Geoeconomy and Geopolitics of Oil

Note on the strategic dimension of the Caspian Sea

by Reda Benkirane

 

 


Aljazeera Centre for Studies, November 2007

With a world demand for oil and gas that could double by 2015, the Middle-East – with its two thirds of known global oil reserves – and the Caspian region – with almost half of known gas reserves – represent an enormous challenge of energy security and control in this new century. The US scenario of a preemptive air strike against Iran is an attempt to weaken the unique regional power that is both a Caspian and Middle Eastern littoral state, overlapping the two world's richest oil and gas regions.

The Caspian Sea is the largest salt lake and inland body of water in the world. Located between the east of the Caucasus Mountains and the west of the steppe of Central Asia, this sea represents a surface of 372,000 sq km (larger than Italy, Poland or the United Kingdom), is 1200 km long and has a width of 320 km. The Caspian Sea is bordered by five countries: Russia (northwest, 142 million inhabitants), Kazakhstan (northeast, 15 million inhabitants), Turkmenistan (southeast, 5 million inhabitants), Iran (south, 71 million inhabitants), Azerbaijan (southwest, 8.5 million inhabitants). Countries bordering the Caspian Sea, with the exception of Iran, are all members of the Commonwealth of Independent States (CIS) created just after the collapse of the Soviet Union (December 1991).

The Caspian region emerged geopolitically after the end of Cold War and started to raise international attention and competition from both major state and non-state actors for the control of its huge energy sources. The Caspian Sea is indeed located along the line of the largest series of existing oil and gas reserves extending from the Caucasus to the Middle East. Furthermore, the existence of additional oil fields in other Central Asian countries (Uzbekistan, Tajikistan and Kyrgyzstan) tends to profile, in terms of potential wealth, these newly independent states as the 'Emirates of the 21st century'. However from the end of the communist era until the 'war on terror', populations of the Central Asia region (in majority-Muslim countries ruled by pro-Western political regimes) are far from having benefited of any economic prosperity.

If the Commonwealth of Independent States was thought as the political entity from where the Russian Federation could exert its sphere of influence on the former Soviet republics of the Caspian Sea, the United States on the other hand sought to immediately counter this Russian domination by affirming that the Caspian region was ranked among 'its national strategic interests'.

During the same immediate post-Cold War period, major Western oil companies such as Chevron and British Petroleum started to invest in the extraction but also in the transportation of energy resources. Pipeline transportation of oil and gas to European and Asian markets was and remains until now the principal concern of the Caspian region. Different routes for oil and gas have been envisaged during the last fifteen years to provide Caspian oil and gas to the rest of the world. Energy of the Caspian region is particularly attractive for Asian consuming countries of the size of India, China, Japan and South Korea.

As the needs from the developed and the developing world are constantly increasing, the main consuming countries are pursuing an energy policy that favors expansion and diversification of both oil/gas sources and routes. Regarding the energy supply, alternatives sources of oil and gas are actively sought in order to make energy markets less sensitive to the ups and downs in potential insecure regions such as the Middle East. Regarding the energy routes of Central Asia, as long as the producing countries are dependent on the Russian control of the existing pipelines, the perspective of an abundant and accessible Caspian oil and gas remains a long term objective.

All through the decade that followed the dissolution of USSR, many threats and obstacles slowed down energy development and transport in the Caspian region. First of all, the uncertainty about the legal regime of the Caspian Sea (should the sea be divided into five equal sectors or into national sectors?) raised a series of problems about disputed waters and offshore rights. During the nineties, the political and economic instability of the Russian Federation was so phenomenal that it was almost leading the post-soviet state to a collapse. Furthermore the war in Chechnya – one of its main causes was Russia's determination to maintain its control on the pipelines transiting through South Caucasus – and the civil war in Afghanistan (which followed the exit in 1992 of the Russian military troops) were major obstacles to the edification of secured energy routes towards Europe and East Asia.

Once that the Russian Federation became more stable, its oil production began to play an international role (2001) and major international oil companies started to invest in its industry (BP, 2003). Even if it cannot be considered as an 'oil Czar', Russia still holds 5% of the world’s oil supply. Furthermore the country possesses today the world's largest proven gas reserves and is considered as a gas 'Superpower'. Its grip on the energy pipelines grid remains a powerful lever which assures its domination on the Central Asian countries.

To escape from the Russian monopoly on Caspian energy exports, the three other Caspian littoral states born from the dissolution of the former Soviet Union (Kazakhstan, Turkmenistan and Azerbaijan), are searching for alternative routes to sell and transport their oil and gas resources. Kazakhstan, which exports 70% of its oil via Russian pipelines, is now engaged in a partnership with China for the construction of oil and gas pipelines. Turkmenistan's gas is confronted with the same problem to expand and diversify its markets, and the country is cooperating with Kazakhstan, China, Iran and Turkey for the construction of gas pipelines to its frontiers. Azerbaijan, on its side, is in conflict with Armenia regarding the Nagorno-Karabakh enclave and since summer 2006, its oil is exported through the Baku-Ceyhan pipeline to the Eastern Mediterranean and European markets (Israel also counts among its main partners and clients since it imports 20% of its oil from Baku).

