The Caspian Basin: USA and pipeline politics

Jul 02, 2003 02:00 AM

by Dr Kumar

In an attempt to emphasize how sordid the connection between business and politics can get, some news articles have raked up the issue of links between the Taliban and the US prior to the 9/11 incident, highlighting their joint efforts to access oil and gas supplies from the Caspian Sea region.
These reports describe the strategies and shifting alliances at play as corporations and governments attempted pipeline development through Afghanistan in the 1990s. Such reports have raised the question of what role oil played in the post September 11th American led war on terrorism in Afghanistan, and whether US economic imperative runs into a political one that is greased with pipeline deals. Even usually impartial observers have gone for the oil point of view.

The May 27th 2002, issue of the US-based Business Week magazine featured a cover story entitled "The Next Oil Frontier" which examined the scope of the US business and military engagement in the region and voiced concern aboutthe substantial political investment in the Caspian basin. Columnist Polly Toynbee writes in the UK Guardian "oil dependency not only warps US foreign policy, it [corrupts] US democracy", pointing to the dangers of "a government in which half the cabinet are oil men."
As these harsh assessments are not just outbursts of embittered ideologues they form the basis for a widespread belief that the fighting for justice and democracy is masking a less noble struggle for control of an estimated $ 5 tn of oil and gas resources from the Caspian Basin.

The American energy strategy
There is a popular notion that the US obsession for oil has created a fear amongst the American ruling elite that oil dependence endangers their national security. To draw any logical conclusion one has to review the computation of their oil production, imports and consumption. On an average the Americans consume 19.7 mm bpd of oil. The USA produces 9.1 mm bpd i.e. 47 % of its demand. The US imports 11.1 mm bpd -- equal to about 59 % of total US oil consumption.
In February 2002 the world produced 76.4 mm bpd of oil and the current global demand is 76.5mm bpd and the US represents over one-fourth of this demand. The department of energy in the US projects that by 2020 the US will be importing approximately 18 mm bpd. If this projection holds true then more than two-thirds of the US oil supplies will have to be imported as the USA has only 21.8 bn barrels of known oil reserves, this is about 2 % of the world’s total oil reserves.

OPEC has close to 800 bn barrels in reserves, almost 4/5th of the world’s known reserves. As the world's largest oil exporter holding the world's largest oil reserves, Saudi Arabia has long been the de facto leader of OPEC. The USA has for long been dependent on Saudi Arabia for oil.
One of Osama bin Laden’s biggest complaints has been that the United States and other oil consuming countries have exploited the Middle East for its oil, and it is feared that this as an approach has the potential to appeal to the Arab world. President Bush has often reflected upon Osama bin Laden’s proclamation that the United States exploitation of Saudi oil being "the biggest theft in history."
He has expressed fears about the possibility of Al Qaeda disrupting the flow of oil from Saudi Arabia or the Persian Gulf. How far this can become a reality is something debatable. It is true that Saudi Arabia cannot defend itself without outside assistance, and it is generally considered that outside assistance would come from the United States.

The American policy makers used to feel that the United States possessed a valuable political lever over Saudi Arabia’s conduct. But over time this notion is changing and is now becoming more apparent in Saudi Arabian view that the United States isn’t involved in the Middle East to defend Saudi Arabia, but rather to defend oil.
This change in Saudis thinking that they have the upper hand in the relationship is becoming more evident because, their survival is not threatened and that the United States needs Saudi Arabia to provide both political cover and operational support for the American operations in this region. Accordingly, it is perceived that the US strategic lever over Saudi Arabia is not as large as Americans think it is.

Prior to September 11, the Saudis ensured that the OPEC cartel was neutral, if not friendly, toward the United States even though its membership includes US adversaries such as Iran, Iraq, and Libya. Because of the preponderance of Saudis among the September 11 hijackers, there seems to be a general consensus that the United States should reduce its dependence on foreign energy supplies.
Many Americans began to feel let down by Saudi Arabia, therefore the dependability of Saudi Arabia as an oil supplier became questionable and so diversity of sources became one of the most important factors in the US energy security. These are some of the compulsions that necessitate a major strategic option for diversifying energy supplies in ways that will reduce US vulnerabilities to a disruption in global oil supplies.

