Central Asia: Energy pipelines or economic lifelines?

by Imran Khan

“I hold the Fates bound fast in iron chains,
And with my hand turn Fortune's wheel about.”
Christopher Marlowe, “Tamburlaine the Great”.

Central Asia has been a recurring subject in geopolitics, as Eurasia has been in geostrategy and energy in geoeconomics. Hardly any other region of the world has been, both overly and overtly, fascinated by cartographers, geographers, geopolitics and geologists alike as Central Asia.
It is known to sages of ages, of diverging orientations, of intuitions, of circumstances and civilisations differently for atypical and odd reasons.

Ibni Bttuta, the 14th century Moroccan traveller-writer, called it Turkestan (the land of Turks) and Rudyard Kipling, the British imperial great gamer-and-epic-writer, dubbed it the “Back of Beyond”.
To the Greeks and the Romans, it itches the images of classical “Transoxiana” (world beyond the Oxus River or Amudarya); to the English Elizabethans, it reminds of “the Tartary”; to the Arabs, it fascinates “the Mavarayunneher” (the land between two rivers-the Syrdaya and the Amudarya).
To the enlightened Occident it was known as the barbaric Orient. The Soviets called it “the Middle Asia” and the Eurasianists, such as Mackinder and Brzezinski, lineated it “the Central Eurasia”.

Central Asia -- Kazakhstan, Uzbekistan, Turkmenistan, Tajikistan and Kyrgyzstan -- stepped into a new prominence at the turn of the 20th century with the dissolution of the Soviet Union (the eclipse). The Union's cataclysmic disintegration was epoch-making, ridding Central Asia of 125 years of decadence, dislocation, dormancy and dissipation, ushering in the age of renaissance.
Central Asia is fast regaining its geopolitical vitality. The geopolitical revitalization is essentially, or eminently, substantiated by energy -- crude oil and natural gas -- and the corresponding geopolitics.

Beside geopolitical and geostrategic importance, the current preoccupation with Central Asia is due to the energy wealth and the export pipelines to offset the geostatic hydrocarbons. Pipelines are the geopolitical anchors. The ongoing geopolitiking over pipelines, allegorized as the “New Great Game”, has been subject to or of a wide-ranging scholastic, generalist and analytical debate -- peculiar in itself though part of the world's energy geopolitics.
This newsletter hails pipelines as geoeconomic lifelines. The energy potential and promise of Central Asia, the pipeline spree and the stumbling blocks to routing new pipelines are other sections of the newsletter.

The El Dorado: Promise and potential
More or less for 70-years, Central Asia had been the preservative of the Soviet Union. The end of the Soviet Union was epochal, ushering in an aura of sovereignty and an age of independence. Simultaneously, a new great rush occurred in the world's energy circles as the El Dorado was relieved of the Soviet's monopoly.
Central Asia, as a part of the Caspian Sea geological basin, emerged as a new hydrocarbon-zone on the Earth's geological map. Central Asian energy is a geopolitical as well as a geological phantasmagoria, eluding accurate and acceptable estimates.

Estimation of the El Dorado, particularly oil, is replete with contradictions. Time and again, its potency was gauged anew and the promise was projected afresh. So came, in response, the bold rejections and odd reductions. Consequently, two schools of thoughts developed -- the projectionism and the reductionism. The projectionists gauged the reserves bottom-up.
Oil reserves were tallied from 200-bbl to 50-bbl. Daniel Yergin puts the reserves 50-bbl at the bottom. John Maresca, the Vice President of the American company Unocal, reports total proven oil reserves of Central Asia and Azerbaijan above 60-bbl. Strobe Talbott, the US Assistant Secretary of State, projects the oil potential as far as 200-bbl.

The projectionists boldly called Central Asia “the second Persian Gulf” and the “new North Sea”. The Central Asian Republics (CARs) were oddly dubbed the “new Kuwaits” of the “new sheikdoms,” reminiscent of Saudi Arabia and Kuwait. Central Asia has been endorsed as an alternative to the turbulent Persian Gulf and Middle East and a thorn in the flesh of the petroleum producers' cartel OPEC, which supplies 65 % of global oil. It was also levelled with and hailed as a replacement of and an alternative to the North Sea – which had already peaked.
The projectionism is attributable, foremost, to the global obsession with petroleum, the burgeoning petroleum demand outpacing supply and the skyrocketing prices.

Also important is the El Dorado's virginity. The reservoir awaits full exploration and optimal exploitation. The energy industry and infrastructure, both down-and up-streams, is under-developed. Monopoly concentration, presently state-centred, is not strangled yet, offering scope for business, space for investment and margins for profits.
The potential is hyped politically too. CARs have bloated the promise to attract foreign investment. America -- under the spectre of energy shortfalls -- boasted the reserves, diverting attention from the Persian Gulf and Middle East to Central Asia and the Caspian. It is commercially over-blown as well to sweep Western companies into the region to develop the El Dorado, out-competing the Russian, Iranian and Chinese contemporaries.

Finally, energy estimations and economics are driven by the irrational, having a general tendency to overestimate the unknown and to underestimate the known. Amy Jaffe and Robert Manning, commenting on the El Dorado, underline “unrealistic expectations”, “over emphasis” and “sudden opening up” the root causes of the projectionists' conceited fixation.
Projectionism was short-lived, fascination with Central Asian-Caspian energy evaporated. By 1995-96, rejectionism outmoded projectionism.

Overstatement gave way to understatement. The Central Asian “munificent bonanza” was dubbed a “mirage”, “a chimera”, or “a myth”. The Centre for Strategic and International Studies (CSIS) asserts the El Dorado as “the potential, rather than the reality”.
The reductionists scaled the El Dorado Top-Down, reducing the reserves. At the top, the crude oil is estimated at 40-bbl, sliding down to 10-bbl. The reductionists' highest premium put the reserves at 4 % of the world. Amy and Robert slate the reserves (Central Asia and Caucasus together) somewhere between 30-bbl and 15-bbl -- less than 3 % of the world. Manik Talwani cuts the “proven and condensate reserves” down to 15-bbl from 31-bbl-that is “one twentieth” of the Middle East and “one fifth” of the Eastern Europe and Russia.