Iran is the country that has a unique geographical position since it is both a Caspian and Middle Eastern littoral state, overlapping the two world's richest oil and gas regions. Iran is the unique littoral state of the Caspian Sea that has survived the collapse of the Soviet block. As a regional Middle East power and most important Muslim Shiite nation, its sphere of influence includes Iraq, Syria and Lebanon. Economically, Iran has the capacity to become an energy hub in the Arabian-Persian Gulf where, in principle, Caspian oil and gas could be transferred to the sea of Oman for delivery to Western and Eastern markets. In the Caspian region, Iran and Russia have developed strong economic ties, including a military cooperation and a civil nuclear programme. On the latter, Iran asserts that its ambition it to develop nuclear power plants in order to meet its long term energy needs whilst the United States is accusing, among others, the Iranian government of developing atomic weapons. A pre-emptive strike on Iran is under active consideration by the US administration and different options are envisaged with the participation of Israeli air forces and possibly other European countries (such as United Kingdom and France) that could act on a unilateral basis. Even limited to air strike, a war against Iran would have catastrophic consequences on International Relations (comforting once more the civilizational clash theory) and, more particularly, on the geopolitics of the Caspian region and the Middle East.

With the increasing oil price and global demand, securing access to energy sources is becoming an urgent issue for great economic powers. Before September 11 attacks and the invasion of Iraq, the US administration was spending between $ 20 billion and $ 30 billion annually to safeguard its oil interest in the Middle East. The United States, with only 5% of the world population and 2% of proven oil reserves, consumes 26% of total world oil while it produces only 11%. Energy security is a priority for the United States which has developed in the nineties a military cooperation with the countries bordering the Caspian Sea, mainly through NATO's practical bilateral cooperation programme 'Partnership for Peace' (1994). In the Caspian region, the United States backed also the pipeline construction led by British Petroleum for oil transport from the Caspian Sea to Turkey and Western markets (inaugurated in July 2006). 

The United States seeks to break the Russian domination on the Caspian energy sources and also, after September 11 events, to consolidate its military presence in the region in order to counter-balance the military weight of Russia and China – while containing at the same time Iran's ideological influence in the region. In this respect, one might ask whether the current US policy and existing and /or planned military operations in the Middle East and Central Asia are adequate actions to bring peace, stability and security.

So far the European Union has shown no particular military ambition in the region, it seeks rather to play a moderator role regarding the multiple geopolitical struggles that are taking place, while at the same time developing commercial relations and diversifying its sources of energy. In this perspective, although it has not been involved in many investments in oil/gas exploration and transportation, the European Union has engaged a significant technical cooperation. For example the EU’s 'Technical Assistance to the CIS States' (TACIS, 1991) provided funds and expertise to enhance the transition process and facilitate the access of post-communist economies to global markets.

Regarding Iran, the European Union considers that its involvement in the Caspian energy development can be constructive, whereas the United States exerts all its influence to bypass and exclude Iran from the energy chain supply. In case of a preemptive military action against Iran, the European Union might be divided regarding its implication in the operation.

China which is already the world’s second largest oil and gas consumer needs more and more energy resources to fuel the two-digit growth of its economy. The country imports two-thirds of its oil from the Middle-East (via the Malacca Strait), maintaining close economic and military cooperation with Saudi Arabia and Iran. Because of the increasing domination of the US in the Middle-East and Central Asia, China strategic interest is to reduce its dependency from the Arabian-Persian Gulf and to diversify its sources of energy by financing the development of energy routes from the Caspian region. Consequently China started to invest heavily on the building of onshore oil and gas import channels transiting through Kazakhstan, Turkmenistan and Uzbekistan.

Though Turkey has not a direct access to the Caspian Sea, it has historical and cultural links with the whole Central Asia. After the collapse of communism, Turkey had hoped that it could be a regional cultural power dominating the Turkophone space extending from the Adriatic Sea to the Sinkiang. But the panturkish dream has not yet come true. Nevertheless, Turkey plays an important intermediary role as an energy hub especially since the opening of the Ceyhan-Tblisi-Baku (BTC) oil pipeline – a US-backed project linking the Caspian Sea to the Eastern Mediterranean Sea which has the advantage of bypassing both Russia/Iran's existing and projected routes. In this context, the United States is favorable to its Turkish ally's integration in the European Community and it is worth mentioning that Turkey's ties with Israel have not been jeopardized by the presence of Islamist leaders in the government.

Israel, on its side, has invested in Azerbaijan's oil industry and is objectively a strategic partner of the US-Turkish Baku-Ceyhan route. Israel is well placed to operate as an American proxy protector whose role is to secure the energy infrastructure of the Eastern Mediterranean. The last war against Lebanon (July-August 2006) can then be also understood as an attempt to impose a strategic control on this energy corridor (a day before the start of the war on Lebanon, the Israeli minister of National Infrastructures Binyamin Ben-Eliezer accompanied with a delegation was in Ankara on the occasion of the inauguration of the Baku-Ceyhan pipeline). More importantly, Israel has announced a cooperation programme with Turkey for a global energy project that would connect the two countries by underwater multipipelines for crude oil, natural gas, fresh water and electricity lines. In the wider context of the Trans-Israel Eilat-Ashkelon project that bypasses the whole Arab environment, another Israeli complementary project is to build a pipeline from the Mediterranean port of Ashkelon to the Red Sea port of Eilat so that the Caspian oil could be sent to Asia. This re-export of the Caspian oil via the Red Sea which is likely to benefit from an international economic backing, represents another opportunity for the United States to weaken, via its Israeli subcontractor, Russia and China's energy routes towards the East Asian countries.