In Washington's global petro-strategy, it is therefore imperative to bring an end to America's oil dependence on the OPEC. In other words it is important that the US establish strategic presence in other regions so as to prevent an US oil crisis caused by a shift in OPEC -- US relations caused by anti-US sentiments.
Hence the search for new suppliers like the Caucasus and Central Asia in and around the Caspian Sea basin. The Middle East is concerned about the energy resources from the Caspian Basin because the main oil producers in the Caspian region -- Azerbaijan and Kazakhstan -- are not members of the OPEC and do not coordinate their policies with the cartel. Caspian oil cannot in the near future replace the volumes from Saudi Arabia and the other Persian Gulf states.

However, its contribution to the world oil market can weaken OPEC's price and political manipulation. Flows of large volumes of Caspian oil through non-OPECcountries would erode the power of OPEC, as well as its ability to maintain high oil prices and to use oil as a mode of political blackmail. The present day world to a large extent runs on oil and gas and those who control it will wield commercial and geopolitical power.
Although this urgency for alternative sources has become more pronounced since 9/11, the need to diversify energy supplies has been an important agenda of the American energy security for over a decade. Since the demise of the former Soviet Union (FSU) in 1991, corporations-often with government support-have competed for control of the Caspian Sea’s hydrocarbon resources.

Since the early 1990s, three countries around the Caspian Sea -- Azerbaijan, Kazakhstan and Turkmenistan -- have yielded a vast reserve of oil and gas. These states are essentially landlocked, as the Caspian Sea is an inland sea with no connection to the oceans. Because the Caspian Sea is landlocked, oil and natural gas must be transported by pipeline to a terminal onthe open sea, where it would be pumped into tankers and shipped to customers.
Pipelines therefore are the key element in exploiting the oil and gas reserves throughout the Central Asian States (CAS) and control over their billions of dollars worth of oil and gas depends on the security and economic influence of the pipelines. Hence the Caspian Sea region with its strategic ports and rich oil reserves opened up a unique economic potential waiting to be exploited by various groups.

This soon led to a battle like situation and some commentators have called this a new "Great Game" for control over Eurasia. According to some analysts this New Great Game is at the core of the present US foreign policy strategy -- compared to which the original 19th-century Great Game between czarist Russia and the British Empire was a childish tin soldier's diversion.
And so ensue the allegation that the real motives behind the US military intervention into Afghanistan is access to and domination of oil and gas in the Caspian Basin. Afghanistan itself has very little natural gas in the north of the country, near Turkmenistan. But it is the strategic geographic location positioned between the Middle East, Central Asia and South Asia, between Turkmenistan and the avid markets of the Indian subcontinent, China and Japan that places Afghanistan at the core of the pipeline route. This region is quite often referred to sarcastically by critics as "Pipelinestan".

The principal energy resources in the Caspian Sea region are to be found in Iran and the former Soviet republics of Azerbaijan (Caucasus) Kazakhstan and Turkmenistan (Central Asia). Although Russia too is a littoral state of the Caspian Sea, much of Russia’s energy resources are found in the eastern parts of Russia and Russian interests in this region is more to do with pipeline routes and stakes in international oil companies.
Azerbaijan, Kazakhstan and Turkmenistan, are where the US can manoeuvre pipeline projects to its advantage. At present the pipeline routesare to a large extent dependent on Soviet-era infrastructure. Those that control the oil routes out of Central Asia will impact all future direction and quantities of flow and the distribution of revenues from new production.

The route of any new pipelines is not only an economic issue but also, given the crucial role of oil and gas in modern society, a key strategic question. Therefore as a long term strategy Washington’s pipeline policy, besides the diversification of sources, will be aimed at neutralizing Russian influence in these oil-rich ex-Soviet States.
But such projects also face huge obstacles. Long distances over inhospitable mountain and desert terrain, prone to earthquakes, and vulnerable to attack, would make pipeline construction and operation very difficult. But as it turns out it is politics, not nature, which poses the greatest hurdle in getting that oil to international markets, as the energy resources must travel by pipeline through one of the most politically volatile areas of the world. As a result, a major aspect of the international competition over the exploitation of these resources is the struggle over which route to take to the sea and from there to global markets.