The downward trend can be ascribed to the higher costs of production and transportation, thus reducing the netbacks, and the digging of dry holes in the region. The autocratic and corrupt regimes and power politics is nonetheless factor. The absence of legal umbrellas, the unsettled legal status of the Caspian Sea, inter-states ethnic- and territorial disputes and politically instability risk payoffs on investments.
Russia, Saudi Arabia and other Persian Gulf states are proactive in downgrading the El Dorado, fearing loss of primacy in the global energy order. The top-down trajectory is based on proven reserves only ignoring the probable and possible.

Natural gas however is lesser controversial. Estimates of gas swing between 232 tcf and 484-tcf that is almost 7 % of the world. Manik Talwani's approximation is 360-tcf, putting it parallel to the African 344-tcf and is “one-seventh” of the Middle East and the Eastern Europe.
The energy calculus of Central Asia has been revised, more pragmatically and realistically, beyond reductionism and below projectionism, differentiating between proved, probable and possible reserves. The Central Asian crude oil is thus projected over 100-bbl up to 116-bbl, technologically recoverable and commercially exploitable. Total natural gas was numerated at 484-tcf, approximately.

Kazakhstan and Turkmenistan posses the lion's shares of the regional reserves, Uzbekistan holdings are reasonable -- Tajikistan and Kyrgyzstan are commercially nominal. Kazakhstan is regional leader in oil possession and production, while Turkmenistan is one of the world's top four producers, together with Russia, Iran and Saudi Arabia.
Kazakhstan's total potential oil reserves are 80-bbl. Between 10 and 18-bbl are proven reserves. Possible reserves are 92-bbl. Total potential gas reserves of Kazakhstan are 153-tcf: proven, 65-tcf and possible, 88-tcf. Western and southern regions of Kazakhstan are energy bearing areas. Shubarkuduk, Emba, Tengiz (ChevronTengiz), Aktobe, Kumkol, Kashagan, Karachaganak and Korolev are the major deposits.

Turkmenistan's natural gas reserves potential is 230-tcf: proven, 71-101-tcf and possible, 159-tcf. Proven oil reserves are approximately 2-bbl and possible reserves are 38-bbl. Sander Hansen's estimations are 0.6-bbl for proven and 80-bbl for possible. Ashgabat postulates undiscovered reserves as far as 22-bbl of oil and 168-tcf of gas in the Caspian Basin of Turkmenistan.
Major oil and gas fields of Turkmenistan are Daulatabad, Tek-Tek, Cheleken and Nebit Dag.

Uzbekistan ranks third in Central Asia. Oil potential is nominal and natural gas is reasonable. Proven oil reserves are less-than 1-bbl and possible reserves are 2-bbl. Total oil deposits, however, are estimated at 32-bbl. Total estimated gas is 101-tcf with 66.2-tcf proven and 35-tcf possible. Sander Hansen sums up proven oil reserves of 0.6-bbl and proven gas reserves of 66-tcf.
Gazli, Shurtan and Bukhoro are gas fields. The Fergana valley, Qarshi and Termiz are oil extraction sites.

Globally, Central Asia is a marginal producer, complementing the majors -- Saudi Arabia, Iran, Venezuela, Russia, Iraq and the larger Middle East and Persian Gulf -- filling loopholes in international oil supply lines. Central Asia is “a pivot” to the global energy order, for discernable reasons. Being the Central Eurasia, the region is at the crossroads of Eurasia -- the future energy demand hub -- with China, France, Germany, Japan as the net importers, India soon to become one.
Commensurate is that Kazakhstan and Turkmenistan are the net exporters (former in oil and later in gas). Domestic energy demand is low. So they have the potential to satiate the boom in the energy demand in South and Southeast Asia. Diversification of sources of energy and decrease in reliability on the unruly Persian Gulf is yet another important aspect. The future of the region is in natural gas. The word energy economy is shifting form oil to gas as lead energy.

Understood also is the rising petroleum demand, so is interdependency and prices. The El Dorado, munificent or not, is critical to the global energy stability and security. Central Asia is not the second Persian Gulf but perhaps the new North Sea.
The El Dorado is almost stranded. Geographically, Central Asia is landlocked, devoid of open seashores and international waterways. It has an export impetrative -- the pipelines. Existing pipeline networks are north-or-westbound toward Russia, except the southbound Turkmenistan-Iran gas-swapping pipeline. Thereby, Russian monopolies, Gazprom and Rosneft, have an ironclad cobweb of pipelines, exacting a heavy price and enforcing discriminatory tariffs.

The terms of deals are biased -- that is, “partly barter, partly cash”. Nonetheless the thresholds are the cash-starved CIS countries. Russia, Ukraine and Georgia all owe areas to CARs.
Pipeline pluralism is the key to unlock the orphaned reserves. Therefore, as soon as, the eclipse occurred, states, multinational companies and consortia – retrospectively -- proposed and modulated export itinerates, culminating in a pipeline-mania.

The pipeline mania
The pipelines mania traces back to 1878, when Vladimir Shukhov of the Bari's Construction Company constructed the Balakhany-Cherny-Gorod pipeline for the Noble Brothers. Dmitry Mendelejev pontificated the idea, describing pipelines as the most feasible and reliable bases of energy industry development.
With pipelines, Baku and Grozny became the first “black gold cities” of the world. However, pipeline construction in Central Asia began as late as the early 1960s as Kazakh oil and Turkmen gas production leaped.

