The energy web
The Caspian Basin geopolitics may prove as fraught as the Gulf's
Australian Financial Review, 24 November 2001

21
Perspective
Copyright of John Fairfax Group Pty Ltd

Nick HORDERN

Since September 11, world dependence on Gulf oil has become a matter of anxiety. The Caspian Basin has huge reserves but the geopolitics may prove as fraught as the Gulf's.

"Kick their ass and take their Gas,'' urged the website of the US Army's 173rd Airborne Brigade in the wake of September 11, showing a map with Afghanistan renamed "Texaco'', Iraq "Chevron'', Pakistan "Exxon'' and Iran "New Texas''.

The paratroopers' choice of energy security as America's chief goal in the region was spot on, but the civilians toned it down a bit.

"It is with pride that I say that the United States will not be deterred from its policy of seeking to develop Caspian energy,'' said US Ambassador Steve Mann, special adviser to Colin Powell on Caspian Energy Diplomacy, at a recent oil industry conference in Ashgabat, the capital of Turkmenistan.

"The message I bring you after September 11 is one of determination and continuity. We will move as strongly as we can to help the nations of the Caspian region develop their resources and transport them to world markets,'' Mann said.

The war in Afghanistan is on the fringes of the Caspian Basin's oil and gas reserves, whose development Moscow, Washington and regional powers such as Iran and Azerbaijan have been contesting since the collapse of the Soviet Union. And the war threatens to disrupt Persian Gulf oil supplies should Saudi Arabia's royal family split over Osama bin Laden.

But even without the war in Afghanistan, America's increasing dependence on imported oil makes it a hostage to Gulf oil, and a partial answer is the development of oil provinces elsewhere.

The Caspian Basin is one alternative, as are West Africa and the Gulf of Mexico, but none of these even approach the Persian Gulf in size. Caspian reserves are of the same order as the North Sea or the US only a fraction of those of Saudi Arabia, which alone has one-quarter of the world's oil, or of Iran, Iraq, Kuwait or the United Arab Emirates. The Gulf will maintain this dominance, so Western economies trying to lessen their dependence on it look favourably on alternatives such as Caspian oil.

US persistence in developing Caspian oil is also a measure of American concern over the Gulf's political stability particularly that of the Saudi monarchy. The fear is that bin Laden will galvanise hostility among the sprawling royal family against its leaders.

As regional expert Robert Fisk of The Independent put it, "the danger comes from within the royal family, from the disaffected royal princes who regard bin Laden as an inspiration rather than a State enemy, from the senior Muslim scholars who hear in his words the authentic voice of conservative Wahhabi Sunni Islam rather than the effete and corrupt edicts of King Fahd.'' How worried is the Saudi regime? Worried enough, it seems, to take the unusual step of buying a 12-page glossy advertisement in the current Economist a eulogy on King Fahd, with testimonials from Baroness Thatcher and former presidents Jimmy Carter and George Bush and a reassuring theme of stability and sound management.

But according to a recent article by Seymour Hersh, King Fahd has in fact been "incapacitated since suffering a severe stroke in late 1995. Fahd is being kept on the throne, [US intelligence telephone] intercepts indicate, because of a bitter family power struggle. Fahd's nominal successor is Crown Prince Abdullah, his half-brother, who is to some extent the de facto ruler,'' Hersh said in The New Yorker. "But there is infighting about money'' so much so "the only reason Fahd is being kept alive is so Abdullah can't become king,'' Hersh quoted a former White House adviser saying.

How great is the threat to Saudi stability and Gulf oil supplies?

One Canberra expert with long Arab experience believes the Saudi monarchy can muddle through. He argues that while Hersh's description of a riven monarchy is true, it has been true on and off for decades and yet the regime is still there, if increasingly discredited. But will bin Laden be the straw that breaks the camel's back?

Much has been made, for example, of the fact that more than half of the September 11 hijackers were Saudi, suggesting internal opposition is at boiling point. But the large numbers of Saudis in Al Qaeda abroad, the Canberra expert argues, highlights the fact the most violent, organised opposition to the monarchy is now outside the kingdom.

Inside the kingdom, popular resentment may seethe against royal corruption, against the presence in Saudi Arabia of US forces and US support for Israel, but "you probably don't have a lot of people with hundreds of kilos of explosives in a shed waiting to blow up an oilfield,'' he said.

If so, this is largely because the royal tactic of carrot and stick, of buying off and cracking down on internal opposition, has worked at least up until now. For decades the regime has used lavish public employment to divert internal dissent, but this line of the monarchy's defences is under strain. The BBC recently reported that only two-thirds of this year's 100,000 Saudi job entrants will find employment.

Taking all this together, there is good reason for the West to seek alternatives to the Gulf as a source of oil. And there is also recognition in Washington that America has other long-term interests in the Caspian Basin besides oil, such as stabilising the region to prevent it becoming a nursery of bin Ladens.