The pipeline routes
According to a report in a Russian newspaper," the struggle for control over routes for oil from the FSU to the world market is entering a decisive stage. The victor in this struggle will receive not only billions of dollars annually in the form of transit fees but also control over pipelines. This will be the most important factor of geopolitical influence in the Trans-Caucasus and in Central Asia during the course of this century.
The energy resources can reshape the geopolitical map in Eurasia, as the eventual control of the development of oil deposits as well as the eventual pipeline route will determine the political and economic future of Russia, Turkey and the CAS. It will also determine Iran’s position in the region and its relations with the west and most important of allit will determine the realignment of the strategic triangle among the USA, Russia and China and will have a strategic consequence by lessening dependence on the Persian Gulf oil.

It is therefore evident that the development of the Caspian Sea basin is significant not only for the potential contribution it can make to the economic development of this region and the resultant advantages to the world energy markets. There is a larger picture as the competition for its reserves reflects a wide-ranging network of interrelated domestic, regional and global-scale rivalries, all of which are helping to draw the geopolitical energy map of the 21st century.
Therefore rather than promoting cooperation the disputes over pipeline routes seems to be encouraging rivalries as the counties of the region struggle to gain as much benefit for themselves as possible. A review of the various pipeline routes will enable one to comprehend perfectly the rival agenda’s.

(a) The Northern Route (via Russia):
The existing pipeline routes for oil from Azerbaijan and Kazakhstan runs through Russia to the port of Novorossiisk on the Black Sea. According to this option, Kazakhstan would expand its existing pipelines to link them to the Russian network and Azerbaijan would build a pipeline from Baku to Novorossiisk. A plan for this "Northern Route" involving the Caspian Sea Pipeline Consortium of Russian and foreign corporations is pressing ahead, but faces several severe obstacles.
A major issue is security, since the pipeline is through the troubled territory of Chechnya. Besides, Turkey keeps protesting about increasing Russian oil and gas tanker traffic exiting the Black Sea through the already over-crowded 17 mile-long Bosporus/Turkish Straits which connect the Black Sea to the Mediterranean, and which now carry 1.7 mm bpd of oil alone. Obviously this is the option favoured by the Russian government, as it maintains their dominance of Central Asia besides being an important source of revenue.

However Russia is too much in the sway in the region and can seriously destabilize these states if it finds itself sidelined from the Caspian oil projects. At the summit meeting of Commonwealth of Independent States in Almaty in March 2002, the presidents of Uzbekistan, Turkmenistan, Kazakhstan and Russia signed a long-term strategic cooperation agreement in the production and transportation of natural gas.
It was the first step toward creating an alliance of the regions gas producers. Such a move would allow the four countries to coordinate the volume and destination of their gas exports using a unified pipeline distribution system. The Americans fear the consequences of excessive Russian control over the pipelines.
The US role is often in the garb of safeguarding the independence of the CAS by ending their exclusive dependence on energy routes through Russia. Although the US has been insisting that the pipelines are not motivated by any policy aimed at neutralizing Russian influence in the CAS its actions clearly indicate theopposite. They do not want to give Russia the chance to become a regional hegemony or try to unite with Iran.

(b) The Southern Route (via Iran):
Iran, has very large gas and oil reserves, located in the south of the country, close to the Persian Gulf. Turkmenistan shares a long border with Iran, and there is already a gas pipeline linking it to the northern region of Iran, where most of Iran’s industry is located. An expansion of the Turkmenistan-Iran pipeline could be beneficial to both states. More importantly, it would provide another route to Turkey, and hence Europe, or to the Indian Ocean.
Kazakhstan too has been leaning towards the “Iran route”, as it is the most cost effective especially for its recently discovered Kashagan oil in the Caspian basin. Therefore from a purely practical point of view this is the best option with the shortest distance. Economically too, this is the most viable option, since Iran already has an extensive pipeline system, and the Gulf is a good exit to both the Asian and European markets.

To get to Asia from the Mediterranean, one has to go through the Suez Canal whereas the Iranian route enables an outlet through the Persian Gulf. The United States, however, has practically vetoed this option and backs only those oil-export pipelines that circumvent Iran. Nonetheless this is the only one of the new route which is actually progressing as good economics has an important role in the corporate and commercial sectors.
Most energy companies operating in the east Caspian believe this transit route will be highly competitive and probably represent the lowest capital costs. Other countries are working in Iran taking advantage of the absence of American competition. And so in disregard for American sanctions against Iran, the French oil company Total has a $ 2 bn joint venture with Gazprom, Russia's gas conglomerate, and Malaysia's state oil company, Petronas, is also developing Iran's gas reserves.
At the same time, the Royal Dutch/ Shell Group, based in The Netherlands, is to build a $ 2.5 bn gas pipeline from Turkmenistan to Turkey via Iran. The emergence of a new strategic alliance of commercial players, backed by their governments, seeking to pre-empt the United States in the resource-rich Caspian region, allow Iran to attract scarce foreign investment and penetrate new markets.

