Henry Kissinger's imaginative Concert of Great Powers needs to be backed by an equally innovative energy policy

On October 25 I was privileged to hear by far the clearest statement so far of what western aims should be in the war against terrorism. It came, not surprisingly, from Henry Kissinger, the former US secretary of state.

He reminded us that, in the entire postwar period, the security of free people everywhere has depended on America's willingness to defend them. "If America fails in its reaction to an attack on its own territory . . . the security of the postwar world will disintegrate."

He argued that terrorism exists in many cells all over the world but cannot survive without some bases. The strategic objective has to be "the elimination of these base areas, or at any rate the suppression of them by the host government".

He warned that if the alliance's aims were limited to victory in Afghanistan, terrorism would come back. Eventually all states that supported terrorism must be induced to stop, with no distinction between the global and local varieties. He did not advocate military intervention to settle old scores - but support for terror had to come to an end reasonably soon.

Mr Kissinger looked forward to a concert of powers including the US, its European allies and perhaps Russia, China and India, which could agree on the definition of terrorism and a common response. He did not think this world concert could be postponed until issues such as Palestine "which have a long time-frame" had been tackled.

He compared today's Nato with the quadripartite alliance existing at the end of the Napoleonic wars against any resurgence of French expansionism. But this never had to be invoked. Instead the action was with a concert of European powers in which France participated - and which worked until Britain withdrew.

Mr Kissinger rightly debunked some of the fashionable talk about allied military forces having the primary role to play in "nation-building" in Afghanistan. This task has eluded many countries over many centuries. At most he favoured a United Nations contact group of neighbouring countries and western economic aid.

Can the same detachment be applied to countries around the Gulf? In my view, not at present. The US and its allies will never disentangle themselves from the Middle East and establish Mr Kissinger's wider concert while they are so dependent on Middle Eastern oil.

Until oil dependence is drastically reduced, the western powers are doomed to recurring intervention in the affairs of the region and to making unpleasant choices between unattractive regimes, nearly all contemptuous of human rights. From time to time they will back the wrong horse - as they did more than 20 years ago in Iran and could easily do in Saudi Arabia now - and be blown from crisis to crisis.

Surely the west must seek a world in which it does not have to decide between the present feudal regime in Saudi Arabia and the fundamentalist radical opposition to it. Would not we all feel safer as well as more dignified if Tony Blair did not have to go looking for common ground with every unattractive Middle Eastern dictator? But we shall not escape from these begging missions while diplomacy is stifled by the need for oil supplies.

We have seen many maps showing how oil could be obtained from central Asia or Russia, bypassing the Arabian peninsula. But look at the areas through which the projected pipelines go. Some traverse the Caucasus and Turkey; others go through Afghanistan and Pakistan. These are some of the most turbulent and unstable areas of the globe.

A medium-term escape from these dilemmas involves the US and its allies becoming, as a group, more self-sufficient in energy and particularly in oil. Let no one say that there is anything anti-free-market in paying an insurance premium to avoid dependence on a monopolistic seller.

A paper by the National Bureau of Economic Research* notes that most US federal energy initiatives were in response to emergencies following large increases in petroleum prices but were afterwards allowed to lapse. After the first 1973 oil price shock, President Richard Nixon launched Project Independence for energy self-sufficiency by 1980.

But by the end of 2000 the US was importing 56 per cent of its petroleum. In the same year energy imports of all kinds surpassed the previous peak by 36 per cent. The failure of US energy-saving drives partly reflects the behaviour of real oil prices, which have remained far below the peaks of 1980.

Meanwhile US domestic refining capacity has been declining. Energy policy, like so much else, has been distorted by a running left-right battle. On the left it is argued that the problem lies in the failure of Congress to authorise petroleum taxes; so gasolene costs much less than in other western countries. On the right, the blame is put on excessive regulation. In the past 10 years the refinery industry has had to respond to five sets of new environmental regulations.

A serious policy will have to cut across these wrangles. Environmental restrictions will have to be reduced to a minimum and shorn of their anti-business subtext. But Republican leaders will have to perform a U-turn on gasolene taxes.

Faced with such problems, Paul Krugman, the US economist, is pessimistic about reducing dependence on Gulf oil. He accepts that strong conservation efforts could reduce US per capita oil use to European levels and make the country self-sufficient. But other industrial countries still account for two-thirds of oil imports from the Organisation of Petroleum Exporting Countries.

For once Professor Krugman may be too pessimistic - or too carried away by distaste for President George W. Bush's desire to drill in a part of the Alaskan National Wildlife Refuge. There are in fact plenty of ways in which Europe and Japan could reduce oil consumption. American profligacy is mainly due to car and truck users. Hardly any electricity is generated by oil, in strong contrast to the position in other countries. If the US were to tax petrol sufficiently and its allies were to substitute other primary fuels for electricity generation, we could be almost home and dry.

Faced with the alternative of continued dependence on countries such as Saudi Arabia, US and other voters should at last be prepared to accept the mixture of planning and the price mechanism so badly required.

*US Energy Policy during the 1990s, Paul Joskow