A swathe of intertwining pipelines was laid down by the Soviets -- the first generation pipelines. The crude oil main transmission system is the Central Asia Russia oil pipeline: Samara-Druzhba, Uzen-Guriev-Kujbyshev, Uzen-Shevchenko, Almetjevsk-Gorky and Gorky-Yaroslavl-Kirishi pipelines. The gas network is called the “Central-Asia-Centre (CAC)-Russia” pipeline, comprising of four parallel lines that extend over 13,750 km.
Beyneu, in northwest Kazakhstan, is the junction: Two branches are going northwest to Moscow and two are proceeding westward via the Volga River to the North Caucasus-Moscow transmission system.
The second gas pipeline network is the Bukhara-Ural that takes gas from northern Turkmenistan along the Caspian shore to the Urals over 2,300 km. This line also branches into Bashkiria and Tatarstan.

Capacity of these networks is limited. The pipelines are inefficient and corroded. Wasteful too. Leakages are frequent. Pipeline piracy is rampant. The transit nations are siphoning off oil and gas from the pipes. Russia and the CARs are refurbishing pipes to expand throughput and reduce losses, juxtaposing routing of new pipelines, thereby not letting the stranglehold loose.
Anyhow, in 1997, Iran and Turkmenistan commissioned the 200-km Korpedzhe-Kurt Kui gas pipeline. Since Ashgabat is swapping gas to Iran at Kurt Kui, Kazakhstan too is trading oil at Neka, Iran's Caspian Sea port, though barges. The swap measure is limited. The bottleneck is on the Iranian front as northern Iran is poorly networked. Capacity of the pipeline is has a ceiling of 500,000 bpd.

Whatever happened, the marble of the Russian monopoly was cracked. The cracks were slight. Moscow consolidated the cobweb of the monopoly by stretching out a new 510-km pipeline from Tengiz, western Kazakhstan, to Novorossiysk, the Black Sea, in 2001.
The Caspian Pipeline Consortium (CPC) built the itinerary, costing $ 2.6-bn. It was a “half state, half private” joint venture of Russia (24 %), Kazakhstan (17 %), Oman (9 %), Chevron (15 %) and others (35 %). Its capacity is 600,000 bpd, curving up to 750,000 bpd by 2010. It was, including Iranian, the second-generation pipelines.

Of the second-generation pipelines, the Baku-Tbilisi-Ceyhan oil pipeline is a third one. Construction is underway, the first two sections -- Azeri (468 km) and Georgian (225 km) -- are completed and the Turkish section (1,037 km) is under construction. America is backing the pipeline; British Petroleum (BP) is financing it.
The consortium is persuading Kazakhstan to streamline the Kashagan gusher to the pipeline. BTC is the product of “the Deal of the Century” of 1994 in Ankara. It has been acclaimed as the main export pipeline and dubbed as an alternate pipeline, skirting both Russia and Iran.

Another export alternative is offing, which is the Kazakh-China oil pipeline -- mystified as the 21st century Silk Route. The “mammoth” 3,000-km pipeline integrates Kazakh oil fields, across the Xinjiang with Chinese, even farther with the Far Eastern markets. The Atyrau-Kenkiyak pipeline is the western section of the line i.e. 448 km and Atasau-Alataw is the eastern section i.e. 998 km.
The western section is operational since March 2003. The eastern part will be completed by December 2005. Work on the Chinese portion however is in progress since early 1999. The Chinese National Petroleum Company (CNPC) and KazMunaiGaz are overseeing the project.

Beside the aforementioned landmarks, a third generation of pipelines is awaiting implementation. The third generation pipelines are mostly for gas. The south-eastern Turkmenistan-Iran-Turkey, trans-Caspian Turkmenistan-Azerbaijan-Georgia-Turkey, eastern Turkmenistan-Uzbekistan-Kyrgyzstan-Kazakhstan-China and trans-Afghan Turkmenistan-Afghanistan-Pakistan (TAP) are third generation pipelines.
The trans-Afghan pipeline, however, has been revisited in May 2002 in Ashgabat, at the trilateral summit between Pakistan, Afghanistan and Turkmenistan. An agreement on the project was signed. The Steering Committee was constituted. The Asian Development Bank joined as a development partner.

The prototype of the route was charted out as early as “the eclipse”. Bridas envisioned the route; Unocal adopted it. Unocal also proposed a parallel north-south oil pipeline from Kazakhstan to Gwadar or possibly India. Kazakhstan has recently come up with an Iranian version of the oil pipeline during the Shanghai Cooperation Organisation (SCO) summit in Astana. Pakistan, Iran and India participated as observers.
Pre-feasibility studies on the TAP gas pipeline have been completed. Logistics and economics of the pipeline are sound. Actualization, however, is a long way to come, haunted by the phantom of insecurity.

Feasibility of the pipeline hinges on security and safety. The generationpipelines, like TAP, have bee dubbed either phantoms or dreams, because a mosaic of complexities have fraught the pipelines ranging from politics to political geography to geopolitics, from economic to economics of pipelines to geoeconomics. Some of these nags and necks are tractable, others intractable, some are malleable, others overriding.
Numerous decks have to be cleared to boon on the El Dorado. Piping energy is not a stand-alone undertaking. Routing pipes involve varying degrees of grey areas and are susceptible to interlocking factors and forces. Everything else affects, some time detrimental too, the feasibility of pipelines.

Geopolitics, grafts, gloams, glitches
Polities constitute the bottom lines of the grey area and politics form the tip of the hierarchy gloams. The couple remains viral and vibrant at all stages -- from pipeline visions to pipe vaults.
The “Stans” are the reincarnation of “the Oriental despotism”, where dictatorship is monstrous and democracy a misnomer. Where tyranny runs riot and liberty lives in absentia. Where political partying is a crime and opposition is an outlaw. Being the leftovers of the socialist-communist-Stalinist legacies, the Stans' leaderships have established cults of personalities -- Saparmurat Niyazov, Nursultan Nazarbayev and Islam Karimov. Leadership succession is mummified, impending political crisis.