(d) The Western Route (via Turkey):
According to Sheila N. Heslin, who was the Director for Russian, Ukrainian and Eurasian Affairs on the US National Security Council staff in 1995-96, the United States simply cannot afford to allow Russia and Iran to dominate the energy resources of the Caspian. The previous and current US administrations are for the construction of an oil pipeline on an east-west route referred to as "Baku-Tbilisi-Ceyhan"(BTC) pipeline bypassing Iran and Russia.
The BTC is backed by a consortium, led by British Petroleum, and the prospects are that significant amounts of Caspian oil will flow from Azerbaijan to the Turkish Mediterranean port of Ceyhan in2005. Russia has, in the last year, dropped its active opposition to the BTC pipeline and appears to have accepted the project as inevitable. In total, this will cost about $ 2.9 bn, but would open the way to Azerbaijani gas reaching the Turkish domestic markets and then onward to Europe.

This would fit with EU planning to create a gas grid stretching from the Caspian to the Atlantic. The US has been pressing hard for the project to come on line quickly, both because it would begin the flow of serious investment funds, and because it would strengthen Turkey, against Iran. However, excessive costs and serious security concerns (as this route would pass through unstable territory -- Kurdish as well as Nagorno Karobakh -- and Georgia still being politically unstable), make this option difficult to implement.
But it is said that this pipeline will be built regardless of whether all Caspian companies join. An alternative plan is by a pipeline linking the Bulgarian port of Burgas with the Greek port of Alexandroupolis.

The US government strategy is also to endorse a proposal that would connect the BTC pipeline to terminals at Turkmenistan and Kazakhstan, by a pipeline corridor through the Caspian Sea. Besides the huge costs, this route appears unsuitable for the states to the east of the Caspian. Anything involving the Caspian Sea itself is regarded as extremely sensitive by oil companies as there is no accepted legal framework governing the Caspian Sea.
As such for the present any project that involves the Caspian Sea will have to involve Russia. Further this will become very expensive if it were to serve the growing markets of south and east Asia and to make any pipeline route viable one cannot ignore the growing markets of Asia.

(c) The Eastern Route (via China):
A gas pipeline of considerable importance for East Asia would be a pipeline from Turkmenistan to Xinjiang in China, and then into the Chinese gas grid to the industrialized east coast -- and possibly on to Japan. The problem however is the huge distance involved -- more than 7,000 km -- and very rugged terrain in places. According to a study prepared jointly by Mitsubishi, Exxon and China National Petroleum, such a pipeline would cost more than $ 10 bn.
There was also an oil pipeline project that would transport oil from Kazakhstan to China. It was the longest and most expensive route but favoured by the Chinese government as a strategic decision as it also allows them to exploit the resources in their western provinces. China National Petroleum recently abandoned this agreement with Kazakhstan because of disagreements about cost sharing. However, China is seriously interested in Caspian Sea hydrocarbon resources, and has even reported an interest in a pipeline to the Arabian Sea, with a view to importing gas and oil by super-tankers.

There is yet another proposal by the ONGC (Oil and Natural Gas Corporation-Overseas) of India. They call this the "Energy Highway" and this gigantic proposal looks into the possibility of constructing a Russia-China-India (RCI) pipeline. It is to stretch from Russia through Turkmenistan, Uzbekistan, Kazakhstan, to Chinese Xinjiang. It will enter India via Ladakh, crossing the Siachen glaciers and the India-China Line of Control (or alternatively through Hamachal Pardesh) to supply gas to Northern India.
The proposed pipeline would extend over an extremely long stretch of extremely varied terrain and may cost anywhere up to $ 15 bn to build, or slightly less if connected through already operating pipelines. During the last Shanghai-6 conference in Almaty, delegates of Russia, Uzbekistan, Kazakhstan and China suggested that the viability of pipeline be studied.
The CAS are interested in any proposal that promises an oil and gas exporting outlet. Russia and China, on the other hand, are likely to consider the broad geopolitical and security aspects before they would agree with the construction of any pipeline. While the RCI pipeline idea may be appealing, at present it is neither viable nor feasible. Although south Asian market is expected to spurt in the near future, it is highly unlikely that the Chinese government would grant India a pipeline passage across the line of control on the China-India border.

