly impossible, according to risk analyst firm Maplecroft, which rated the following countries at “extreme risk” for energy security:

  1. Sierra Leone
  2. Gambia
  3. Guinea-Bissau

The area is commonly known for severe political conflicts, corruption and frequent violence, which further weakens already-fragile communities and governments. In the case of the one country most at risk for energy security, Maplecroft found that:

Sierra Leone emerged from a decade of civil war in 2002 and despitereconstruction efforts and recent economic growth, it is the worst performing country in the Energy Security Index (short term). Sierra Leone was also categorized as extreme risk in the 2011 Energy Security Index (short term). Nearly 10 years after the end of the war only 10% of the country’s population has access to electricity and the supply is erratic and limited to major towns. This highlights the lasting effect that conflict can have on the energy security and infrastructure in vulnerable nations.

But these West African countries are not the only ones at risk for energy security.

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Most of the G-7 nations are included in the short-term “high risk” category, including Italy, Japan, UK, Germany, France and the USA.

The world’s second largest consumer of energy, the USA, rates as ‘high risk’ in the short-term, primarily because of the high imports of fossil fuels and electricity needed to support its colossal demand for energy. The largest percentage of US oil imports come from Middle Eastern countries – leaving the country at continual high risk of supply interruption and price shocks.

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In 2008, the US imported an average of 12.9 million barrels of oil per day, which represents 15.10% of world production in that year, with 23.36% coming from the MENA region.

Canada is the only G-7 nation rated as “low risk,” most likely because of the country’s abundant energy production and exporting business, coupled with its wealth of energy expertise, science and technology.

Japan’s ranking as “high risk” was due to many factors, including the earthquake and tsunami in March, which severely damaged the country’s ability to generate energy.

There is a silver lining, however, as Prime Minister Naoto Kan recently unveiled plans to bring down the cost of solar power generation by 2010 and to install solar panels in 10 million Japanese homes.

Water Risk in the Middle East

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Water scarcity has become a hot topic within the last few years (we ran a feature on the the risk of water scarcity and its effect on businesses in our June 2009 issue). That risk, however, is far greater in certain areas of the world than others. On March 22nd, Maplecroft warned that Middle East and North African (MENA) countries top the list for extreme water security risks, which could lead to further increases in global oil prices and heightened political tensions in the future.

Maplecroft rated 18 countries at “extreme risk” with 15 of those located in the MENA region. Of the 12 organizations of the Petroleum Exporting Countries (OPEC), six are rated as “high risk.”

“Water security has the potential to compound the already fragile state of societal affairs in some countries,” says Professor Alyson Warhurst, CEO of Maplecroft. “For example, in Egypt water security may intensify the on-going civil tensions. In turn it is not unrelated to food security, which leads to cost of living protests and in turn violent oppression in less democratic societies.”

The report states that technological innovations, such as the desalination of salt water, may alleviate some of these risks. Businesses that require intensive water use (food and beverage, semiconductor manufacturing, etc.) will also need to consider their impacts and analyze options for lessening their reliance on water, especially in regions already experiencing shortages.

Child Labor: A Reputation Armageddon

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For the most part, a company never anticipates its suppliers will be using child labor to provide a product, but for many large corporations with production facilities or suppliers in poorer countries, that is exactly what is, and has been, happening. And the reputation damage inflicted by accusations that a company uses child labor to make a profit, even if unaware, is devastating.

You may remember back in 2007 when Gap came under fire for, apparently unknowingly, using child labor in the production of a line of children’s clothing in India. An investigative reporter videotaped the scene at the factory.

It shows children who appeared to be between the ages of 10 and 13, stitching embroidered shirts in a crowded, dimly lit work-room. The video clearly shows a Gap label on the back of each garment. The reporter, Dan McDougall, said the children were working without pay as virtual slaves in filthy conditions, with a single, backed-up latrine and bowls of rice covered with flies. They slept on the roof, he said.

Though Gap immediately ordered a full evaluation and had a clean record of ethical out-sourcing up until that point, the reputation damage was severe and lingers to this day.

But Gap is not the only company accused of using child labor. In 1998 Nike agreed to root out underage workers and require overseas suppliers to meet strict Unites States health and safety standards after it received heavy pressure from critics.

Nike said it would raise the minimum age for hiring new workers at shoe factories to 18 and the minimum for new workers at other plants to 16, in countries where it is common for 14-year-olds to hold such jobs. It will not require the dismissal of underage workers already in place.

Though the shoe and apparel giant took some steps to ease the concerns of critics, the company suffered boycotts by consumers who refused to support such “sweatshops.” Examples include this boycott petition and this website encouraging the end of support for anything Nike.

More recently, Apple “said it found more than a dozen serious violations of labor laws at its suppliers.” One investigation found that three overseas facilities had hired 11 workers who were 15 years old (the minimum employment age is 16 in those countries). Apple’s reputation damage continued to worsen this year with news of an alarming rate of suicides at its biggest supplier, China’s Foxconn (check out an in-depth article on the topic).

China, India, Bangladesh, Nigeria and Pakistan are among the countries with the most widespread abuses of child workers, according to a report released today by Maplecroft. Below is a map illustrating the ares most prone to use of child labor.

Screen shot 2010-12-01 at 11.24.01 AMAs the report states, there are more than 200 million children working throughout the world, many full-time. Of these, 126 million are exposed to hazardous forms of child labor. As we have seen, many big-name companies have been accused of using child labor, and though they’ve taken many steps to correct their ethical violations, the reputation damage still lingers — and may do so forever.

Terrorist Attacks: The Countries Most at Risk

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When we think of countries most at risk of terrorist attacks, we usually think of Iraq, Pakistan or Afghanistan. But according to a report from Maplecroft, Somalia is now more at risk than any other country in the world. The firm’s global ranking assessed the frequency and intensity of terrorist incidents in 196 countries and found the following countries qualify as “extreme risk” territories:

  1. Somalia
  2. Pakistan
  3. Iraq
  4. Afghanistan
  5. Palestinian Occupied Territory
  6. Columbia
  7. Thailand
  8. Philippines
  9. Yemen
  10. Russia

The report found that between June 2009 and June 2010, Somalia experienced 556 terrorist attacks, killing a total of 1,437 people and wounding 3,408.

The principal threat in Somalia comes from the Islamist al Shabaab, which has claimed responsibility for several deadly suicide bombings, including one in February 2009, which killed eleven Burundian soldiers on an AU peacekeeping mission.

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In a recent and worrying change of tactics, the group carried out its first major international attack in July 2010, when it bombed the Ugandan capital, Kampala, killing at least 74 people.

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Yemen makes its first appearance in the “extreme risk” category, with 109 attacks in the one-year period ending June 2010. The country’s primary source of terrorism is al-Qaeda, “which is causing growing alarm among Western intelligence services as the group plots more attacks abroad.

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Greece overtook Spain to become the European country most at risk from terrorist attacks. Though most Greek attacks tend to be non-fatal, they are highly disruptive, as we saw in the November 2010 letter bombs that targeted embassies in Athens and foreign leaders both in Greece and abroad.

Greece