The polities are legal-constitutional black holes. Legal regimes are transient and shifty. The presidents flaunt and alter rules of law by decrees. Commercial transactions are insecure and least guaranteed, legally.
The climate for foreign investment is unfriendly and irregular, which is the product of the leadership idiosyncrasies. The presidents stamp foreign investments and reject tagged investments, approve of joint ventures and disapprove of independent projects. They arbitrarily, without intimation, cancel projects and freeze assets.

Martha Brill Olcott's explication of Turkmenistan's foreign investment regime is impressive:
"No decision on foreign investment can be confirmed without his approval, and the allocation of foreign exchange credits requires his personal consent. Niyazov, who is said to take advice from a changing coterie of foreign businessmen, is generally distrustful of international economic advice.”
“Regardless of legal provisions to the contrary, the government of Turkmenistan insists on maintaining majority stakes and both managerial and operational control in all major projects."

So, the legal void and the constitutional destitute prohibit FDI having a deserting influence on the energy sector. The shady constitutions and the shoddy laws restrain investment and technology, requisites for the development of oil and gas industries. Kickbacks and illegal appropriations are restraining investors to stake capital -- it should not be a problem as these are the nuances of the global energy business.
Central Asia is thus the wasteland of investment. Still, worrying is the mounting instability.

Central Asia is a crucible. The Stans brim with stagnant poverty, widespread deprivation, rampant corruption and social stratification. National wealth is concentrated in vicious circles of presidential coterie or dispensed for building palaces and villas, monuments and statutes. Living conditions are pathetic. Inflations are hiking and incomes are sliding. Human resources are scarce and development is shackled. Illiteracy, unemployment and malnutrition are widespread.
Social disenchantment and populace hatred is seething. In retrospect, colour revolutions, regime changes and mass uprisings are recurrent. Thereby, encouraging aggressive nationalism, ethnic separatism and religious fundamentalism, are putting solidarity and sovereignty of the Stans' in jeopardy.

Central Asia is an ethnic cauldron. The ghost of balkanization is in the air. Ethnic cleansing is surging and civil wars are overhanging the horizons. Uncertainty looms large. CARs are hence on verges of the states' failures. Stability, sustainability and credibility are the quintessential of investments, promising profits on assets staked. In such circumstances, it is unlikely that MNCs or consortia will hook their capital and technology to pipeline projects.
The inter-states disputes over borders, oil and gas reserves and water streams are other risk premiums. Upon this, Brzezinski dubbed Central Asia the “arc of crises”. But the arc extends further from core to periphery -- the outer Eurasia. The security regime is precarious and conditions are tumultuous, culminating in the insecurity syndrome.

Eurasia, particularly the former Soviet space, is replete with flashpoints. The pathways of pipelines are troubled as “warring nations hold keys”. The exterior, made up of Iran, Afghanistan, Pakistan, China, Azerbaijan, Armenia, Georgia, Turkey, is instable too. Civil war is raging in Afghanistan; the Kurdish liberation war is blazing in Turkey; Uighur’s independence struggle is unflagging in the Chinese Turkestan (Xinjiang); Baluchs are warring the Federal government for greater provincial autonomy; Azerbaijan and Armenia are wrangling over the Nagorno-Karabakh ethnic enclave; Ajaria and Ossetia are troubling Georgia.
The breakaways are targeting energy installations as scapegoats to garner political clout. The instability contagion is spreading in and out. In such a scenario, pipelines become the fault-lines.
Jaffe and Manning explain: "Smouldering conflicts stand in the way of foreign direct investment, hinder the development of normal patterns of regional cooperation, while reinforcing historic animosities, restive hinterlands."

Pipelines are the dictates of geography -- that is pivot. To reach out for markets or oceans, the pipelines must transit territories of other states -- Afghanistan, Iran, Georgia, Azerbaijan, Russia, Armenia and Pakistan. The intermediaries are the overland bridges. Pipelines thus become the geopolitical fault lines. For pipelines, besides transit rents and revenues, bestow the transit nations with geopolitical leverages.
Choosing a route is therefore subject to geopolitical considerations. Thence, constituting a new geopolitical paradigm – “the new Great Game”, a watchword of the geopolitics of pipelines, that symbolizes the hardbound political struggle.

Pipelines lineate a new geopolitical landscape, analogized as “the grand chessboard”. The gaming or geopolitiking over pipelines is residual as are also geography, and asymmetrical as interests. Rules are changing, players are ranging. Nation-states and national companies oppose pipelines advantageous to enemies and enemies of friends and propose pipelines beneficial to friends and friends of friends. So geopolitics is the most defining factor in piping energy.
For instance, Tehran conceived a gas pipeline from Central Asia to Europe via Turkey. The pipeline was logistically most feasible and financially attractive. The National Petroleum Company of China, French Total and American Halliburton affirmed that.

The pipeline became the geopolitical nightmare of America. The project was stripped of capital through sanctions -- ILSA. On the other hand, the most expensive and insecure Baku-Tbilisi-Ceyhan pipeline was contrived encapsulating the Caucasian and Turkish war zones. The debacle of the former and the success of the later is the manifestation of geopolitics. The pipeline would have given Iran geopolitical ascendancy, neutralizing Washington's double containment of Tehran.
Evident is geopolitics in the CPC pipeline. American companies allied with Russia in the consortium to solicit Russian fears of encirclement by America and to drain out Russian opposition to BTC by sharing the energy windfalls.

Yet another dictate of geography, geoeconomics lurks in the background. The geoeconomics of pipelines, being the coupling of geography and economics, is very complex though outsighted. The economics of pipelines encapsulate geology of fields, topography of routes, scale of economies, producer's supply potential and consumer's absorptioncapacity of all factors.
Rasizade explains: "The economic feasibility of a pipeline hinges upon a number of factors, some technical, some political, some related to energy markets, some tied to the geology of the source, and some, lastly, ineluctably related to geography... Demand for gas at the outlet and supply of gas at the inlet must match. Both ends are important. A large line is uneconomical if half empty."

