Gathering of geo-economic storm in the Caspian Sea
Farhan Siddiqui
Dr. S. M. Rahman
Energy worlds are the coveted worlds. Those who covet are the western
nations, more specifically North America and its allies in Western
Europe, whose affluence and glitter, to a large extent, depend on the
oil reservoirs of the Middle East and the Persian Gulf, but ironically,
the locus of control over the price rests not with the producers of the
oil, but with the buyers. The much-trumpeted buzz word __ free market
economy __ is not at all relevant in this context. Oil is a commodity
as well as politics. It is not without significance that the major
traumatic events having far-reaching consequences during the past
fifteen years of the fading century, notwithstanding the collapse of
the Soviet Union, have occurred in and around the oil fields of the
world.
The most notable of these are the eight-year internecine war between
Iran and Iraq, the tanker wars in the Persian Gulf and the operation
Desert Storm, euphemistically called 'Gulf War', but was essentially an
economic war for oil wealth, no different from the Opium Wars of the
nineteenth century. The recent massive air strike operations in Kosovo,
viewed in longer perspective is to establish NATO's primacy in Eurasia
to be able to ultimately exploit the energy resources of the Caspian
Sea and the Central Asian states, and thereby dilute the power and
influence of Russia, which is still nourishing a nostalgic lust for
the 'near abroad' region. Despite colossal geo-political upheavals the
price of oil has remained amazingly low to the detriment of the
suppliers and 'boom' for the buyers.
Energy security, for the western nations is a one-way traffic. It is to
ensure adequate and uninterrupted supply of oil at the cheapest
possible price. George Bush, made no secret of the fact that the Gulf
War was for the preservation of US 'values'. It is estimated that in
1996 western countries consumed nearly 30 million barrels per day (mbd)
of refined oil, i.e., 48 percent of the world production. Iran, has
acted as a conscientious objector, and accused western powers led by
the US, of manipulating demand and supply of oil to gain maximum
advantage over the Gulf producers. It has also exposed the Washington
game in not letting regional cooperation emerge so that through 'unity'
they could withstand exploitation and enhance their bargaining power.
Through a propaganda ploy Iran is being projected as a 'threat' to its
neighbours. To fish in the troubled waters, is the age-old game and the
imperial powers have pursued 'divide and rule' policy to perpetuate
their hegemony and monopoly. Between themselves, however, the
industrialised western nations have unitedly created an International
Energy Agency (IEA) in 1974-75 to acquire strategic reserves of minimum
of 500 million barrels and a maximum of one billion barrels so that
they could break their dependency on the import of oils, especially of
the Gulf region.
The US hold over the Arab and Persian Gulf oil has been fairly
established after the Gulf War, but the political consciousness in the
region is creating aversion to US's military presence and should the
situation so develop that US's continued presence was no longer
feasible, other sources of energy had to be tapped. The North Sea,
supplies are also expected to decline in the early half of the 21st
century, and the western powers, therefore are eyeing with greed, the
hydrocarbon resources of the Caspian region.
It is estimated that the states of Central Asia, have up to 200 million
barrels of oil and several billion cubic meters of natural gas. As
these resources are not yet fully explored, there are 'optimistic' as
well as 'pessimistic' views with respect to the quantum of energy
reserves. One version holds that Caspian Sea is yet another 'Persian
Gulf', and that it would play crucial role in the energy dynamics of
the new millennium. But a conservative appraisal points out relatively
limited reserves as compared to Persian Gulf, the Russian Federation
and the North Sea.
Among the Caspian Sea littoral states, Azerbaijan, is estimated to have
150.42 million tons of reserves, as compared to 672.95 of Kazakhstan,
79.17 of Turkmenistan, 6887.79 of Russia and 12721.00 of Iran. All
Caspian states taken together have 20511.33 million tons, which falls
short of Saudi Arabian reserves of 35321.00. Even though the Caspian
energy reservoir may not compare favourably with the Persian Gulf and
the Arabian Peninsula, it has all the potential to meet the alternative
energy security requirements of the western world, and it goes without
saying that the future progress and prosperity of the region, to a
great extent, would depend on the development of the energy resources
of the Caspian __ Caucasian region.