If the political tensions and the military conflicts of the Middle East are a danger for the energy supply, and if the Western attention on the Caspian Sea and Central Asia is due to the quest of alternative sources and routes, it is not guaranteed that this vast region will not mirror the Middle East instability. The globalisation of the 'war on terrorism' has also reinforced the confrontation between pro-Western regimes and radical Islamist groups. Now that the US administration is working on the scenario of an air strike over Iran, the risk of popular uprisings in Central Asia against authoritarian and corrupted regimes or the possibility of a democratic spring that would bring Islamists to the forefront appear to the US strategists as somber perspectives.

Recent parliamentary elections in the Arab world (Palestine, January 2006, Morocco, September 2007) and in Turkey (August 2007) have shown that legal Islamist political parties are now becoming key players in the democratization process of many countries. Even if the Turkish AKP experience is perceived as 'Euro compatible' and can still serve the US strategic interests in Central Asia and the Middle-East (in particular regarding its cooperation with its Israeli ally), the fact remains that Islamist movements are perceived as an uncontrolled ideological threat and a potential danger for vital American interests. There are objective reasons to anticipate the hostility of 'Islamist democrats' if we take into consideration the consequences of the occupation of Iraq and the 'war on terrorism' in Afghanistan (which allowed Russia, China and other Central Asian states to fight under the same scheme their own radical Islamist movements).

With a world demand for oil and gas that could double by 2015, the Middle-East – with its two thirds of known global oil reserves – and the Caspian region – with almost half of known gas reserves – represent an enormous challenge of energy security and control in this new century. It is today more than probable that the crude oil could very soon reach $ 100 a barrel and some analysts predict that in 2015 its price would range between $ 200 and $ 300. The main powers US, EU, Russia and China have so far been engaged in economic rivalry for the control of energy sources and their supply chain, but with the combined increase of price and demand, these powers might start considering building alliances (e.g. EU with Russia? And China with Russia?) and working together to bring regional stability and assure their own prosperity.

From the Caspian Sea to the Black Sea and from the Balkans to Central Asia, a vast geographical zone is reshaped by the question of energy control, security and supply in the 21st century. At the interface of Europe and Asia, at the crossroad of interdependency networks of different kinds (cultural, political, economic, energetic and military), strategies for securing supplies from the Arabian-Persian Gulf and the Caspian region as well as their consequential geopolitical struggles attest of a new multipolar world in formation. More than ever, energy remains the catalyst of civilizations rise, decline and collapse.

 

Reda Benkirane

 

 

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 Further readings:

Caspian Sea, Country Analysis Briefs , Energy Information Administration, U.S. Department of Energy, January 2007.

The War on Lebanon and the Battle for Oil , by Michel Chossudovsky, Global Research, Canada, July 26, 2006.

Globalisation, Geopolitics and Energy Security in Central Asia and the Caspian Region, Mehdi Parvizi Amineh, Clingendael Institute, The Hague, 19 June 2003.

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The littoral states of the Caspian Sea, basic figures

 

Caspian Countries

Area

(sq km)

Total population

millions (2007)

Projected population

millions (2050)

Religions

 
GDP per capita

 


$

Gas proved reserves

 

 

trillion cubic metres (2006)

Oil proved reserves

 

 

thousand million barrels (2006)

Russia

 

17,075,200

 

141.9

 

 

111.8

Russian Orthodox 15-20%, Muslim 10-15%,

other Christian 2%

(2006 est.)

 

$12.200

 

47.65

 

 

79.5

Kazakhstan

2,717,300

14.8

 

13.1

Muslim 47%, Russian Orthodox 44%, Protestant 2%, other 7%

$6.300

3.00

39.8

Turkmenistan

488,100

5.0

 

6.8

Muslim 89%, Eastern Orthodox 9%, unknown 2%

$5.800

2.86

0.5

Iran

1,648,000 

71.2

 

101.9

Muslim 98% (Shi'a 89%, Sunni 9%), other (includes Zoroastrian, Jewish, Christian, and Baha'i) 2%

$8.700

28.13

137.5

Azerbaijan

86,600

8.5

 

9.6

Muslim 93.4%, Russian Orthodox 2.5%, Armenian Orthodox 2.3%, other 1.8%

$3.400

1.35

7.0

Sources: State of the World Population 2007, United Nations Population Fund (UNFPA),       
              Statistical Review of World Energy, British Petroleum, June 2007.

 

 

 The Caspian region and the Middle East after the US invasion of Iraq (2003)

 Source: Eric Waddell, Center for Research on Globalization, Canada.

 

 

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