Analysis: Energy Geopolitics In The Caspian

RFERL
18 Oct 04

By Houchang Hassan-Yari

Intense competition for unimpeded access to the world’s natural
resources is continuing and is likely to increase, according to the 21
April edition of “Jane’s Foreign Report.” The current unprecedented
surge in fuel prices illustrates the growing need for a greater supply
and consequently demonstrates the volatile nature of the energy
market.

The Caspian Sea could meet some of that demand, because it has
sizeable proven and possible oil and gas reserves (“proven reserves”
are defined as oil and natural-gas deposits that are considered 90
percent probable, and “possible reserves” are defined as deposits that
are considered 50 percent probable). The littoral states of the
Caspian Sea — Russia, Kazakhstan, Turkmenistan, Iran, and Azerbaijan
— collectively have an estimated 10 billion-32 billion barrels of
proven and another 233 billion barrels of possible oil reserves. In
comparison, Saudi Arabia has 261 trillion barrels of oil, while the
United States, China, and India’s proven oil reserves are respectively
22.677 trillion, 18.25 trillion, and 5.371 trillion barrels. The
proven natural-gas reserve of the five Caspian countries is an
estimated 170.4 trillion cubic feet (4.83 trillion cubic meters) while
their possible reserve is 293 trillion cubic feet (8.30 trillion cubic
meters).

Like the Persian Gulf, Nigeria, Venezuela, and other regions rich in
energy resources, the Caspian Sea is becoming a battleground for
states and business entities with competing interests. Eni, BP,
ChevronTexaco, Caltex, LUKoil, and Royal Dutch Shell are the main
companies actively developing Caspian Basin oil and gas as they
continue building pipelines to transport those hydrocarbons to
international markets. The United States, China, Russia, Iran, several
European countries, and to a lesser extent Japan are interested in
exploring and investing in Caspian resources as a supplement to
Persian Gulf supplies.The Persian Gulf countries normally maintain
almost all of the world’s excess oil production capacity.

The situation in the Persian Gulf has increased pressure on Caspian
countries and oil companies to contribute to global oil supplies. The
Persian Gulf contains 715 billion barrels of proven oil reserves,
representing over half (57 percent) of the world’s oil reserves, and
2,462 trillion cubic feet (69.72 trillion cubic meters) of natural gas
reserves (45 percent of the world total), according to the Energy
Information Administration’s “International Energy Outlook 2003.” At
the end of 2003, Persian Gulf countries maintained about 22.9 million
barrels per day of oil production capacity, or 32 percent of the world
total. Perhaps even more significantly, the Persian Gulf countries
normally maintain almost all of the world’s excess oil production
capacity. As of early September, excess world oil production capacity
was only about 0.5-1 million barrels per day, all of which was located
in Saudi Arabia.

Since the demise of the Soviet Union and emergence of independent
states in Central Asia and the Caucasus, a major issue in the Caspian
Basin has been the division of the energy resources that lie beneath
the sea. Other sources of regional tension include the complex
unsettled legal status of the sea; the existence of unresolved
conflicts in Russia, Azerbaijan, and Armenia; terrorism; and
increasing Islamic militancy. The landlocked position of Azerbaijan,
Kazakhstan, and Turkmenistan causes further tension, as all three
countries depend on their neighbors’ good will in order to export
their oil and natural gas to international markets.

In terms of reserves, production, and access to international markets,
Russia and Iran are in better positions than their neighbors. The CIA
“World Factbook 2004” put Russia’s proven oil reserves at 51.22
billion barrels, its proven natural-gas reserves at 47.86 trillion
cubic meters (1 January 2002), and its natural-gas exports at 205.4
billion cubic meters (2001 estimates). It puts Iran’s proven oil
reserves at 94.39 billion barrels (1 January 2002), its proven
natural-gas reserves at 24.8 trillion cubic meters (1 January 2002),
and its natural-gas exports at 110 million cubic meters (2001
estimate).

Regardless of how much oil is produced, there will still be enough
customers. For example, China’s rapid economic growth means the
country’s energy needs are increasing. China already uses a great deal
of foreign energy, and in a decade or so it is expected to be totally
dependent on the Persian Gulf and the Caspian Sea area for its energy
needs. Russia and Kazakhstan are both already eyeing the expanding
Chinese market. The United States, Europe, India, Japan, South Korea,
and many other countries will also be seeking alternative supplies of
oil. Guaranteed access to energy resources is becoming an important
component of foreign policy for these states and is gaining even more
prominence in light of the continuing insurgency in Iraq, as well as
the expanding U.S. presence in the Caspian region at the expense of
Iran, Russia, China, and India.

Caspian Sea Basin energy assets have the potential to significantly
reduce consumers’ reliance on Middle Eastern oil. Yet this raises the
prospect of crises and conflicts that directly involve China, Iran,
Russia, and the United States. The actual production of oil and gas is
not the only potential source of competition between international
actors; for the last decade there have been disputes over the best
routes for pipelines that would transport oil and gas to markets. Iran
promotes itself as the most economical route from Central Asia, while
the United States promotes the export of Caspian oil via Georgia and
Turkey.

(Houchang Hassan-Yari is the head of the Department of Political and
Economic Science at the Royal Military College of Canada.)

From: Emil Lazarian | Ararat NewsPress