The relatively unstructured situation of the Caspian Sea region,
presents the dialectics of two opposing paradigms __ confrontational
and cooperative. One perspective presents a dismal view, whereas the
other one holds promise of hope and harnessing of new opportunities.
Competition for energy has always been a source of tension and
conflicts in international and regional relations. But in the case of
Caspian Sea, the situation is quite complicated due to historical
legacy, and the problems of adjustment to the new imperatives of
gaining independence nearly six years ago by the littoral states __
Azerbaijan, the Russian Federation, Kazakhstan and Turkmenistan. These
states are still struggling for the difficult task of development of a
national outlook and consensus, and gain confidence of being fully
autonomous and sovereign, and freeing themselves from the historical
dependence and control by the former Soviet Union __ now Russia.
The newly independent states, are victims of authoritarian pattern of
governance, which did not allow clear demarcation of borders, creating
legal complexities with respect to ownership of land, water and other
natural resources. While the states have much in common, due to shared
experience of the past, there are also interstate rivalries due to
their unique aspirations based on linguistic, ethnic and sectarian
identities. The conflicts and tensions have further been exacerbated
due to big oil investments.
Territorial disputes and great power rivalries have aggravated the
situation and prospects of peace and cooperation are becoming all the
more complex and difficult to overcome. On the other hand, the region
can only be prosperous through a cooperative integrated venture and
using oil and gas resources for the sustained economic growth, social
development and political stability. It is becoming increasingly
apparent that Caspian resources can only be fully exploited through an
international cooperation involving all littoral states as well as
outside powers, and business communities of the world, who can invest
and provide their expertise.
The world demand for energy is steadily growing, and not only the
western nations would seek access to the Caspian energy reservoirs to
gain greater flexibility in gaining energy security, even the Asian
nations, particularly China, Japan and other states would be added to
the demand list.
The initial response of the western oil companies reflected a typical
gold-rush-mentality, who with an exaggerated vigour to establish their
primacy in claim over the oil reserves of the Caspian Basin, came in to
position themselves, in the Central Asian states and the Caucasian
region, to make investments in oil transportation, soon after the
erstwhile Soviet Union had to concede independence to them in 1991.
The acquisitive spirit, however, soon got dampened, when it became
apparent that the basic infrastructural pre-requisites for opening up
to the neighbouring countries and subsequently to the world market were
markedly deficient. These states being essentially land-locked, lacked
a commercial cooperative culture, and the overly centralised
administrative machinery of the former Soviet Union had an inhibiting
influence on developing entrepreneurial spirit, without which progress
and prosperity can not be accelerated.
Countries like Afghanistan, Iran, Turkey and China in the immediate
neighbourhood of the liberated states of Central Asia and Azerbaijan,
have their own historical legacies and geo-political compulsions in
determining the pipeline diplomacy. Afghanistan, for instance, due to
the lingering civil war, makes it extremely risky for investment in oil
transportation. The US is not reconciled to letting pipelines run
through Iran, even though the oil companies executives privately admit,
that a route through Iran would be the shortest and cheapest way to
ship oil to international markets, and, therefore, the most
attractive.
It is on this account, "the US oil companies, as well as several other
western energy companies are hesitant to invest in an Iranian route,
fearing US reprisals in the form of sanctions under the Iran, Libya
sanctions Act (ILSA) of 1996. The US favours multiple routes that would
run from or through Kazakhstan/Azerbaijan via Georgia to the Turkish
Mediterranean port, but this would entail more investments as the route
is longer and traverses war-torn territory and unstable territories
like Nagorno-Karabakh and Chechnya.
With the price of oil at an all-time low, and the Asian financial
crisis showing no signs of letting up, it is unlikely that oil prices
will pick up in the near future, thereby putting on hold the various
oil companies dreams of development and wealth. No one is willing to
invest more money on high-cost and high-risk projects that could take
years to reap dividends.
