Caspian Oil Fuels Competition to Exploit: Azerbaijan Leads Nations Bordering Sea

By Sieff, Martin | The Washington Times (Washington, DC), December 14, 1996 | Go to article overview

Caspian Oil Fuels Competition to Exploit: Azerbaijan Leads Nations Bordering Sea


Sieff, Martin, The Washington Times (Washington, DC)


The Cold War may be over, but Russia and the United States remain fierce rivals as they maneuver for wealth and power in the back yard of the defunct Soviet Union - the new republics around the Caspian Sea.

The offshore oil deposits found by Western oil companies in the Caspian since the collapse of communism are vast. The resources beneath the sea are still largely unexplored by modern geological surveying methods. Western experts believe they may range in size from 40 billion to 200 billion barrels.

Crude oil output in the Caspian region - including western Kazakhstan, western Turkmenistan, southern Russia, Azerbaijan and Georgia - will more than triple to 120 million tons a year by 2010 from 36.9 million in 1995, Nadir Biyikoglu, assistant general manager at Botas Petroleum Pipeline Corp. of Turkey, told Reuters news agency.

Already, U.S. oil companies alone have invested $8 billion to develop the Azerbaijani offshore oil and gas fields.

Far bigger investment is coming.

Gudrat Guliyev, Azerbaijan's minister of foreign economic relations, said Nov. 21 that his government had just signed contracts with the world's leading oil corporations to attract another $14 billion in investments over the next 15 years.

Mr. Guliyev also said Azerbaijan had reached agreement with the world's leading international financial institutions on the opening of an additional credit line of more than $700 million.

"In 1994, the value of foreign investments [in Azerbaijan] amounted to $22 million, but in the first nine months of this year, it grew to $240 million," he said.

In December 1995, the American Petroleum Institute put known world reserves at 1.01 trillion barrels. Of the total, Mideast reserves accounted for 659 billion barrels, or two-thirds. One barrel of oil contains 42 gallons.

"In the long run, the appearance of major oil exports from the Caspian basin will mean a significant increase in available resources on the world market," said oil analyst Pietro Nivola of the Brookings Institution, a Washington-based research and policy group. "It must be seen as part of a massive 30-year trend of discovering and developing major new resources around the world."

"The Caspian reserves are very substantial. They will mean a major increase in world supplies," Mr. Nivola said.

Azerbaijan and Kazakhstan, two oil-rich, predominantly Muslim former Soviet republics, want maximum freedom to forge deals with the United States and other Western nations to export their oil wealth and to develop the resources of the Caspian.

"Azerbaijan and Kazakhstan are taking a common position," said Jayhun Molla-zade, president of the Washington-based U.S.-Azerbaijan Council.

"My estimate is that, in the long term, development and export of the Caspian resources could make some republics bordering on it [such as Azerbaijan] economically independent of Russia," Mr. Nivola said.

But Russia, backed by Iran, wants to keep a large slice of the Caspian oil pie. They are supported by Turkmenistan, which is the world's fifth-largest producer of natural gas and which desperately could use a portion of the Caspian's oil wealth for its own development.

"Russia and Iran are taking pretty much the same line on the Caspian issue," said Mr. Molla-zade. "They both maintain that what is in the middle of the Caspian Sea does not belong solely to the states facing it, but should be divided by all the nations bordering on the [inland] sea."

Azerbaijan, historically fearful of neighboring Iran, repeatedly has accused Tehran of political intrigue and seeking to undermine its stability by fostering Islamic fundamentalism.

In August, Azerbaijan arrested Muslim religious activists with alleged ties to Iranian intelligence.

However, despite the efforts of Moscow and Tehran, Azerbaijan, encouraged by the Clinton administration, has succeeded in maintaining control over its deals with Western companies to develop the oil. …

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