A dangerous oil game in the Caspian

Jun 22, 2001 02:00 AM

At the turn of the 20th century, J. D. Rockefeller made the Standard Oil fortune in the waters at the southern end of the Caspian Sea, near the Caucasian city of Baku. The fierce international competition for those riches was described as the Great Game.
A century later, after the collapse of the Soviet Union, this term has been revived to describe the renewed struggle among multinational corporations and global political powers to control the oil and gas fields of the Caspian region. The stakes are higher than they were for Rockefeller because of the discovery of oil fields in Kazakhstan at the northern end of the Caspian, and natural gas to the east in Turkmenistan.
Russia and the Western powers are operating in the region on an increasingly competitive basis, on the assumption that Caspian development is a zero-sum game. They are building military alliances with local governments and engaging in exercises with local troops. In the United States, the competitive outlook is intensified by a consideration of petroleum products as a national security issue.
Around the Caspian, however, this approach contributes to local political instability, diminishes regional security, heightens the risk for investments in the region and reduces opportunities for effective extraction of Caspian resources.

The Great Game metaphor has become a misleading, possibly dangerous, anachronism. It is dangerous because while it is appropriate to the keen sense of geopolitical competition in the region, it invites participants to forget that most parts of the region either are currently scenes of conflict or are only a few steps away from ignition. Heightened international competition will certainly produce sparks and further conflagrations would be costly for everyone. It is no longer possible to treat the locals as pawns in a game, so it is impossible to separate the extraction of energy resources from local economic development and political stability.
The combination of energy extraction with development and stability appears to be the strategy of the Russian government in the sleepy Caspian seaport of Mahachkala, in the Russian republic of Dagestan. It appears that Moscow is determined to transform Mahachkala into a major oil and gas terminal. It has completed reconstruction of the petroleum pipeline from Baku to the Russian Black Sea port of Novorossiisk, bypassing Chechnya through Dagestani territory.
The pipeline now includes a 17 km link to Mahachkala's seaport, which has permitted officials in Russia's Transneft oil organization to urge Western oil executives to transfer Turkmen and Kazakh crude through Mahachkala's facilities.

There appear to be at least three related reasons for Moscow's interest in Mahachkala's increasing hydrocarbon traffic.
First, it is clear that Moscow wants to support the Dagestani economy, and thereby contribute to the Republic's political stability. Budgetary transfers from Moscow to Mahachkala have increased six fold in the last two years.
Second, Moscow has now recognized that Dagestan is the key to its presence in the North Caucasus.
Third, this presence is particularly important to Moscow because Dagestan, on the Western shore of the Caspian, has historically been the point of north-south connection in the region. If Moscow is to maintain its presence in the southern Caspian-Caucasus region, it must maintain a vital presence in Dagestan.

If these considerations are the basis of Moscow's strategy in the Caucasus then that strategy makes sense in terms of the challenge posed by Caspian hydrocarbon development. Among hydrocarbon basins the Caspian is uniquely landlocked. From the Caspian Sea to Western industrial centres, all routes for hydrocarbon transport run through the Caucasus.
It will be more difficult for the West to get anything into or out of the Caspian basin if there are political problems in the Caucasus, and there will be political problems in this impoverished region unless hydrocarbon extraction results in local economic development.
An alternative to the Great Game would emphasize local stability, giving greater attention to local cultures, problems and politics, with international cooperation toward broad-based economic development. Only through attention to regional stability will the players succeed in the extraction of Caspian resources.

The writer, an assistant professor at Southern Illinois University, contributed this comment.

Source: The International Herald Tribune
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