US interests, no doubt, in the Caspian Basin are largely a function of
the regions' energy potential. Washington, as Michael Croissant
maintains, "has geo-political interests that magnify the need for
American engagement in the region. Situated at the strategic crossroads
of Europe and Asia, the Caspian is an area of intrinsic geo-political
importance. Since the break-up of the Soviet Union, a major struggle
for leverage __ including control over Caspian oil has taken place in
the region between Russia, Turkey and Iran. As the only remaining
superpower with global interests, the United States has keen stake in
the outcome of the contest".
That Iran was to be kept out in the new geo-political dynamics of the
Caspian Sea was quite explicitly mentioned by Ambassador Morningstar,
special advisor to the president and secretary of state for Caspian
Basin energy diplomacy (November 2, 1998). One of the US objectives, he
said, was "bolstering the energy security of the US and our allies and
ensuring the free flow of energy from the Caspian region to the world
market place. The primary tool we are employing ... is the
establishment of an east-west energy transit corridor, comprised of a
network of multiple pipelines that will bring Caspian energy resources
to world markets while bypassing the potential choke-point of Iran".
The role of the United States, according to him, was that of an honest
broker. "Our job", he said, "is to encourage the relevant companies and
countries of the region to negotiate in good faith on commercial and
political factors that must be satisfied in order to make any of these
pipelines viable. Some argue that pipeline decisions should be made
strictly according to commercial criteria. Having spent all but the
past five and a half years in the private sector, I am naturally
partial to these sorts of arguments. However, commercial decisions must
also be seen in a broader political and economic context. These broader
issues can have a direct impact on commercial considerations."
The US also supports Caspian pipeline consortium which will run from
northwestern Kazakhstan across southern Russia to the Black Sea port of
Novorossiysk. Russia is conceived to be a partner in the development of
the Caspian energy resources. This orientation reflects a changed
perspective not to completely oust Russia as it could enrage it, but to
work through it to achieve maximum geo-political and geo-economic
objectives. This way, Russia would be kept contained to play the role
which would be in harmony with the US's strategic interests.
Morningstar when he characterises the US as an "honest" broker, he
probably implies that it is 'honest' to the extent that it does not
hide its interests, which according to Croissant, "hinges around the
emergence of truly independent, pro-western democratic regimes with
market-oriented economies. The rise of such states not only would
facilitate the unhindered development of Caspian oil and the creation
of new export opportunities and jobs for American businesses, but also
would strengthen the region against domination by a single power."
One recalls, when asked as to why was the Gulf War waged, George Bush
had replied: "Jobs." The external power most active in the Caspian
Basin, no doubt is the US, but a host of industrialised nations have
pumped billions of dollars in investment into Azerbaijan and other
Caspian riparian states.
Indeed, oil companies representing the national interests of Norway,
France, Italy, United Kingdom, Germany and Japan are at work in the
Caspian Basin. A handful of European nations also have been active
diplomatically in the region through such fora as the NATO and OSCE.
Notwithstanding the efforts to downplay the quantum of hydrocarbon
reserves in the Caspian Basin, the fact remains that the US companies
have already invested substantially, and the $8bn contract signed
between Azerbaijan and an international consortium in September 1994,
aimed at developing three large offshore oil fields ... If the various
oil contracts are brought to fruition, experts predict that the Caspian
Sea could become the second largest energy supplier to the West within
the next 10-15 years."
In order to strengthen the US and the western countries hold over the
Caspian oil, a systematic attempt has been made to patronise Turkey
against Iran, as the former is considered a bridge between the West and
the southern republics and to counter the latter's influence in Russia.
Strategic support is being given to Turkey for connecting the Soviet-
era pipeline originating in Baku, with an existing pipeline in eastern
Turkey to the Mediterranean part of Ceyhan. This pipeline is expected
to carry oil and gas from Kazakhstan and Turkmenistan and then grant
Turkey a central role in the transportation of Caspian energy to
market.
