CASPIAN UNCERTAINTIES:REGIONAL RIVALRIES AND PIPELINES

Year 1998, Volume: 3 Issue: 1, 0 - 0, 01.03.1998

Bülent Gökay

Abstract

In the next century, the Caspian Sea and the regions adjoining it could become the largest supplier of oil and gas to Asia and Europe. The oil potential of this colossal territorial region is so significant that the analytical centres of a series of the world’s large oil refining companies consider it to be a more long-term than the unstable Persian Gulf. According to different evaluations, oil reserves under the depths of the Caspian amount to more than 13 billion tonnes.l With the collapse of the Soviet Union, the Caspian-Caucasus region, which was previously politically and commercially inaccessible to the western oil industry, is now opening up to foreign investment. Current industry estimates put Caspian oil reserves at up to 200 billion barrels, more than any region outside the Persian Gulf. Such reserves put the region on a par with Saudi Arabia, and it is expected that the Caspian will become the second most important source of oil for the West in the next century. Since 1991, the oil rush to the Caspian has been underway. Oil giants from around the world are racing one another in efforts to explore and develop the hydrocarbon resources of the Caspian Sea region. The quest for Caspian oil is often cast as a replay of the 19th century ‘Great Game’, in which the British and Russian empires duelled for influence in the region. More than anything, Caspian oil is putting surrounding impoverished countries and their neighbours at the heart of the world’s geostrategic map after seven decades of isolating Soviet rule

References

• l Kalandarov, Kamilzhan, Nezavisimaya Gazeta, 4 June, 1997, p.5.
• 2 Bagirov, Sabit, ‘Azerbaijani Oil: Glimpses of A Long History’, Perceptions, June-August, 1996.
• 3 Ibid., p.42.
• 4 Ibid., p.35.
• 5 President Aliev tried to develop better relations with Iran as well, particularly in the fields of oil production and marketing. On 12 November, 1994, five of SOCAR’s 20% shares in AIOC were transferred to Iran. Owing to objections from the US government, however, this transfer was revoked.
• 6 This contract provides shares to following companies: Pennzoil (30%), Italian AGIP (30%), Lukoil (32%), and SOCAR (7.5%). See Interfax, Moscow, in English, 9 June, 1995.
• 7 The Shah Deniz consortium is divided between the BP-Staatoil Alliance, which holds a 51% stake, Russia's Lukoil (10%), France's Elf Aquitaine (10%), Iran's OIEC (10%), Azerbaijan's SOCAR (10%) and Turkish Petroleum 9%. Declared reserves in Shah Deniz are 230 million tonnes. See MEED, 24 May, 1996, p.14; and Azerbaijan Daily Deport, February 1998.
• 8 The contract provides shares for Amoco (30%), Unocal (25.5%), Itochu (20%), SOCAR (20%) and Saudi Arabia’s Delta (4.5%). See OMRI Daily Digest, 16 December, 1996.
• 9 Participants are French Elf-Aquitaine (75%), and SOCAR (25%). See Reuters, Paris, 13 January, 1997.
• 10 Bol’shaya Sovetskaya Entsiklopediya, Vol. 43, 2nd edition, to press 13 August, 1956, p.443.
• ll Blank, Stephen, ‘Russia’s Real Drive to the South’, Orbis, Vol. 39, Summer 1995, pp. 369-370.
• 12 Kalandarov, Kamilzhan, Nezavisimaya Gazeta, 4 June 1997, p.5.
• 13 Blank, Stephen, ‘Russia’s Real Drive to the South’, Orbis, Vol. 39, Summer 1995, p. 370.
• 14 As regards the matter of security in the Caspian basin, Iran attaches ‘great importance to the establishment, to the safeguarding and continuation of peace and stability in the region’. (The Iranian Journal of International Affairs, Vol. VII, no. 4, Winter 1996, p.845.) Iran has good reason for wishing to tread carefully. Instability could spill over and spread from the Caucasus into Iran. 15 Middle East Economic Digest, 20 October, 1995, p.31.
• 16 Ibid.,8 July, 1994, p.33.
• 17 In future, the interests of Azerbaijan and Kazakhstan might be quite different. Azerbaijan is more interested in exporting to the Western markets. Kazakhstan is, however, further away from Western markets, but has a potential link to the new expanding markets of East Asia through China. This region is the most rapidly growing sector in the world as regards energy demands. It seems quite logical that Kazakhstan could easily choose to look East rather than West.
• 18 Turkish Probe, 21 July, 1995, p.9.
• 19 Middle East Economic Digest, 3 June, 1994, p.24.
• 20 The Deputy Under-secretary of the Turkish Foreign Ministry said in November1997 that Turkey would reconsider the Straits Regulations in a way that would ease the tension between Russia and Turkey. (Hürriyet, 20 November, 1997.)
• 21 Pipeline News, No.37, 19 November, 1996, pp.12-13.
• 22 Pipeline News, No.37, 19 November, l996, p.9. At least eight routes are being seriously considered at the moment. Some would lead to markets in Asia, such as proposed new pipelines from Kazakhstan to northern China, and from Turkmenistan through Afghanistan to Pakistan.
• 23 In December, 1997, the International Monetary Fund (IMF) approved loans totaling $64 million to support economic reforms in Azerbaijan. The fund said inflation had fallen shaply and growth is resuming. As the oil sector continues to develop, the IMF said the country’s growth rate would surge from 7% in 1998 to 9.6% in the year 2000. (Reuters, Washington, 23 December, 1997.)
• 24 In late October 1996, Tehran and Almaty agreed to swap oil. Accordingly, the Kazakhs will ship the crude oil via the Caspian to the Iranian harbours of Bandar Anzali and Neka to be delivered through the existing pipeline network to the Tebriz and Tehran refineries. In return, Iran will export the same amount from its own production through its Persian Gulf terminals. The US administration announced that Tengizchevroil’s swap deal with Iran did not fall within the purview of the 1996 Law. (Middle East Economic Digest, l November, 1996, p. 38; New Europe, 17-23 November, 1996, p.l.)
• 25 US Energy Secretary Federico Pena reiterated the US commitment to multiple pipelines. (Voice of America, 21 November, 1997)
• 26 Reuters, 16 January, 1998. On 31 January, 1998, Heidar Aliev stated that ‘an improvement in US-Iranian relations can contribute to peace and stability in the Caucasus’. (RFE/RL Newsline, 5 February, 1998)