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February 2009
Every American president since 1992 has claimedthat engaging the Caspian states is a strategic pri-ority or the United States. The region is hometo vast unexploited oil and gas reserves and is animportant staging area or the U.S. military in Aghanistan. Yet Washington’s inuence in theregion is at its lowest ebb in many years.The Obama administration could reverse thistrend with a new approach that accepts Russia’spresence and China’s interest as historical andgeographical givens and advances U.S. strategicobjectives by putting more emphasis on short-and medium-term problem solving in multilateraland bilateral settings and less emphasis on long-term political and economic transormations.
a N Dcon ou.S. Poc n  Cspn ron
Martha brill OlCOtt
Senior Associate, Carneie Endowment or International Peace
ENDOWMENT FOR INTERNATIONAL PEACE
C
 ARNEGIE
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With Washinton’s inuence on the Caspian reion at its lowest ebb in many years, the Obama administration couldreverse this trend with a new approach that accepts Russia’s presence and China’s interest as historical and eoraphicalivens and emphasizes short- and medium-term problem solvin in multilateral and bilateral settins instead o lon-termpolitical and economic transormations.
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The United States can accomplish more in the Caspian reion by ocusin on military reorm and buildin security capacitythan on ormin military alliances.
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The United States should switch rom a multiple pipeline stratey to a policy that advances competition by promotinmarket pricin or enery producers, consumers, and transit states.
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The United States could acilitate the introduction o renewable sources o enery as a stimulus to economic recovery anda source o enhanced social security.
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The United States should develop a nuanced stratey that encouraes political development throuh social andeducational prorams and local capacity buildin.
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The Obama administration should name a hih-level ofcial as a presidential envoy to this reion.
Summar
 
F  O R E I  G N  P O L I  C Y  
f o r  t h e  N e x t  P r e s i d e n t 
Since the mid-1990s, U.S. policy in theCaspian has been primarily shaped by three de-sires: to keep Moscow rom overwhelming its weaker neighbors, to prevent Iran rom gainingany kind o economic or geopolitical advantagein the region, and to slow the pace o China’s eco-nomic penetration. Since 2001, Washington hasalso tried to use the Central Asian states to jump-start Aghanistan’s economic recovery, oten atthe expense o their best economic interests.These policies have done little to advanceU.S. interests in the region. Central Asian andCaucasian leaders requently eel caught in astruggle between great powers. They don’t like what they see as Moscow’s pushiness, but neither
 
2POLICY BRIEF
are they happy with Washington’s emphasis ondemocratic institution building, neither un-derstanding nor trusting the kinds o politicalchanges that the United States would have themmake.Nor do they like the security choices they have been oered. The Collective Security Treaty Organization (Russia, Armenia, Taji-kistan, Kazakhstan, Kyrgyzstan, and, since 2006,Uzbekistan), is more in evidence today thanever beore. Engagement by the United States,European Union (EU), and North AtlanticTreaty Organization (NATO) has enhanced theability o these countries to protect their nationalborders, but has not yet rendered them equal tothe growing tasks they ace. Terrorist groups areas at home in south Asia as they were just beorethe 2001 attack on the World Trade Center, al-though al-Qaeda camps have at least shited east- ward, arther away rom Central Asia’s borders.Drug trafcking is at an all-time high.Regional leaders became even more wary o U.S. engagement ater Georgia’s conict withRussia in August 2008, which many blame on aU.S. policy that gave Georgia’s president MikhailSaakashvili alse expectations that Washington would come to his deense i he sought to reassertcontrol over South Ossetia or Abkhazia.Russia is also using its “success” in Georgia tourther consolidate its domination o Caspianoil and gas transit routes. Moscow is trying toturn Azerbaijan away rom the United States andEU by suggesting that Russia might recognize Azerbaijan’s control o Armenian-occupied terri-tories that adjoin the disputed region o Karabakh.I Russia resolves the conict between Azerbaijanand Armenia, it could integrate Azerbaijan’s gasindustry into its own, gaining even greater con-trol over energy supplies to Europe. That wouldslow even urther the development o new, inde-pendent pipelines or Caspian energy.Collectively, the Caspian region’s gas reservesmay even surpass Russia’s. But ater a decade o U.S. support or pipelines that bypass Russia,the eastern Caspian countries (Kazakhstan andTurkmenistan) still have limited options: eithergo west through Russia or east through China.The new administration must fnd new waysto advance U.S. security interests in the Caspianregion, embracing an approach that providesopportunities or local elites and leaders tobroaden their options by closer engagement with Washington, in ways that do not antagonize ei-ther Russia or China. U.S. policy can do this by ocusing on fve important building blocks.
1) the uNiteD StateS CaN aCCOMPliShMOre by FOCuSiNg ON Military reFOrMaND builDiNg SeCurity CaPaCity thaNON FOrMiNg Military alliaNCeS.
Georgia’s ailed military campaign to recaptureSouth Ossetia ended any realistic chance o bringing that territory, or Abkhazia, back underGeorgian control. Whether or not Russia goadedGeorgia into attacking Tskhinvali, Georgia’s mil-itary overestimated its ability to gain control o this territory and underestimated Russia’s mili-tary response.The crisis underscores the wisdom o NATO’straditional approach to expansion: as a frst con-dition, members must control the territories within their internationally recognized borders.NATO’s priority should be continuing engage-ment with Georgia, Ukraine, and other interestedCommonwealth o Independent States (CIS)states to help them develop the military orces ap-propriate to their individual security needs. This would leave these countries ree to work closely  with NATO and to accept military aid or Russiaor China, hopeully making both those powersless eager to oist unwanted assistance on thesecountries.The United States would beneft rom a reso-lution o the dispute between Azerbaijan and Armenia, and Washington should welcome e-orts by Russia to acilitate this outcome, withinand outside the Organization or Security andCo-operation in Europe’s (OSCE) Minsk group.Resolution o this conict would eliminate oppo-sition by U.S.-based, pro-Armenian groups to o-ers o basing rights by Azerbaijan, which wouldput U.S. orces near Iran’s border and within easy reach o Aghanistan.The eroding security situation in Aghanistan,coupled with uncertainty over Pakistan’s reliabil-ity as an ally, argue or increasing U.S. military cooperation with all interested Caspian states.This includes Washington’s ormer partner,
M b Oco
is a seniorassociate with the Russia andEurasia Proram at the CarneieEndowment or InternationalPeace in Washinton, D.C.Olcott specializes in the problemso transitions in Central Asiaand the Caucasus as well as thesecurity challenes in the Caspianreion more enerally. She hasollowed interethnic relationsin Russia and the states o theormer Soviet Union or morethan 25 years and has traveledextensively in these countries andin South Asia. Her book,
Central  Asia’s Second Chance,
examinesthe economic and political devel-opment o this ethnically diverseand strateically vital reionin the context o the chaninsecurity threats post 9/11.In addition to her work inWashinton, Olcott codirects theCarneie Moscow Center Projecton Reliion, Society, and Securityin the ormer Soviet Union. Sheis
 professor emerita
at ColateUniversity, havin tauht politicalscience there rom 1974 to 2002.Olcott served or fve years asa director o the Central AsianAmerican Enterprise Fund. Priorto her work at the CarneieEndowment, Olcott served asa special consultant to ormersecretary o state LawrenceEaleburer.
 