Pipeline economics can be categorized in four spheres: the wellheads, the transits, the ramp ups and the thresholds.
The wellhead economics are based on the volume of reserves in the well earmarked for a pipeline, and production cost. High volume of reserves and low costs of production boast viability and broaden margins profits for stakeholders over the project lifetime and compensate for high costs in other spheres. Otherwise the balance tends to swing to the other side narrowing the probability and margins of paybacks on investment.
The economics of transits comprises topography anddistance. Each additional mile is tyrannical and each river or mountain crossing is detrimental. On the other hand, each reducing mile is virtuous and each river or mountain skirting is favouring.

This is particularly crucial for gas pipelines as the economic reach of gas is distinctly limited. The ramp ups economics is the throughput or payload capacity of the pipeline. It is also called the “economies of scale”, that is, the total volume of gas or oil and the scale and speed of flow -- full or half, slow or fast.
Finally, the scale of demand of consumers and “credit worthiness” of customers are the aspects of the threshold economics. Simply demand must match supply and supply shall be returned either in “net cash”, “part cash, part barter” or as per agreement.

In the geoeconomics of pipelines, competition is also crippling on prospects of a route. Every route is hobbled by a number of alternatives. Each state is vying to become a transit country. So are the energy starved states, striving to diversify and stabilise sources of supplies.
The producer states aspire a pipeline that can hone their political prestige and accrue commercial revenues. Turkmenistan, for instance, has three alternatives for gas export -- the trans-Caspian, the trans-Afghanistan and the trans-Iran. Western countries and companies have their own priorities.

The geopolitics of pipelines is simply a volatile mix -- a mix of both transient and residual factors. Routing pipeline is therefore an extremely painstaking and slow process. Where economics are promising, geopolitics become a stumbling block and where geopolitics is conducive, domestic politics huddles.
Economics however will prevail over other considerations. For, pipelines are the end-to-end oil and gas conveyance channels as well as the economic lifelines of Central Asian, Eurasian and the world's corporate energy economy.

The analogy -- Energy pipelines, economic lifelines
Pipelines are end-to-end energy conveyance channels, promising both inward and outward pay offs -- from one end to another and to the intermediate. Like pipelines promise the currency of economy to the producing states, they also project the lifeblood (energy) of the economy to the consuming states.
Inwardly, pipelines are a means to monetize on the geopolitically stranded and economically orphaned El Dorado. Central Asia had inherited economic specialisation of the Soviet Union economy. CARs were heightened raw-producers, referred to as cotton, mineral or hydel-monoculture. Stans in the Union economy were preserved as cotton orchards, wheat baskets, coal mines, oil pits or gas wells. A vicious, distorting circle of production and distribution was artificially ringed. Raw materials were supplied to Russian factories, processed there and exported to Central Asia as raw material.

CARs were skewed in the web of export-import pipelines. They were dependent on the Union for foodstuffs, clothes, medicines and fuels and gases. Independence became a buck fever for the Stans. Energy and the export pipelines are panaceas to the malady.
Being specialized economies, the lion's shares of the Stans' incomes are based on oil and gas or cotton exports. Optimal exploitation of the El Dorado thus promises emancipation and diversification of the economies. Unless and until the Stans optimally cash on energy, economic prosperity and financial restructuring is a mission impossible. Albeit new pipelines are built, optimal utilization is a chimera. Energy export pipelines are therefore the economic lifelines.

Multiplicity of pipelines is a sin qua none. Pipelines are the export conduits, plurality of outlets means expansion in exports. Greater exports demand strong feedback that is production. Energy production has always been low. The sliding gas production curve of Turkmenistan depicts this: 93 bn cm in 1990, being the third producer after Russia and Algeria, 3.7 % of the world; 84-bn cm in 1991; 65-bn cm in 1993, 35-bn cm in 1996.
This was checkmated either by limited export-lines(Russian pipeline outlets, Iranian barge-pipeline swaps and Chinese pipeline-railway trunks), saturated or incapacity markets, outmoded infrastructure or sheer unavailability of modern, efficient technology. New export conduits are imminent as well as urgent for Central Asia to produce according to their actual capacity or potential and to achieve production targets. So pipelines are a means of transforming potential into assets.

The plurality of pipelines will determine development of the Central Asian energy industry and efficiency of infrastructure. Pipelines funnel the requisite capital and technology. Irrespective of the precarious scenario, ExxonMobil, ChevronTexaco, British Petroleum and others have invested above $ 30-bn in exploration and exportation projects.
New technology means new discoveries, new discoveries means a hike in reserve trajectories; a hike in reserves potential means promise of supply, availability of supplies means new pipelines. Even pipedreams will become realities, givingCentral Asia a reprieve from the Russian monopolies, granting autonomy and authority over resources, having positive implications for the global energy economy. So new pipelines will buck the economies.

For CARs, pipelines are the roadmaps of economic development, eventually viable polities. Pipelines are key to monetize the partly stranded, partly substantiated El Dorado. The outflow of oil and gas via pipelines ensures inflow of exchange revenues. With these revenues, the “Stans” can stabilise their foreign exchanges, resurrect and restructure financial and economic regimes, service foreign and domestic debts, implement economic development plans, revert the inflation and raise per capita incomes, invest in human resources development and can improve living standards.
Pipelines are the pathways leading the Stans' to prosperity and political stability -- as civic prosperity will drain out communal alienations and social ailments. This is possible only through constant and consistent exports backed with sufficient production.

Outwardly, pipelines are the stable and secure networks of energy transmission. China, Pakistan, India, Iran, Turkey and the European Union all get oil and gas through pipelines -- some operative, other offing. China had become the net importer and had outscored Japan in 2003 as a second frontline energy consumer after America. China, therefore, is prospecting in Central Asia, exploring fields, developing wells, transacting oil through railways, accruing stakes in consortia and above all is routing a pipeline.
Iran is accessing Central Asian fields to provide fuels and gas to northern Iran, which is poorly integrated in national supply grids, by swapping domestic supply in exchange. Russia is manoeuvring to command the flow lines so it can earn rents and can supplement local production with cheap Central Asian oil and gas.