(e) The South Eastern Route (via Afghanistan):
The Asian market is expanding and is expected to create the biggest demand, which appears much more promising than the European one. Washington’s plans for the CAS has focused on undercutting the current monopoly enjoyed by Russia and preventing China and Iran establishing alternative pipeline routes through the region.
Keeping this in mind, to serve the Asian market the US is left with only two alternatives. A long tortuous route to the west through the BTC pipeline to the Mediterranean and from there to Asia by tankers or a shorter southern route through Afghanistan and Pakistan. The Afghan route can play an important role being the shortest and cheapest export route for the Caspian energy resources for the growing Asian market.
Serious planning for both oil and gas pipeline construction by US companies through Afghanistan was discussed and given serious thought soon after the disintegration of the FSU in 1991 when the newly independent republics around the Caspian Sea sought new routes to transport their oil to world markets. There are official reports of the Taliban representatives invited by oil magnates of Texas, in the years after the establishment of the Taliban regime. It has been revealed in official forums that this proposal was a reason behind both Osama Bin Laden's war on the US and the US action in Afghanistan. With the fall of the Taliban this route has once again entered the scene with much fanfare.

US, pipelines and the Taliban:
The explicit US energy strategy in the Caspian basin, since the mid-1990s has focused on pipelines either south through Afghanistan or west through the Caucasus. As a potential transit route for oil and natural gas exports from the Caspian basin to the Arabian Sea, the prospect of construction of oil and natural gas export pipeline through Afghanistan opened up new avenues for oil companies for investing in the pipelines.
Most of the major energy giants including Chevron, Texaco, ExxonMobil, BP and Halliburton invested substantial sums in the region. It was under these circumstances that in 1995 the US based Unocal (formerly Union Oil of California) with the support of the US State Department, got involved in Afghan pipeline projects.
Turkmenistan, Uzbekistan, Afghanistan and Pakistan agreed in 1997 to build a large Central Asian Gas (CentGas) pipeline through the less mountainous southern parts of Afghanistan to Pakistan, and then possibly on to the growing market of India. The CentGas consortium led by Unocal was set up to build an 890 mile long gas pipeline from Dauletabad in Turkmenistan through Afghanistan to Multan in Pakistan A parallel oil pipeline as well as road and rail connections were also considered. The Central Asian Oil Pipeline Project was to construct a 1,050 mile oil pipeline from Chardzou, Turkmenistan, through Afghanistan to the oil terminal on the Pakistani coast.

Besides Unocal, the Argentinean Bridas Oil was active in developing Caspian oil and gas and, according to some reports had been first to propose a pipeline route through Afghanistan. Bridas worked closely with the governments in Turkmenistan and Pakistan. Bridas and Unocal were pitted against each other and this became the basis of strategic manoeuvring by national governments to assert control over the region's oil and gas resources.
But these projects were unable to take off due to the political instability and civil war that followed the with-drawl of the Soviet forces from Afghanistan. A crucial condition for building the pipelines is political stability in Afghanistan, and for a time the US believed the Taliban could provide just that.

Once the Taliban gained ground against other Afghan factions, capturing Kandahar in 1994 and Kabul in 1996, it was thought they might be capable of bringing the stability that neighbouring countries and oil companies had sought. Ahmed Rashid's book "Taliban, Militant Islam, Oil and Fundamentalism in Central Asia" carefully documents how the US and Pakistan helped install the Taliban in hopes of bringing stability to the war-ravaged region and making it safer for the pipeline project.
A pro-Western government in Afghanistan was to guarantee the security of the Unocal pipeline. In an article in the Guardian of London appropriately titled, "A Pro-Western Regime in Kabul Should Give the US an Afghan Route for Caspian Oil," George Monbiot observed that for the first year of Taliban rule, US policy towards the regime appears to have been determined principally by Unocal's interests.

