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Re11- Caspian Energy and Transport Issues Expand Into Military-Political Confrontation. Microsoft Word

Re11- Caspian Energy and Transport Issues Expand Into Military-Political Confrontation. Microsoft Word

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Published by: EXTREME1987 on Jan 30, 2010
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Caspian Energy And Transport Issues Expand IntoMilitary-Political Confrontation.
Source: Nezavisimoe Voennoe Obozrenie, May 18, 2007Agency WPSThe Russian Oil and Gas Report (Russia) 23/5/2007The presidents of Russia, Kazakhstan, Turkmenistan, and Uzbekistanhave agreed to build a joint gas pipeline to Europe along the CaspianSea shore. The leaders of Poland, Ukraine, Georgia, Lithuania,and Azerbaijan have attempted to create their own energy alliance,independent of Moscow. These developments have drawn the internationalcommunity's attention to the world's largest lake, which is turninginto a geopolitical apple of discord. New states have been establishedin Central Asia and the South Caucasus; promising hydrocarbon depositshave been discovered; new pipelines are operating; the region has anumber of frozen and active armed conflicts; the United States, NATO,Iran, and Turkey are striving to expand their political, economic, andmilitary hardware influence in a strategically important region. Allthis is intertwined in the Caspian.According to Russian specialists, the West's estimates of the Caspian'sexplored oil and gas reserves exceed the actual data several-fold. Thisprimarily applies to hydrocarbon reserves in Azerbaijan's sector of theCaspian Sea. For example, American estimates of Azerbaijan's energyresources are four times greater than Russia's estimates. The reasonfor the discrepancy is clear. The Caspian countries are exaggeratingtheir reserves in order to attract foreign investors. But this isalso advantageous for Russia's geopolitical rivals, since it enablesthem to influence policy in the Caspian countries.All the same, there is good reason to call the Caspian the secondPersian Gulf. Oil production volumes here are comparable to thecombined output of Iraq and Kuwait, but far smaller than the combinedoutput of OPEC. Caspian production levels are expected to reach 4million barrels a day by 2015. OPEC produced 45 million barrels aday in 2006.Russian companies control 10% of oil production in the Caspian andabout 8% of gas production. The largest oil deposits, and the threelargest oil projects, are in Kazakhstan and Azerbaijan. Westernoil majors have stakes in each of these projects. Turkmenistan'spotential offshore oil reserves in the Caspian Sea have not yet beenexplored, and cannot be developed due to disputes between Turkmenistan,Azerbaijan, and Iran about border demarcation in the southern partof the sea.By 2012, Kazakhstan is expected to take the lead in oil output volumes(about 55%), followed by Azerbaijan with 32%; Russia and Turkmenistanwill produce around 13% between them. It is hardly surprising thatWashington intends to implement the Bush-Nazarbayev Houston initiativeby investing the huge sum of $200 billion in Kazakhstan's raw materialssector over the next decade.For the Caspian region countries, the local oil and gas reservesare strategic riches; for Moscow, they are of interest only at thestrategic level so far. The main consumers of Russian oil and gas are
in Europe, and as yet there are no Caspian hydrocarbons mixed in withthe resources exported to Europe from Eastern Siberia and Russia'sArctic regions. Hence our efforts to build the Baltic Pipeline Systemand expand deliveries in the south - to Turkey and via Bulgaria andGreece. But the Caspian Shore Pipeline construction agreement isalready inspiring hope that the Kremlin will pay more attention tothe Caspian.Russia could not only maintain its positions here, but even enhancethem. The Kremlin's strategic interest in developing new fieldscoincides with national interests in developing stable, friendlyrelations with states in the South Caucasus (Azerbaijan, Armenia,Georgia) and Central Asia (Kazakhstan and Turkmenistan), as wellas Iran.At the end of the 20th Century, the Caspian map changed from twostates - the USSR and Iran - to five independent countries: Russia,Kazakhstan, Turkmenistan, Azerbaijan, and Iran. This confronted themall with the problem of defining the status of the lake-sea. Untilthe Soviet Union's disintegration, the legal regimen here was basedon two treaties between the USSR and Iran (the RSFSR-Persia treaty of1921 and the USSR-Iran Trade and Navigation treaty of 1940). Thesetreaties defined the Caspian as off limits to the vessels of otherstates. Negotiations aimed at changing this regimen began in the 1990s,but they are still at an impasse.To date, a sea floor demarcation agreement has been signed bythree countries: Russia, Kazakhstan, and Azerbaijan. The trilateralagreement concluded by these countries in May 2003 divided 64% ofthe Caspian Sea floor: 27% to Kazakhstan, 19% to Russia, and 18%to Azerbaijan. The northern agreement participants are prepared togive Iran no more than