The Caspian Pipeline Dilemma: Political Games and Economic Losses

The Caspian Pipeline Dilemma: Political Games and Economic Losses

The Caspian Pipeline Dilemma: Political Games and Economic Losses

The Caspian Pipeline Dilemma: Political Games and Economic Losses

Synopsis

The Caspian Sea region is rich in oil and natural gas and can potentially become a major energy supplier. Despite the interest of the three Caspian countries of Azerbaijan, Kazakhstan, and Turkmenistan, their energy resources have remained mainly undeveloped a decade after their independence. The main factor that has prevented the full development of the Caspian energy resources has been the difficulty of selecting long-term safe, reliable, and economically viable export routes. The three landlocked Caspian countries have no choice but to depend on their neighbors to access international waters for their exports. For many reasons, including internal stability and extensive oil facilities and pipelines, Iran offers the most suitable routes to all three Caspian countries. However, despite the interest of the Caspian energy-exporters, in using this route, the U.S. policy of containment of Iran has prevented them from doing so. For political, economic, and security reasons, the existing in-use Georgian and Russian routes cannot and will not be a long-term solution for energy exports. The insistence of the American government on imposing the expensive and unreliable Turkish route on the reluctant Caspian energy-exporters and its categorical rejection of the Iranian route have created a major obstacle to the development of the Caspian energy industries.

As Peimani suggests, if this policy continues, many oil and gas exporters will opt for the Iranian route without regard to existing U.S. punitive legislation. The results could well be the isolation of the U.S. in the Caspian region and a gradual exclusion of American oil companies from the region. This overview will be of interest to scholars, researchers, and policymakers involved with economic and political issues of the region.

Excerpt

The post–Cold War era has witnessed the emergence of the Caspian Sea region as a new energy producer. the existence of significant amounts of oil and natural gas in that region has been a well-known fact for over a century. However, the importance of the region as a potentially major global energy-producer was not appreciated before the fall of the Soviet Union, except for a few decades in the second half of the nineteenth century when Baku enjoyed an oil boom. There are disagreements among energy experts about the size of its oil and gas reserves and therefore its strategic importance for the rest of the world. Nevertheless, they all agree on the value of its economically sensible reserves as an additional large source of energy for the world economy. Despite the interest of many regional and nonregional oil companies in the Caspian Sea region, the energy resources of Azerbaijan, Turkmenistan, and Kazakhstan are still mainly underdeveloped about a decade after their independence. This situation is not due to a lack of interest on the part of their governments. On the contrary, they have been more than eager to develop their energy resources as a necessity for revitalizing their declining economies and addressing an increasing number of transitional challenges in addition to a . . .

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