Building pipelines means to simply construct permanent, stable and long-term means of supplies -- not to mention diversification. The continuation of flow consequently is a consistency in growth and progression along the development graph.
Consistency of prices is another feature of piping energy. Per letter or barrel prices of oil or gas unanimously agreed upon by the stakeholders and parties -- piped energy is devoid of price shocks. Stability of prices and flow are the most promising fundamentals rather yardsticks to economic boom – as the price hikes or interruptions cause economic bust if not doom.

Pipelines are therefore the lifelines. To cut these lines is to cut the blood vessels of the growing economies, which mean death. Pipelines, thereupon, integrate and intermingle resource economies end-to-end with scale economies. These produce a web of interdependencies -- the producer, the intermediary and the consumer.
Pipelines also cluster investors, operators and lobbies together in the interdependency cycle. Hence the survival of one is the survival of another. This can be classified as the scale economy of the servitudes. Economic growth at one end means flow of capital at the other. Conversely, persistence in flow means consistence in economic progression. In the middle, the transit nation receives revenues and infrastructure. To rupture or disband the web is to cut its economic lines.

Midway, pipelines are the financial lifelines of the transit territories. Transit states are paid rents and tariffs in return for using territory, or damaging some of its cultural or archaeological assets, or degradation of its soil, or causing other environmental contaminations. The rents are predetermined. Other corollaries of a pipeline transit for the transit state are employment opportunities, infrastructure and communication development and modernisation, expanding trade ties and boasting trade revenues, even strengthening of security regime.
The economics and commercial pay offs of the pipelines are global in scale despite the fact that these are regional networks of transportation. MNCs get hands to new projects -- pipeline construction, exploration, drilling, exportation, surveys and so on. Some companies sell their technology, some services, still others stake their capital. The technology, services and capital they invest in the pipeline and related projects promise returns of investment and, more importantly, expand their influence and strengthen their command and control over the global economy.

The new pipelines and the ensuing optimization and modernisation of the Central Asian energy industry will act as an equalizer for the world's razor-edged transient energy equation. The proposition is simple: a new source of energy supply in any region or country means diversification of sources of supply in other regions or countries.
Likewise, satiation of demand anywhere means relaxation of supply pressure else. A supposition. The piping of 3.2-mm bpd Kazakh oil to China means ease of use of the same volume. It also means Japanese and Koreans access to the Far Eastern gas and oil and that of Europeans to Russian and Eastern European.

Likewise, provision of Turkmen gas to South Asia, whose demands are outscoring domestic consumption, through the trans-Afghan pipeline ensures availability of the Persian Gulf and Middle Eastern oil to other end-users like Japan and the West, Latin America's to the US and Myanmar's energy to China and other ASEAN nations. This will also enable India and Pakistan to shift from petroleum to gas as power generation fuel.
The pipelines hold in reserve a splendour for a regional trade boom, not only in energy but in other sectors as well. Free trade zones, natural economic territories, economic circles will be establish both as measures of safety and stability and as means of flourishing trade along the pipelines. Movements of goods, services and capital will become frequent, frequent and indiscriminate. Instance is the Chinese and Kazakh declaration of intent to form a free-trade zone, the Northwest Economic Circle, stretching over a 200-hectare border area (China, 30 and Kazakhstan, 70) between Yili Kazak(Xinjiang) and Alma-Ata (Kazakhstan).

The pipelines will also resurrect the Silk Route of the 21st Century, snaking across the Eurasia-South, Southeast, Central Asia and Eastern and Central Europe. Trade will blossom on overland railways and roads and in airways. Border security and trade lines will be pacified as Chengaiz Khan once did. The road on which the process of globalization kicked off will climax -- the world will witness the real globalization, not the mythical.
Pipelines constitute a growth league of underdeveloped, developing and developed economies. Consequently, Central Asia will integrate in Europe and Asia, Europe will shake hand with Asia, Asia with Oceania and farther with Atlantica, the Heartland will hug the Rimland and the Easter Hemisphere will embrace the Western Hemisphere. Simply building of new pipelines will add a prime to the globalization, once interrupted by the emergence of navies.

In addition, a pipeline has several advantages over other means of transportation in terms of technology and finances. These are efficient too with least chances of damages in comparison with tankers, trunks and trucks; if something ever happens, it is easy to restore. Pipelines are environment friendly, causing less deterioration, as the chances of spill is reduced further by building underground storage dumps.
In addition, pipelines are only a means available to deliver gas from fields to industries. Other means of gas transportation are required from a field to a terminal to the threshold, and requires peculiar installation like freezing and defreezing plants. Therefore gas liquefication is very costly and technologically not viable in Eurasia yet. Oil, on the other hand, can be trucked, piped and conveyed through railways -- but these means are very slow, time consuming, costly, tedious and accidents are frequent.

Conclusion -- Recommendations and remarks
Energy pipelines are, retrospectively, the economic lifelines of Eurasia in particular and the world in general. The pipeline mania of Central Asia is a complicated and unfortunate one. Piping energy involves an intriguing, intermittent geopolitiking.
Pipelines are the fault lines of geopolitics, flaring up pipeline-, energy- or resource wars, fanning ethnic rivalries, territorial disputes, breakaway nationalism, opaque historical rivalries, religious fundamentalism and terrorism. The geopolitics of pipelines has augmented problems into flashpoints that beset the Stans eventually becoming scourges on the development.

Against this backdrop, given the consequent economic value, commercial worth, high prospects of returns on investment, conveyance of energy and trade boom, pipelines would eventually bust out of the ring of geopolitics. The geopolitical pipedreams would ultimately become economic realities. The logic is that despite the high-risk premium, investment has been flowing into and companies have been staking in mining, extraction, exportation and other projects in Central Asia.
Pipelines have been built oninsecure turf such as the BTC, the CPC and others. However its safety and maintenance become problematic.