Besides Turkey, the US has built up Azerbaijan as a crucial actor to
support its interests in the Caspian Basin, and in return a large chunk
of international investment has been made in Azerbaijan. It is believed
that $25 billion in oil and gas investment would flow into this state
during the next decade. On this account it is being characterised as
the emerging Kuwait of the Caspian Sea Basin, as it would be the first
country of the region to export oil to the West. Initially Russian
pipeline network to the north would be utilised, and later after two
years, Azerbaijan would have the option to transport some of the oil
through western pipeline running through the Caucasus and Turkey.
Azerbaijan's marked tilt towards the US is not being relished by Russia
and Iran, particularly due to the allegation made by Baku, that Russia
was supplying arms to Armenia through Iran. Though vehemently refuted,
Russia is overly apprehensive that Azerbaijan would be used for
containment, undermining Russia's clout in the region and Iran is also
apprehensive that it could be manipulated by the US to fan ethnic
conflicts in its northern part, where a sizable number of Azeris live.
Despite some semblance of understanding and tactical cordiality
between the US and Russia, deep down there is a lurking antipathy and
mistrust against each other. Russia is keen to maintain the present
infrastructural network of pipelines and transit routes, and is
resisting alternative routes to develop as it would deprive her of the
much-needed royalty in foreign exchange, particularly, when its economy
is in shambles. The US, on the other hand, playing a proverbial camel,
has made strategic space for itself into the heartland of Eurasia __
the Central Asia and Caucasus to be able to prolong its unipolarity and
gain full control over the energy areas of the world. The Caspian Sea
Basin is much too lucrative to be left exclusively for Russia __
formerly a contesting superpower, now under strategic convalescence,
but the prospect of resurgence is the dream of the ultra nationalists.
It is not without significance, that in places such as Tajikistan,
Kyrgyzstan, Armenia, Georgia and Chechnya, which are not oil-producing
areas but serve as transit routes, Russia retains fifty thousand
troops. To counter the Russian influence, the US offered security
protection to the region and held military exercises in the steppes of
Kazakhstan. The idea is to bring the region under the US central
command. The rivalry is reminiscent of the Cold War era. The
traditionalists' in Russian society are getting popular among the
elitist class, and there is a marked feeling among them that Russia was
being pushed out of the vast and important regions adjacent to its
borders, i.e., the Baltics, Central Asia and the Caucasus. The
conflicts, some hold, are due primarily to US's 'machinations', and
there exists an alarmist perception that "the bushfire of the civil war
is sweeping throughout the entire southern periphery of the Russian
state, particularly from the direction of the Caucasus. Reactionary
forces there, as well as in some other countries of the region, e.g.,
Turkey that provides Azerbaijan with weapons and trains the Azeri army,
take keen interest in drawing Russia into conflict, while projecting
her in the role of a (regional) gendarme, and weakening her traditional
influence. They also try to spread this conflict on to Russian
territory. Therefore, in the future, the entire region may easily
become a major threat for the Russian Federation."
There is a strange irony implicit in the fact that during the days of
Cold War, the Caspian Sea Basin, with its serene blue water, was a
region of peace, and the zone was demilitarised and practically tension
free. But now when the Cold War is formally ended with the dismantling
of the former Soviet empire, there is a reversal and this region has
metamorphosed into a mini cold-war-zone. There is a conflict between
Armenia and Azerbaijan over Nagorno-Karabagh, trouble in south Ossetia
and Abkhazia in Georgia, and many more brewing as economic prosperity
is hostage to their land-locked predicament. While the Russians hold
USA responsible for fanning ethnic and other rivalries in order to wean
the region out of the Russian orbit of influence, conversely analysts
in the US tend to believe that it is Moscow which fuels the strifes and
tension so that the Central Asia and Caucasian region states do not
gravitate to form an alliance against Russia and also to block the
development of alternative pipeline, which would hurt Russian economic
interests. The Caspian Sea littoral states must remain dependent on
Russia's Volgo-Dan Canal, which provides entry to the high seas, and
this option Russia wants to perpetuate for extracting maximum strategic
leverage.
