Russia, the West, and the Caspian Energy Hub

Article excerpt

ALTHOUGH the Cold War has ended, geopolitical competition has not. A new, more competitive, regional international system is forming around the Caspian basin in response to declining Russian national power, rising local nationalism, and the arrival of major Western energy corporations. The Caspian basin contains major oil and gas deposits that have attracted multibillion-dollar investments by Western firms. Since the flag often follows the great multinationals, Great Britain, the United States, and other Western powers have entered the Caspian political circle. Western states now have concrete interests in the Caspian region's developing natural gas and petroleum industry, in addition their traditional stakes in the Middle East. This essay argues that a strategy aimed at nurturing a Caspian basin energy system that is both a buffer and a link between Russia and the Middle East is in the best interests of the West, the five Caspian littoral states--Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan--as well as Armenia, Georgia, and Turkey.

THE SOVIET LEGACY

During its last thirty years, the Soviet regime deliberately prevented the Caspian region's energy resources from being developed, and deprived Azerbaijan, Kazakhstan, and Turkmenistan of the opportunity to reach for substantially higher standards of living. The Soviet regime gave priority to oil and gas fields inside the Russian Federation, directed new capital into Russia's western Siberian fields, and built pipelines that linked them to Western markets. It maximized exports by restricting domestic oil and gas consumption and by using more nuclear and hydroelectric power at home. It imposed a grand plan on the entire Union. It decided if and when Caspian reserves would be tapped and how the income would be distributed. From Moscow's point of view, it made neither political nor economic sense to permit general, open competition by the fifteen constituent republics for foreign investment and foreign export market shares. As a result, the Caspian's untapped oil and gas deposits became future opportunities waiting for the political situation to change. Ambitious Azeri, Kazakh, and Turkmen political leaders were eager to liquidate the Soviet state, to take control over its assets, and to seek foreign partners to invest in natural resource development. They began to explore such opportunities in the waning months of Mikhail Gorbachev's presidency, as the Soviet state relaxed its grip. It was Russian president Boris Yeltsin, however, who threw open the doors.

In December 1991, when Yeltsin disbanded the Soviet state, the Soviet energy system lost its authoritative political center, and the network of exploration, production, and transportation facilities began to unravel. Oil output fell from a peak of 11,000,000 barrels per day (b/d) in 1988 to about 7,000,000 b/d in 1994. Each of the fifteen republics nationalized the defunct Soviet state's energy facilities in its territory. The vast southern oil and gas reservoirs moved out of Moscow's de jure control, and Azeri, Kazakh, and Turkmen leaders sought foreign partners to develop their national wealth. Once major Western multinationals such as British Petroleum (BP) and US-owned Chevron confirmed that the Caspian region's oil and gas deposits were large and potentially economically attractive, Great Britain, the United States, and the energy-importing states felt it to be in their national interests to encourage the Caspian Sea basin to develop independently of Russia and the Middle East, as a third major source of energy flowing into world markets. The new republics were naively enthusiastic about prospects for Western political and economic support. They expected Great Britain and the United States to promote viable, independent states in the Caucasus and the Caspian region.

RUSSIA'S THREE POLICY STAGES

The natural attraction between the West and the three energy-rich Caspian states--Azerbaijan, Kazakhstan. …

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