A NEW DIRECTION FOR U.S. POLICY IN THE CASPIAN REgION3
Uzbekistan, where the United States was evictedrom its airbase as part o the allout romTashkent’s brutal suppression o demonstrationsin Andijan ater local authorities were orcibly ousted rom the center o the city in May 2005.Using commercial convoys to move NATO mili-tary supplies and humanitarian assistance acrossUzbekistan and Tajikistan may appease U.S. crit-ics o military cooperation with nondemocraticstates. But it is slower, ar more costly, and doesnot provide the range o support that NATO’sorces in Aghanistan need.The United States cannot become a party to human rights abuses, but military reorm inUzbekistan is in the U.S. interest, because in-creasing the military’s adherence to the rule o law should make it easier to pursue political re-orm more broadly. Closer U.S. military engage-ment with Tashkent is critical to NATO successin Aghanistan, given the strategic location o that country.
2) the uNiteD StateS ShOulD SwitCh FrOMa MultiPle PiPeliNe Strategy tO a POliCythat aDvaNCeS COMPetitiON by PrOMOt-iNg Market PriCiNg FOr eNergy PrODuC-erS, CONSuMerS, aND traNSit StateS.
For over fteen years, the United States hasexpended enormous diplomatic eort to pressor the development o oil and gas pipelines that would bypass Russia, a policy that has antago-nized Russia without relieving most Caspianenergy producers o their dependence uponRussia to transport their products.The one success o this policy is the open-ing o new pipelines linking Azerbaijan (throughGeorgia) with Turkey’s Mediterranean coastthrough the Baku–Tbilisi–Ceyhan (BTC) oilpipeline and the Baku–Tbilisi–Erzerum (BTE).These are o great beneft to Azerbaijan andprovide transit income to Georgia. But they al-low only limited transit options or Kazakh oil,and no new options or gas rom Kazakhstan orTurkmenistan, both o which are on the easternside o the Caspian Sea. This is also bad newsor southern Europe, which must have the ex-tra volume o gas running through BTE i they are going to build the EU-supported Nabuccopipeline, as U.S. sanctions eectively precludeshipping Turkmen and Kazakh gas overland toTurkey through Iran.The increased bargaining power o the Central Asian states owes more to the entry o China intothe market than to the opening o BTC and BTE.Russia’s oer to pay higher purchase prices orCentral Asian gas in 2008 and 2009 came only ater China signed a long-term purchase agree-ment or Turkmen gas at a base price that washigher than what Moscow was oering.The interruption o gas sales rom Russia toEurope in December 2008 and January 2009 iscertain to revive talk o the need or alternativepipeline routes to Europe. But these alterna-tive routes will be even harder to develop in thisperiod o global recession, when demand is un-certain and low energy prices double and triplethe expected payback period o costly pipelineprojects.Even under the best-case scenarios, newpipelines are still years away. Oil moving romKazakhstan to Azerbaijan by reighter will in-crease to 500,000 barrels a day, but not until the very end o 2012, at the earliest. Small connectorsbetween o-shore gas deposits in the Azerbaijaniand Turkmen portions o the Caspian could movebetween 8 to 10 bcm (billion cubic meters) o gas per year, but not beore 2015. And support-ers o the U.S.–backed TransCaspian (undersea)pipeline admit it would not be likely to becomeoperational until 2018 or 2020.There may be sufcient gas developed in thenext ten to 20 years to fll new alternative routes,but or the moment Russia and China havebought up, and are the only ones able to ship, theexisting supply o gas. Russia plans to use Central Asian gas to meet European demand, and hasmore incentive to do this now that lower oil pricesmake development o Russia’s own felds prohibi-tively expensive. China’s position has also beenenhanced. Beijing has signed a long-term supply agreement with Turkmenistan, which provides animproved price structure or gas delivered to theChinese border through a new 30-40 bcm pipe-line that will pick up additional gas in Uzbekistan
Cn asn nd Ccsn ds qn c n  s n  pos.
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