The Clinton administration and Unocal both regarded the Taliban as a means for stabilising Afghanistan and ending the anarchic rule of a myriad of warlords and militia leaders. Soon Unocal tied up with the Taliban, seeking cooperation and contracts to support their pipeline proposals. It is believed that Unocal entertained Taliban officials at their headquarters in Texas and indirectly funded the establishment of facilities in the southern city of Kandahar to train the necessary technicians for pipeline construction.
Unocal's negotiations included agreements in which the Taliban would receive transit fees for gas pumped through the proposed CentGas pipeline. Initially, the CentGas project was to begin construction in December 1997. However, continued instability caused Unocal to delay that by a year. Then in 1998, several events occurred that further affected the project and caused both Unocal and the US government to completely reverse its approach to the Taliban.

In August 1998, factions trained by Osama bin Laden bombed US embassies in Kenya and Tanzania, straining US relations with the Taliban and forcing Unocal to move staff out of Kandahar and suspend its work with CentGas. Also during 1998, US women's groups mounted pressure on Unocal to sever its ties with the Taliban on human rights grounds due to the status of Afghan women.
Falling oil prices, too, affected the project. By December, 1998, Unocal issued a statement announcing it had dropped out of CentGas and abandoned the natural gas pipeline project altogether. In 1999 and 2000, US policy toward Afghanistan focused mainly on getting Osama Bin Laden. But even then they seemed to have soft peddled with the Taliban. When President Clinton launched cruise missiles against Osama bin Laden's training camps in 1998, the US made a point of insulating the Taliban leaders by declaring emphatically that Osama bin Laden's terrorists were "not supported by any state."

Interestingly, energy issues once again figured prominently in US-Taliban relations in 2001, at least until terrorism became the sweeping issue. It is not clear but is alleged that soon after George W. Bush gained presidency energy resources became a topic of conversation between the US and the Taliban.
A book by Jean Charles Brisard and Guillaume Dasquie, “Bin Laden: la verite interdite” (Bin Laden: The Forbidden Truth) claims that the Bush administration held meetings with Taliban officials before 9/11 to discuss once again the prospect of a pipeline through Afghanistan. The book asserts that very close ties with the oil industry motivated the Bush administration to revive pipeline discussions with the Taliban despite the American dislike for the regime.

There are many reported connections, too numerous to recount here, but some of these ties include Vice-president Dick Cheney's involvement with Halliburton, an oil drilling services provider. It is very difficult to find out deals that happened when public figures were in private office but such connections have been widely reported in the American press.
Also in question is the US manoeuvre of the rise to power of two former Unocal employees: Hamid Karzai, the new interim president of Afghanistan, and Zalmay Khalizad, the Bush administration's Afghanistan envoy. The National Security advisor Condoleeza Rice's former seat on the board of directors for Chevron has also been questioned.

Basing their claims on interviews with former FBI deputy director John O'Neill, co-authors of the above mentioned book “Bin Laden: la verite interdite” state that the White House impeded investigations into Osama bin Laden's activities while pipeline talks were active. The most shocking claim in this book concerns a statement alleged to have come out of talks between Taliban representatives and the US government in Washington, in March 2001.
According to the book, increasingly frustrated US negotiators told the Taliban, "either you accept our offer of a carpet of gold, or we bury you under a carpet of bombs." The parties talked for many months before reaching an impasse in August 2001. And ironically the September 11 attack provided the Bush administration a legitimate reason to use the US military to pave the way for the long-sought Afghan oil route.
There are reports that demonstrative support for the war on terrorism against the Taliban was most clearly visible in US energy company boardrooms. In this context Osama bin Laden offered a golden opportunity to further expand American geopolitical influence into South and Central Asia.

Clients for the Caspian oil
After the ousting of the Taliban government the interim government began to shape the economic and political future of Afghanistan and things seemed conducive enough for the Bush administration to accelerate the pipeline projects that were abandoned. Pakistan and Turkmenistan have shown keen interest in the construction of a gas pipeline on the lines of the one initiated by Unocal and proposed as the “CentGas” pipeline.
On May 30, 2002, heads of Pakistan, Turkmenistan and Afghanistan signed a tripartite accord in Islamabad to revive the pipeline and formed a high-level managing committee to oversee the progress of the project. Similar to the earlier proposal, this pipeline would connect the gas fields of Eastern Turkmenistan through Afghanistan to Pakistan’s Arabian Sea coast. Besides the gas supply, a parallel crude oil pipeline from Turkmenistan to Pakistan is also once again being given serious consideration.

