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. Last Updated: 07/27/2016

Crude Games




Last Thursday, U.S. President Bill Clinton reveled over how one of his key foreign policy aims - the construction of a pipeline for Caspian oil independent of Iran and Russia - had moved closer to reality.


As he watched, Azerbaijan, Georgia, Kazakhstan and Turkey committed to seeking financing for the 1,730-kilometer pipeline. The $2.4-billion line is to originate in the offshore oil fields near the Azeri capital of Baku, cross Azerbaijan, Georgia and Turkey then end at Turkey's Mediterranean port of Ceyhan. The main commercial player in Baku is BP Amoco, which last month appeared to soften its previous hostility to the project.


A second agreement was aimed at advancing the construction of a companion pipeline, a 2,000-kilometer natural-gas line from Turkmenistan, which has the w orld's fourth-largest natural gas reserves, to the Turkish city of Erzurum. This proposal came from a partnership of General Electric, Bechtel Group and Royal Dutch/Shell Group.


Some Clinton appointees have been accused of excessive zeal, particularly in repeatedly predicting an imminent policy triumph. But Clinton's own remarks reflected the still-uncertain future that lies ahead for the Caspian nations and the pipeline project, problems exacerbated by corruption and autocratic politics that some experts say threaten regional instability. "Today represents just the beginning of the intensive commercial phase of this project," Clinton said.


NEW BOOM, OLD OIL


In the late 1980s, a trickle of Westerners wandered onto the Caspian, the world's largest inland body of water - in a region that apart from Baku itself had been largely closed to the outside, even under tsarist rule.


Attention eventually focused on two places. One was Baku, which at the turn of the century eclipsed John D. Rockefeller's monolithic Standard Oil as the world's largest oil producer, before ruin came with industrial strife and the Russian Revolution in 1917. The second was Tengiz, one of the world's 10 largest oilfields, on the northeastern shore of the Caspian Sea in Kazakhstan.


More recently, the region has been at the heart of one of history's rare unions of commercial venture and high-stakes theater, dominated by figures of outsized ego, almost of all of whom have left poorer and, often, bitter when large companies crowded them out.


Oil executives, diplomats and journalists spoke of so much oil - 6 to 9 billion barrels of recoverable reserves in Tengiz alone - that the Caspian was bound to be the next Kuwait. Some said there were 30 billion barrels, while others ventured that there could be as much as 80 billion. Soon the often-quoted figure was 200 billion.


BEARING DOWN


The embellishment stemmed from the injection of geopolitics into a region made up of republics unknown to most outsiders. Having lost possession of the natural riches of its former republics, powerful Russians sought to continue to control them. One method was the threat of destabilization and the encouragement of ethnic rebellions.


As U.S. companies like Amoco, Pennzoil and Unocal tried to negotiate oil deals in Baku, unofficial arms shipments fueled wars and coups in Azerbaijan and Georgia, felling governments and breaking off sections of both nations.


But Moscow's main lever of power, then as now, was its pipeline system, a remnant of the centralized Soviet economy in which all oil and natural gas from the Caspian first traversed Russia before passing on to the West. In 1993, Kazakhstan learned that it could not ship the volumes of oil it intended because the pipelines were too full. Turkmenistan's natural-gas shipments to Western Europe, initially worth about $2 billion a year, were severed in December 1993.


That potential choke hold inspired the current U.S. strategy.


The administration has argued that the West needs an alternative to Persian Gulf oil.


But a more important reason for what at the time was considered daring, even foolhardy, U.S. assertiveness has been to shrink Russia's backyard so that, when it gets back on its feet, it cannot march back into the Caucasus and Central Asia.


A second reason that has come to assume equal or even greater weight in administration logic has been to challenge the possible emergence of strong Iranian influence.


BATTLE JOINED


The administration's first move - against the strong opposition of BP Amoco's predecessor, British Petroleum - was to promote the construction of a relatively small export pipeline to Georgia's Black Sea port of Supsa, avoiding Russia entirely.


That line went into service in February, and with frequent cutoffs of a competing Russian line because of trouble in Chechnya, the decision to build it now seems prescient.


The main battleground, however, has been ov er the direction of the bulk of Azeri oil once exports begin peaking in 10 to 15 years.


Azeri President Heidar Aliyev has relied on White House backing to insist on the Baku-Ceyhan route. Aliyev's strategic partner in the region is Georgian President Eduard Shevardnadze, whose popularity in Washington has helped soften Aliyev's reputation as an authoritarian leader presiding over a particularly corrupt regime.


In competition with Baku-Ceyhan, Moscow continues to advocate enlargement of the existing northern route to Russia's Black Sea port of Novorossisk - a route now severed because it crosses Chechnya.


Moscow has dismissed critics who argue that a planned bypass would remain vulnerable to attack by Chechen fighters.


Another alternative that has intrigued oil companies is a pipeline through Iran. With an outlet on the Persian Gulf, an Iranian line would be closer to Asia, which is expected by many to be the world's fastest-growing energy market in the early years of the 21st century.


Some say such a pipeline would also be cheaper than Baku-Ceyhan, but no one has fully examined the economics, and because of U.S. enmity it is considered, for now, politically impossible.


Underlining the region's growing profile - and the continuing decline in Western empathy for Russia - the Caspian has now generated a James Bond thriller.


A decade after the Caspian Sea first slipped into the discourse of oil executives and policy wonks, the latest Bond installment, "The World Is Not Enough,'' in which villains try to wrest control of oil in Azerbaijan, opened last week in the United States. By odd coincidence, the Bond flick opened just one day after the latest agreement was signed in Istanbul.


"Every country that's important gets its James Bond movie," said Laurent Ruseckas, who is writing a PhD dissertation at Columbia University on the pursuit of Caspian oil. "It has great history, oil, the new great game, plus big players - Russians, Turks, Americans. It adds a touch of excitement."


The region, in short, has come of age - though whether it ever becomes the bonanza many have predicted remains in doubt.


WORTH FIGHTING FOR?


The main stumbling block to the U.S.-backed project is concern that the Caspian has yet to turn up enough oil to justify such a line.


The BP Amoco-led consortium has said the minimum necessary volume to make the pipeline feasible is 6 billion barrels of proven reserves. The consortium's Baku fields contain an estimated 4.5 billion barrels.


Nevertheless, last month, BP Amoco said it would cooperate with attempts to make the pipeline work.


Most experts see the answer on the eastern Caspian, in Kazakhstan. The administration is encouraged by new seismic studies showing that Tengiz may contain 50 percent more proven recoverable reserves than previously thought, or 9 billion to 13.5 billion barrels. Some of that could be committed to an extension of Baku-Ceyhan across the Caspian, the administration asserts.


The greatest attention among Baku-Ceyhan advocates has been on an offshore Kazakh field called Kashagan, a salt-topped geologic structure that seismic studies shows is three times the size of Tengiz.


This year, a consortium of companies began the first of several planned exploratory wells to see what lies inside. The consortium includes BP Amoco, Royal Dutch/Shell Group, Mobil, Phillips, Agip of Italy, Statoil of Norway, Inpex of Japan and Totalfina of France.


Even if one or more wells strike oil, though, it could be a few years before the consortium is sure how large Kashagan's reserves are, company executives said.


Washington's political muscle could push matters faster. But no one can predict the policies of the next administration, leading many oil-company executives to predict that construction of a new pipeline will not begin until at least 2004.


"A million things could happen," said one Western oil executive, who declined to be identified. "Look at how unstable the whole region is. You'll probably have new leaders in all the countries. So how can anyone say with any confidence that any pipeline is a sure thing?"


- New York Times Service