Caspian Sea Energy Still in Dispute; Five Nations Fail to Find a Way of Sharing it.(WORLD)(BRIEFING: WESTERN ASIA)

Article excerpt


The five nations bordering the Caspian Sea, eager to harvest its vast oil and gas resources, have nevertheless failed to agree on a declaration to settle their rival claims.

While Russia, Kazakhstan and Azerbaijan want the Caspian split into national sectors according to the length of each country's shoreline, Iran has been insisting it be divided equally five ways.

Iran, which shared the Caspian's resources equally with the Soviet Union, is concerned it will lose most of the access it enjoyed until the Soviet collapse in 1991 created countries along the littoral.

This week, leaders of the five nations did not agree on boundries across the inland sea.

Still, many states dependent on Persian Gulf oil are hoping to find new sources of energy in the Caspian Sea, a source believed to be more reliable and less subject to political disruption.

"There is nothing new about this idea" of making Caspian oil more available, said Frederick Starr of the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University. He said that increasing the amount of Caspian oil in the world market is welcome news.

The Caspian Sea, which is believed to hold the world's third-largest reserves of oil and natural gas, after the Persian Gulf and Siberia, has long had the attention of Western governments.

Western nations, including the United States, have been particularly interested in tapping Caspian oil because of their heavy reliance on Persian Gulf oil.

The Gulf has an output capacity of 22.7 billion barrels per day, 27 percent of world's oil supply, and contains about 679 billion barrels of proven oil reserves, about 66 percent of world oil reserves.

More important, the region holds 91 percent of the world's excess oil capacity - the ability to compensate for oil unavailable during disruptions of trade. If there were any long-term disruption in oil deliveries from the Persian Gulf, it would cause energy shortages, rising prices and general economic panic for the world economy.

Caspian oil will help lower the cost of any disruption of oil supply from the Persian Gulf, said Lucian Pugliaresi, president of LPI Consulting Inc. and former member of the National Security Council under President Reagan.

"Oil from the Caspian Sea can help, just as oil from Alaska can help," Mr. Pugliaresi said. "Marginal supplies outside the Persian Gulf can engage in price discipline."

Caspian oil will be useful for price leverage "when the price of oil reaches a certain level" that is too high for the market to handle, Mr. Starr said. "It is enough to become a crucial buffer of oil supply, putting them on warning that there are other voices in the chorus," he said of Persian Gulf states.

Nevertheless, increasing the amount of Caspian oil on the world market is difficult because the sea is landlocked. Because of geographic limitations, the only cost-effective means of conveying Caspian oil is through pipelines to Georgia and Turkey, countries with port access in the region.

Mr. Starr said that transporting oil by land is, in a sense, building an old-fashioned road next to a high-speed highway - the latter being oil transport by sea.

"Even in year 2002, the cheapest way to move anything is by water," Mr. Starr said. "There is kind of a distance tariff. You just have to add a surcharge and it makes Caspian oil less competitive."

But with no alternatives, oil-extracting nations of the Caspian region have built and continue to build pipelines to ports in Georgia and Turkey.

In the case of Georgia, President Eduard Shevardnadze has been the driving force in propelling the country to prominence on the world's oil market. He created the Georgian International Oil Corp. (GIOC) in 1995 to lay pipelines that could move Caspian oil. …