"For several decades," says Dabiri, "when Iran and the Soviet Union
were the only littoral states of the Caspian Sea, the two enjoyed
secure borders and cooperated in view of the political and military
equations of the bipolar world and the priority of having safe and
secure borders. This spirit of toleration also entailed some economic
privileges for both sides. Accordingly, neither country felt a need for
detailed attention to such issues as the regions' exact legal status.
However, when Azerbaijan, Turkmenistan and Kazakhstan joined the
littoral states' fold and when each began independent activities ...
the legal status of the Caspian became a necessity and priority."
Besides the land deposits, oil is also found on the sea shelf and the
seabed. Land deposits of oil are subject to no controversy. A highly
contentious issue is with respect to marine oil and gas resources. Iran
maintains a principled position that "the existing legal regime of the
Caspian Sea has been determined by the Iran-Russian Friendship Pact of
February 26, 1921 and the commercial and navigation agreement which
were signed between Iran and the former Soviet Union on March 25,
1940". Until the agreement is reached among all five littoral states,
all should share equally the "Seas' bounties", but in the event all
agreed to divide the sea, Iran was ready to do so, on a fair and
equitable basis.
When Russia signed an agreement with Kazakhstan, on dividing the
resources of the sea-bed, while jointly sharing the waters for
navigation and other purposes, this was objected to by Iran and
Turkmenistan, who insist that "the interests of all five Caspian
littoral states must be taken into consideration before any agreement
can be reached vis-a-vis the Caspian legal status."
Iran has rightly been critical of the American companies and the US
government who have involved themselves in the semantic considerations
whether Caspian was a lake or an 'enclosed sea', thereby accentuating
legal controversies in the region by first making investments in
Azerbaijan and later in Kazakhstan, "which had been unified not by
economic but also by political and security motives".
Azerbaijan in line with the US thinking, pleads for "the division of
the Caspian Sea into five national exclusive areas under the
sovereignty of the five littoral states and treated as the territorial
waters for each". The idea as that if all five littoral states are
grouped as condominium, there is likely to emerge a consensus and sense
of togetherness, but if Azerbaijan formula is accepted it may lend
ample scope and opportunity for playing one against the other.
The confrontational paradigm which has surfaced due to conflicting geo-
economic and geo-political interests, in the Caspian Sea Basin, is also
tempered by pragmatic concerns to promote a cooperative venture which
may be conducive to judicious utilisation of the oil and gas resources.
The project for building a 3000-kilometre pipeline from Kazakhstan to
eastern China, at an estimated cost of US$10 billion if implemented
would be a gigantic step, as it would open up vast market in South East
Asia.
Kazakhstan's President Nursultan Nazarbayev has demonstrated a mature
leadership in seeking solutions of Caspian problems through a spirit of
compromise and adjustment and pursuing a policy of not unnecessarily
antagonising its powerful northern neighbour __ Russia __ but in the
process, he remains resolutely committed to determine an independent
foreign policy for Kazakhstan. He has based his Caspian policy on three
principles:
*National zones should cover all major oil fields located in would-be
sectors of the littoral states;
* zone delineation should not infringe on existing cooperative
agreements concluded with international oil companies, investing in the
Caspian zone, and
* the legal status of the Caspian Sea should be resolved in such a way
as to provide for unimpeded flow of outside investments, without which
the developments of local resources may not be possible.
Turkmenistan, maintaining a neutral stance, is also pursuing a policy
that Caspian problems should be resolved among the littoral states.
Iran occupies a pivotal position in the global energy scenario. On the
one hand, it dominates the strategic sea-exist for flow of Gulf region
oil, while on the other, it is one of major countries around Caspian
Sea.
It is, therefore, blessed with the responsibility along with other
global powers to extricate the region from crises and conflicts and
promote an ethos of cooperation. It has already taken sagacious steps
to win over the confidence of its neighbours and improve its relations
with the US.
With Russia and China, it already enjoys cordial relations. The geo-
economic power game played in the context of Persian Gulf states by the
US and its allies must not be allowed to be repeated in the context of
Caspian Sea. A paradigm of regional cooperation is the antidote to the
neo-colonial exploitation.
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