"If we do not assist those [in the Caucasus and Central Asia] who want to move westward, we empower the factions coming in from countries which support terrorist activities,'' US Senator Sam Brownback said on October 26. He was speaking as Congress lifted decade-old sanctions against Azerbaijan in return for its support for Washington in the War on Terror. But as these sanctions on Azerbaijan imposed after a war with Armenia over the disputed enclave of Nagorno-Karabakh show, the geopolitics of the Caspian region have their own pitfalls.

The development of Caspian oil has been planned for some time. In 1994 the Azerbaijan International Operating Company, a consortium led by BP Amoco, concluded the $US11 billion "Deal of the Century'' with Azerbaijan to develop its Caspian Sea fields. But the Caspian region is fraught with political risk. Turkmenistan, where Ambassador Mann spoke, is ruled by the dictator Saparmurad Niazov, whose personality cult is so extreme one regional expert described the country which has more gas than Indonesia or Malaysia as "North Korea with money''.

The seabed itself is disputed. Before the collapse of the Soviet Union there were only two Caspian littoral states: Iran and the USSR. Now there are five: Iran, Azerbaijan, Russia, Kazakhstan and Turkmenistan. Russia and Iran are disputing ownership of offshore Caspian reserves with Kazakhstan and Azerbaijan On July 23, Iran used warships and military aircraft to confront two Azeri oil exploration ships chartered by BP Amoco an escalation bringing a rebuke from Washington.

But extracting Caspian oil from this geopolitical morass is only half the battle. The other is to transport it to world markets, and it is precisely for control over the export of Caspian oil that Moscow, Washington and the regional heavyweights have been fighting for a decade.

To the north, Caspian oil and gas can go through Russian pipelines to European markets but the Central Asian republics, the 'Stans, and Azerbaijan, bent on maintaining their political distance from Moscow, don't want to give the Kremlin the control over their economies this Russian solution would entail.

Then there are the plans to pipe gas from Turkmenistan and oil from Kazakhstan south through Afghanistan to Pakistan. As well, Tehran points out, Iran is a natural conduit for Caspian oil; it has much of the infrastructure already in place, but American sanctions and the security imperative to avoid the Gulf region preclude US backing of this logical solution.

Then there is China. Beijing's plan to build a 3,200km, $US2.4billion pipeline from Kazakhstan 's western oil region of Aktobe to Urumqi in Xinjiang has run into trouble. In theory China is a large potential market for the region's petroleum, but the Kazakhstan experience suggests this energy corridor may be some time in coming.

So if Caspian oil isn't going north, south or east, it can go west and this is Washington's preferred option: an oil pipeline running from the Azerbaijan capital of Baku through Georgia to the Turkish port of Ceyhan on the Mediterranean. This is the pipeline that Ambassador Mann says Washington is determined to bring about.

But if US determination to build this Baku-Ceyhan line is spurred by worries over Saudi stability, its success will be determined by the health of relations between Washington and Moscow, currently glowing in the wake of the recent Bush-Putin summit. Have the two struck a deal on respective influence in the Caspian Basin? And does it include the Baku-Ceyhan line?

Certainly Moscow's support for Washington in the war on terror has borne fruit. On November 15 the Russian military announced it had killed 376 Chechen fighters in the previous four weeks. Russia is carrying on its war against Chechnya with a free hand with no western complaints about human rights abuses.

Moscow is striving to maintain its position in the "near abroad'', its own arc of instability that takes in the former Soviet republics of Georgia, Armenia and Azerbaijan in the Caucasus and, east across the Caspian Sea, the 'Stans. Some of these, like Tajikistan, are dependent on Russia, others, like Georgia, Azerbaijan and Uzbekistan, have seized the opportunity of the war on terror to increase their independence from Moscow. Russia and Georgia, in fact, have been fighting their own mini-war, by proxy, in the disputed enclave of Abkhazia.

The political and military connection between Georgia, on the Black Sea, and Tajikistan, bordering China, may seem tenuous, but to the Russians the Caucasus and Central Asia are one and the same thing.

Moscow sees the war in Afghanistan as directly linked to the Caucasian conflict which embroils it. Last Sunday, Russian Defence Minister Sergei Ivanov said despite the collapse of the Taliban there were still Islamic "terrorists in northern and southern Afghanistan, as well as outside the country, in the Philippines, in Kosovo and in the Pankissi Gorge''. The Pankissi Gorge is in Georgia, and Chechen fighters whose brothers are fighting with the Taliban in Afghanistan have taken refuge there, to Moscow's fury.

The Caspian oil industry may well get a boost from the war on terror, perhaps as a result of increased co-operation between Washington and Moscow. But Caspian geopolitics may prove as fraught as those of the Gulf. Moscow's legacy of hatred in the region continues to grow.

"Before September 11 the Russian military was more careful, afraid public opinion would discover the murders they committed [in Chechnya],'' said Usam Baysayev, a human rights worker for the Moscow-based Memorial Group, quoted on Radio Free Europe/Radio Liberty.

"Now they just throw people's bodies into the streets in front of everyone. After the attacks in America, they're thinking: "Now the world is on our side and we're not afraid of anyone or anything','' Baysayev said.

Maybe the Caspian will become a nursery of Osama bin Ladens, despite Senator Brownback's good intentions.

Australian Financial Review, 24 November 2001