Secondly, demand determines supply. The towering global energy demand and corresponding tightening global oil market and skyrocketing prices would dictate construction of the new pipelines.
Thirdly, the world energy economy is deeming a shift form oil to gas as a “fuel of choice”, as was from coal to oil. Natural gas is clean burning and less pollutant, which abounds in Central Asia, particularly in Turkmenistan. So gas pipelines, sooner not later, will become operational.
Thirdly, politics cannot nag pipelines for very long and would give way to economic pressures and fears of economic downturn.

For Central Asian economies to flourish, Eurasian economies to sustain growth and global economies to maintain balance in energy demand and supply, the pipelines shall rout out willy-nilly, no matter how hardbound is geopolitics, within the postulated timeframe (2010). A favoured, grand strategy needs to be charted out that is based on economic and commercial realities, not merely geopolitical ones.
As Rasizade explicates: "Pipeline projects require an incremental approach grounded in commercial realities, not perceived geopolitical imperatives. Oil can only be pumped when adequate volumes exist, allowing for reasonable export costs."

The favoured strategy should be a composite, tackling pipeline routing and related issues as wholesome, not in piecemeal. Whether it is technical or technological, geopolitical or geographical, economical or commercial, political or geopolitical, all shall constitute bits and parts of a grand plan.
Pipelines are constructed in partnership, geographically, politically, commercially and economically and cannot be routed in isolation by a single state or a company. A partnership between producer and consumer and the transit state, if there is one. A partnership between multinational and national companies that is a consortium, which builds the pipeline.

The grand strategy shall not be a grand geopolitical design that excludes some nations and includes others. The marbles cannot be safely taken away unilaterally; the windfalls have to be shared.
Competition may have a hint of cooperation. Otherwise pipelines are pipedreams -- rather geopolitical nightmares, seducing “wars on resources” or “wars on riches”. Geopolitics of pipelines, absent of cooperation, is retrogressive. Hence pipelines shall not be upheld as cogs in state machinery of national grandeur and prowess. Pipelines shall be viewed an economic and commercial infrastructure, primarily, and geopolitical prefecture, secondarily, as economics cannot be separated from politics. Pipelines therefore shall be regarded as means of integration, not instruments of containment or encirclement.

Replicating pipelines, the grand strategy, shall horizontally integrate the segments and sections of pipelines. Thereby, considering sensitivities and promoting interests of all involved, from producer to consumer to investors. A strategy that multiplies social and commercial yields, reduces scope for exploitation of the market power, eliminates cross-subsidies and avoids the loss of control sometimes associated with highly integrated firms.
Likewise, vertical integration or monopoly is to be dismantled to assure non-discriminatory access to pipelines, reduced supply uncertainty and lower transaction costs.

The grand strategy may also involve the intergovernmental, multinational, regional and international organisation and institutions to harness these trans-border transportation networks. Therefore the frameworks of the ECO, CIS, SCO, NATO, ASEAN, EU, OSCE and others can be utilized as platforms for agreements on pipeline routes and conducive geopolitical regimes and resources of ADB, EBRD, IMF, WB, WTO can be marshalled to construct these pipelines. These institutions nonetheless can be effective in resolving the intra-regional, inter-states disputes and in pacifying the region.
The grand strategy should alsovitalize the Energy Charter Treaty of 1994 and can cover up the legal and constitutional black hole, providing sufficient guarantee on investment and returns. Promisingly, the Stans are signatories of the charter that provide for freedom of energy transit through pipelines and grids. Besides, the Stans can be forced to bring requisite reforms in the legal frameworks.

The grand strategy should also include a package of reforms for the Stans. The Stans that have rarely privatized their economies or liberalized their markets can be compelled to restructure their economies on the back of these pipelines. So are political reformations. The republics are to be pressed for democratizations and political pluralism, bringing an end to tyranny and personality cults.
Social reforms are also necessary to develop good citizenry and healthy societies. The civil and participatory culture should be encouraged. Reconstruction and resurrection of the failed states, like Afghanistan, too is important.

The favoured, grand pipeline strategy can only end the stalemate, created by the geopolitical gaming. So can pipelines. For only pipelines can unlock the geostatic El Dorado and can replenish and modernise the age-old, underdeveloped energy industry and infrastructure.
Under the export-import imperative, pipelines also promise steady and stable supplies to the energy deficit burgeoning economies of Eurasia. The pipelines also dig a financial niche for transit nations. The energy pipelines are therefore the economic lifelines.

