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Analysis: Energy Geopolitics In The Caspian

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  • Analysis: Energy Geopolitics In The Caspian

    Analysis: Energy Geopolitics In The Caspian


    RFERL
    18 Oct 04

    By Houchang Hassan-Yari


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

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

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


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

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

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

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

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

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

    From: Emil Lazarian | Ararat NewsPress
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