Feasibility studies have already put the total cost of these two pipeline projects at $ 4 bn. The first Trilateral Steering Committee meeting of Afghanistan, Pakistan and Turkmenistan, to implement the intergovernmental agreement on the construction of this Trans-Afghan Gas Pipeline (TAGP) was held in Ashgabat, July 9-10, 2002.
Identification of financiers, evaluation of potential markets, determination of principles to form a consortium, which will build, operate and own the pipeline and select consultant to oversee the project were discussed with US participation. The Asian Development Bank (ADB) besides providing for the feasibility study of $ 5 mm has agreed to invest between $ 2 to $ 3 bn for pipeline construction.

Although the Steering Committee of TAGP has considered constructing the pipelineinitially up to Gwadar in Pakistan, it has in principle agreed to the extension of this pipeline to India. To make the pipelines feasible the Indian market is necessary. Besides it is hoped that the pipelines may bring about a reduction in the tension prevailing between the two countries.
Initial capacity of the pipeline is 15 bn cmpy, which may be raised to 30 bn cm. Pakistan market may absorb only 1-2 bn cm at best from the TAGP. This leaves the planners with 13-14 bn cm to dispose of elsewhere to make the pipeline commercially viable. Therefore besides Pakistan, India and Japan may be among the other potential clients.

Currently, India consumes approximately 26 bn cm of natural gas annually, this is not enough to meet the mammoth economic needs and is running at a gap of 6-8 bn cm between demand and supply. Japan has recently given very strong signal to buy 3 mm tons of LNG from TAPG.
However, actual demand of Japan may be much more than that because Japan has made an official announcement that it is going to reduce its dependence on crude oil and pay more attention to natural gas. Korea and Taiwan also use LNG extensively and there is all possibility that they too can get their supplies from TAGP. With all these proposals there is a rush to go ahead with the project and the picture looks rosy.
But it is not as simple as it reads. If one is to read between the lines it is not possible to miss the fact that there remain far more questions than answers. First and foremost is the financing of these projects. What the World Bank and the ADB have promised may not be enough, besides they come with stipulations.

Then there is the question of the security of these pipelines, especially in Afghanistan. Afghanistan is still to rid itself of the competing warlords and one wonders whether they can manage such an ambitious pipeline project, ensure its security, and will these proposed transit fees be lucrative enough to replace the opium cash crops. With continuing instability in the Caucasus and autocratic regimes in the CAS, one wonders how long an American presence is welcome.
With vast numbers of American troops in the CAS, the question rises of whether Russia will continue on its course in supporting America's war on terrorism. There are big risks involved as the dictatorships of CAS, has been criticized this year by Human Rights Watch for its "crippling levels of corruption" and human rights abuses. Besides nearly all of these states are unstable and face armed opposition.

The influx of US military aid and corporate investment tends, in the eyes of observers to benefit only those at the top. Then there is the question of who will buy the volumes pumped through the pipeline. This leads to another major question -- will India and Pakistan accept a shared ‘peace’ pipeline. But then all said and done for the US the trans-Afghanistan pipeline is not simply a commercial enterprise, but a key component of a broader geo-strategic agenda, which is the total military and economic control of Eurasia-- which includes the Middle East and the Caspian basin.
The strategic importance of this region is described by Zbigniew Brezezinski in his book "The Grand Chessboard-American Primacy and Its Geostrategic Imperatives" as the centre of world power. Capturing the region's oil wealth, and carving out territory in order to build a network of transit routes, was a primary objective of US military interventions throughout the 1990s in the Balkans, the Caucasus and Caspian Sea.

Source: News Central Asia
Market Research

The International Affairs Institute (IAI) and OCP Policy Center recently launched a new book: The Future of Natural Gas. Markets and Geopolitics.

Cover_242-width

The book is an in-depth analysis of some of the fastest moving gas markets, attempting to define the trends of a resource that will have a decisive role in shaping the global economy and modelling the geopolitical dynamics in the next decades.

Some of the top scholars in the energy sector have contributed to this volume such as Gonzalo Escribano, Director Energy and Climate Change Programme, Elcano Royal Institute, Madrid, Coby van der Linde, Director Clingendael International Energy Programme, The Hague and Houda Ben Jannet Allal, General Director Observatoire Méditerranéen de l’Energie (OME), Paris.

For only €32.50 you have your own copy of The Future of Natural Gas. Markets and Geopolitics. Click here to order now!


 

Upcoming Conferences
« April 2019 »
April
MoTuWeThFrSaSu
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30

Register to announce Your Event

View All Events