Bibliography -- Further readings
-- Afzal, Amina, “The Caspian Region: Competition for Pipeline Routes”,Strategic Studies, vol. 24, no. 3, Autumn 2004, 87-111 pp.
-- Arvanitopoulos, Constantine, “The Geopolitics of Oil in Central Asia”, Thesis, Winter-1998 http://www.hri.org/MFA/thesis/winter98/geopolitics.html
-- Brezezinski, Zbigniew, The Grand Chessboard: American Primacy and its Geostrategic Imperatives, BasicBooks, New York, 1997, pp. 223
-- Capisani, Giampaolo R., The Handbook of Central Asia: A Comprehensive Survey of the New Republics, I.B. Taurus, New York. 2000, 264 pp. (xxii)
Hill, Fiona, “Pipelines in the Caspian: Catalyst or Cure-all?”, Georgetown Journal of International Affairs, Winter/Spring 2004, 17-25 pp.
-- Forsythe, Rosemarie, The Politics of Oil in the Caucasus and Central Asia, Adelphi Paper, Oxford University Press, May 1996, 64 pp.
-- Grau, Lester W., “Hydrocarbons and a New Strategic Region: The Caspian Sea and Central Asia,” Global Security, Foreign Military Studies Office, Fort Leavenworth, KS. http://www.globalsecurity.org/military/library/report/2001/hydrocarbons.htm
-- Gurgen, Emine, “Central Asia: Achievements and Prospects,” Finance and Development (F&D), vol. 37, no. 3, International Monetary Fund (IMF), September 2000. http://www.imf.org/external/pubs/ft/fandd/2000/09/gurgen.htm
-- Hansen, Sander, Pipeline Politics; The Struggle for control of the Eurasian Energy Resources, CIEP 02/2003, Clingendael International Energy Programme, The Clingendael Institute, Hague, 2003
-- Imran Khan, South Asia: Peace in Pipeline, Thinking-East, issue 2, March/April 2005. http://www.thinking-east.net/site/index.php?option=com_content&task=view&id=99
-- Jaffe, Amy Myers and Robert A. Manning, The Myth of the Caspian “Great Game”: The Real Geopolitics of Energy, Caspian Sea Library, The Council on Foreign Relations, 1999. It is originally published in Survival, International Institute for Strategic Studies (IISS), winter 1998-1999.
-- Kalicki, Jan H., “Caspian Energy at the Crossroads”, Foreign Affairs, September-October 2001. http://resources.net.az/d/cog1101.htm#08. The essay was accessed at Azerbaijan Internet Links.
-- Kalyuzhnova, Yelena and Dov Lynch, The Euro-Asian World: A Period of Transition, The Centre of Euro-Asian Studies, Macmillan Press Ltd., UK, 2000, 219 pp (xxii)
-- Karagiannis, Emmanuel, Energy and Security in the Caucasus, RoutledgeCurzon, New York, 2001, p. 2.
-- Krause, Reinhardt, “Caspian Oil Fields Rise in Significance with Gulf Volatility”, Investor's Business Daily (IBD), November 8, 2001. The interview was accessed at Azerbaijan Internet Link http://resources.net.az/d/cog1101.htm#08
-- Olcott, Martha Brill, “International Gas Trade in Central Asia: Turkmenistan, Iran, Russia and Afghanistan”, Baker Institute for Public Policy Working Paper, no. 28, Rice University, Houston, May 2004
-- Rashid, Ahmed, The Resurgence of Central Asia: Islam or Nationalism? Oxford University Press, Karachi, 1994, 278 pp (x)
-- Rashid, Ahmed, Taliban: Islam, Oil and the New Great Game in Central Asia, I.B. Tauris, 2000, 274 pp (xiii)
-- Rasizade, Alec, “The Mythology of the Munificent Caspian Bonanza and Its Concomitant Pipeline Geopolitics”, Comparative Studies of South Asia, Africa and the Middle East, vol. 20, nos. 1 and 2, 2000. 38-152 pp.
-- Ruseckas, Laurents, State of the Field Report: Energy and Politics in Central Asia and the Caucasus, The National Bureau of Asian Research, 1998. http://www.treemedia.com/cfrlibrary/library/geopolitics/ruseckas.html
-- Stauffer, Thomas R., “Caspian Fantasy: The Economics of Political Pipelines”, The Brown Journal of World Affairs, vol. 7, issue 2, Summer-Fall 2000. 63-78 pp.
-- Shaffer, Brenda, “A Caspian Alternative to OPEC”, The Wall Street Journal, A-22, 11 July 2001. The article was accessed at the Azerbaijan Internet Links at http://resources.net.az/d/cog1101.htm#08.
-- Smith, Dianne L., Central Asia: A New Great Game? Strategic Studies Institute (SSI), Washington, June 1996, 40 pp (vii).
-- Soligo, Ronald and Amy Myers Jaffe, Unlocking the Assets: Energy and the Future of Central Asia and the Caucasus, The James Baker III Institute for Public Policy, Rice University, Houston, no. 6, April 1998
-- Talwani, Manik, Andrei Belopolsky and Dianne L. Berry, Geology and Petroleum Potential of Central Asia, The James Baker III Institute for Public policy, Rice University, Houston, 1998. http://bakerinstitute.org/Pubs/studies/gppca/gppca.html#Introduction
-- The Department of International Relations, “Geopolitics of the Silk Road: New Economic and Strategic Opportunities”, Lecture 10, Eurasia, Bond University, Australia, 2002. http://www.international-relations.com/wbeurasia/wblec10.htm
-- The Asian Development Bank (ADB), Central Asia Regional Cooperation (CAREC): Energy, 2005. http://www.adb.org/Carec/energy.asp
-- The Centre for Strategic and International Studies (CSIS), The Geopolitics of Energy in the Former Soviet Union , Washington, DC, February 11, 1999.
-- The United Nations Online Network in Public Administration and finances (UNPAN), Nations in Transit 2003, Freedom House, 2003
-- The US Energy Information Administration (EIA), Caspian Sea Region: Survey of Key Oil and Gas Statistics and Forecasts, December 2004. http://www.eia.doe.gov/emeu/cabs/caspian_balances.htm
-- Vatansever, Adnan, Prospects of Building Trans-Afghan Pipeline and its Implications, PNNL14550, August 31, 2003.
-- Vittachi, Imran, Afghanistan: Pawn in the New Great Game, Berkeley Institute Asia Pacific Project, US. http://journalism.berkeley.edu/projects/asiaproject/vittachi.html
-- Yergin, Daniel and Thane Gustafson, “Evolution of an Oil Rush”, The New York Times, 06 August 1997.

The Caspian Sea Region's oil reserves include those of Russian, Iranian and Azeri sectors of the sea. Russian proven reserves are 0.3, possible 7 and total 7.3 bn barrels; Iranian reserves are 0.1, 15 and 15.1, respectively, and; Azeri proven reserves are 7 (low), 12.5 (high), possible reserves are 32 and total reserves are 39 (low) and 44.5 (high).

Caspian Sea includes Azerbaijan's and Iran’s gas reserves. Proven reserves of Azerbaijan are 30 tcf, possible reserves are 35 tcf and total reserves are 65 tcf. However, total possible reserves of Iran are 11 tcf while proven reserves are not listed. See: EIA, “Survey”.
Source: World Security Network.