Politics of Oil Lead to Unusual Central Asia Alliances

By Neela Banerjee with Sabrina Tavernise N. Y. Times News Service | THE JOURNAL RECORD, December 18, 2001 | Go to article overview

Politics of Oil Lead to Unusual Central Asia Alliances


Neela Banerjee with Sabrina Tavernise N. Y. Times News Service, THE JOURNAL RECORD


There is no oil in Afghanistan, but there are oil politics, and Washington is subtly tending to them, using the promise of energy investments in Central Asia to nurture a budding set of political alliances in the region with Russia, Kazakhstan and, to some extent, Uzbekistan.

Since Sept. 11, the United States has lauded the region as a stable oil supplier, in a tacit comparison to the Persian Gulf states that have been viewed lately as less cooperative. The State Department is exploring the potential for post-Taliban energy projects in the region, which has more than 6 percent of the world's proven oil reserves and almost 40 percent of its gas.

The government cannot compel investment, but it can clear the path of diplomatic and bureaucratic obstacles. Western oil companies say warming relations with regional powers could yield small openings. Better ties between Russia and the United States, for example, have accelerated a thaw that began more than a year ago over pipeline routes from the Caspian Sea to the West.

"The sharp edges are off that discussion, and things are seen as less of a threat," said Martijn Minderhoud, a senior regional vice president for Royal Dutch/Shell.

But any pay off remains distant. The entrenched problems that hobbled oil investment in Russia and Central Asia before September still loom. Oil companies and regional experts wonder whether significant new oil and gas reservoirs will be opened to foreign investment, whether onerous laws and tax codes will be reworked, and whether persistent corruption can be damped.

"This is a period of reassessments among oil companies, and a time of cautious optimism," said Scott Horton, a partner at the law firm Patterson, Belknap Webb & Tyler in Manhattan. "But all have been badly burned in the former Soviet Union before."

Skeptics, especially in the Islamic world, contend that oil interests lie at the heart of the West's war in Afghanistan. "The Pipeline Of Greed," read the headline of a recent article in the Pakistani newspaper Dawn about the American-led attacks on the Taliban and al-Qaida. "The war on terrorism may well be a war for resources."

The Bush administration says that its war goals have been clear - - and do not involve oil. There is no such hidden agenda," said an administration official. "Operation Enduring Freedom is meant to get rid of terrorism in Afghanistan, Central Asia and the surrounding areas."

Still, the administration lately has discreetly overlooked the pitfalls of doing business in the former Soviet Union. During a visit a week ago to Kazakhstan, Secretary of State Colin Powell said he was "particularly impressed" with the money that American oil companies were investing there. He estimated that $200 billion could flow into Kazakhstan over the next 5 to 10 years.

Two weeks earlier, on a visit to Russia, Energy Secretary Spencer Abraham championed the need for increased foreign investment in its oil industry. On the same trip, David O'Reilly, the chairman of ChevronTexaco, said his company was reviewing possible projects in the Russian Far East.

Pipelines are the clearest realm of progress. For years the United States and Russia clashed over routes to transport oil and gas from the Caspian Sea region to lucrative Western markets -- and the political and economic power that control of those networks conferred.

Russia wanted pipelines built on its territory, and some were. The United States backed a pipeline from Baku, Azerbaijan, to the Turkish Mediterranean port of Ceyhan, bypassing Russia entirely. The pipeline consortium is led by BP and represented by Baker & Botts, the law firm of James A. Baker III, a Bush family confidant and former secretary of state.

Over the last year, Russia's opposition to that route has subsided, and in October, the oil ministry invited BP to make a presentation about it to domestic oil companies. …

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