Oil and Geopolitics in the Caspian Sea Region

By Michael P. Croissant; Bülent Aras | Go to book overview

The West as well as the Caspian states have several competing policy interests in the region, which are difficult if not impossible to reconcile fully: For the world's oil consumers, Caspian oil production offers the prospect of diversifying energy supplies. The global economy is heavily dependent on energy from the volatile Persian Gulf, and that dependence is almost certain to rise in coming years. The consumers' interest in diversifying supply sources would be ill served were Caspian oil brought to world markets through Iran. That would be true no matter what regime ruled in Iran. This abiding geostrategic reality complicates the delicate issue of Western relations with the government of the Islamic Republic of Iran. Furthermore, the West's interest in global energy diversity is of little if any concern to the Caspian states.

Unlike energy diversity, an issue on which the West and the Caspian states share common goals is reinforcing the independence and sovereignty of the Caspian states. That interest is served by providing alternatives to dependence on pipelines via Russia. Besides the political problems, such dependence allows Russian pipeline owners to charge extraordinarily high fees. The solution is multiple energy export routes. This immediately raises the issue of whether to allow pipelines to cross Iran, which would conflict with the energy diversity goal, as well as with the United States' concern about limiting resources available to the Islamic Republic so long as it pursues destabilizing weapons like long-range missiles as well as undermining the Arab-Israeli peace process and sponsoring terrorism.

An even more serious quandary for the West is that the goal of reinforcing Caspian sovereignty may complicate the West's strong interest in a stable and non-hostile Russia, if nationalist sentiment in Russia is inflamed by Western activities in the area. As much as the West would prefer a Russia that accepts fully independent Caspian states, the future of the Caspian matters less to the West than does the future of Russia's nuclear arsenal. On the other hand, if Russia looks set to be hostile to the West, then Western interests may be best served by limiting Russian power, including its influence in the Caspian.

On the same geostrategic level, the West has an interest in helping NATO ally Turkey, both to guarantee its security in a dangerous neighborhood and promote economic development that may undercut radical discontent, especially that feeding the Islamist cause. At the same time, the West has to consider whether support for Turkey affects Russian attitudes on the more vital issue of Russian-Western relations.

Perhaps the greatest policy interest for the Caspian states is to secure oil income soon. There is a real danger that low oil prices and stagnant oil demand—whether due to world recession or to environmental restrictions—will erase the profitability of Caspian oil development. To confront this risk, Caspian governments could adopt one of two major strategies: either help hold down costs or get oil companies to commit so much that they are locked in. The first approach would argue for making do with existing transport facilities by debottlenecking, e.g., expanding capacity of pipelines with extra pumping stations and chemical additives to cut resistance. In this context, it would be quite attractive to swap oil with Iran; Caspian oil fields are closer to Iran's major

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