what it had before the USSR broke up: 14% ofthe shelf. But Iran wants 20%, and insists on moving the border 80kilometers to the north of the former Soviet border. Then Iran couldclaim the Alov, Araz, and Sharg oil fields, which an internationalconsortium is developing by agreement with Azerbaijan.Iran's stance has been supported by Turkmenistan, which was ignored bythe three northern coalition countries when they signed their separateagreement. Turkmenistan is challenging Azerbaijan's rights to theSharg, Chirag, and Azeri fields. At the same time, Turkmenistan is alsoapprehensive about Iran's claims to its gas reserves. It has taken aprovisional stance, supporting Iran, but seeking to establish a 15-milecoastal zone under national sovereignty and a 35-mile fishing zone.Although Azerbaijan's position on sea floor demarcation is close to thepositions of Russia and Kazakhstan, it still proposes to distinguishbetween water and airspace, which should be entirely under nationalsovereignty. Baku also maintains that laying pipelines along the seafloor should be the sole prerogative of the country that owns theterritory crossed by the pipeline.Iran is proposing to allocate 20% of the Caspian to each of theregion's five countries, then using the sea in common, on thecondominium basis, and establishing an Organization of Caspian ShoreStates to develop the sea's resources and distribute profits equally.The Caspian demarcation problem now depends on whether Azerbaijanand Iran can find a common language with Turkmenistan's new leader,Gurbanguly Berdymukhammedov, and whether he will accept a compromisewith them, and what kind of terms he would require to sign a
demarcation agreement.Development of the Caspian's energy capacities and energy resourceexports depends on more than developing oil and gas fields andestablishing the sea borders. The associated problems of hydrocarbontransport and security have become particularly significant.Caspian oil is exported via several pipelines. The Baku-Tbilisi-Ceyhansystem has a capacity of over a million barrels a day; accordingto some Russian experts, this pipeline owes its existence topolitical rather than economic considerations, and the outlook forit is uncertain. The same applies to the Northern oil pipeline(Baku-Novorossiysk) and the Western oil pipeline (Baku-Supsa),with throughput capacities of 100,000 and 115,000 barrels a dayrespectively. Kazakhstan and Azerbaijan recently signed an agreementto transport 10 million tons (733 million barrels) of Kazakhstan's oilto Baku by barge each year. There is also the Russian Atyrau-Samarapipeline, starting in Kazakhstan and ending on the Volga. Itsthroughput capacity is 300,000 barrels a day, but Russia has promisedto increase this to 500,000 barrels.A Kazakh-Chinese pipeline is being built to deliver oil to China; itsfirst part links Kazakhstan's Aktube oil fields with the Atyptau oilcenter, already complete. The second part, still under construction,will run from Atasu (north-western Kazakhstan) to Alashkanou (Xinjiang,China) and cost around $850 million. Initial throughput will be200,000 barrels a day, with a maximum of 400,000 barrels.In December 2002, the governments of Turkmenistan, Afghanistan,and Pakistan signed a memorandum of intent to build a Central Asianpipeline that will supply oil from Uzbekistan and Turkmenistan toGvadar, Pakistan's port on the Arabian Sea. This project has beenpostponed due to continuing instability in Afghanistan.Overall, most pipeline systems being built from the Caspian eitherbypass Russia or run south outside Russia. So it is no coincidencethat the agreement reached by Russia, Turkmenistan, Kazakhstan andUzbekistan - on building a Caspian shore pipeline system leading toEurope via Russia - has caused such a furor abroad. Efforts to cutoff Russia from the Caspian Sea's hydrocarbon riches have failed. Andmany do not like this at all.Presumably, the foreign policy of the United States in the Caspianregion over the next few years will be aimed at achieving severalobjectives, including creating conditions that prevent Russia fromcontrolling and directing the development of various processes to thedetriment of Washington's interests. Those interests include ensuringguaranteed access for American corporations to the Caspian region'sfuel and energy resources and other resources - especially in light ofuncertainty about the stability of Middle East hydrocarbon resources.The United States will strive to take advantage of the favorablemilitary-political conjuncture shaping up in the course of theanti-terrorist operation in Afghanistan, and to expand its presencein Central Asia, and to secure additional defense infrastructurefacilities for deploying missile defense elements in Azerbaijan andGeorgia. In addition to the United States, Britain, and Turkey, someother countries are also developing an increasingly visible presencein the Caspian region: Germany, China, Saudi Arabia, the UnitedArab Emirates, and Japan. It should also be noted that internationalcorporations control 27% of oil reserves and 40% of gas reserves in

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