Which Way Will the Oil Flow?
The drama is heating up as Moscow makes trouble over routes to transport oil from locations in former Soviet republics to the rest of the world
A HUGE strategic shashlik is on the fire in the Caspian Sea area, cooking in the Caucasus and Central Asia, with eager diners in Russia, the United States, and Britain waiting for the first bite - which may be taken Oct. 9. Turkey and Iran are standing by as well. The taste of oil grips them all.
Billions of dollars and geopolitical assets are at stake. The century-old oil fields off Baku in Azerbaijan, restored to vigor by new discoveries, can yield as much as 10 percent of the total US production including Alaska. Kazakstan's Tengiz field can do the same. Turkmenistan is the world's fourth largest producer of natural gas. Tapping this wealth and, more important, bringing it to market, involves frantic diplomacy sometimes bordering on blackmail, legal hocus-pocus, and even blood. It is a matter
of real importance to the West because the Caspian-basin gas and oil will be coming on stream as production in Alaska and in the North Sea tapers off.
The plots and subplots of this international soap opera are intertwined. The Baku story came alive less than four years ago with the collapse of the Soviet Union and Azerbaijan's declaration of independence. For Moscow it was too independent - and not only because it looked around for oil markets. Russia wants, as a matter of principle, to influence, if not dominate, all the former Soviet republics now loosely gathered in the Comonwealth of Independent States. It has in fact, for the time being, stymied
a major contract between Kazakstan and Chevron, in which the oil company has already invested at least $1 billion. Moscow, cut out of that deal, refuses to let Tengiz oil move through Russian pipelines. No others are available.
When is a sea a lake?
When Azerbaijan last year concluded what is called ''the contract of the century'' with an international oil consortium, it gave the Russian state oil company a 10 percent share. But Russia called the whole thing illegal, asserting that the Caspian Sea is not a sea in international law but a lake, because it is enclosed, with no egress. If it is a sea, each riparian state would control the resources in its coastal economic zone. If it is a lake, these states, including Russia and Iran, would share equal ly in all its riches. Iran agrees with Russia; the others do not.
Subplot: Azerbaijan, in addition to needing cash, feels it prudent to have its southern neighbor, Iran, in on the deal; but the US, with a policy of ''containing'' Iran, has blocked its participation. Washington would not permit US companies, with a 40 percent share in the Baku contract, to work in any kind of partnership with Iran. It has also signaled a veto to financing any transport arrangements with Iran. Azerbaijan, having to live with Iran, has apparently decided informally to give it some of Bak u's own share as a strictly silent partner.
The Baku consortium is ready to sell oil beginning next year, so-called ''early oil,'' between 70,000 and 100,000 barrels a day. Two old pipelines are available to move it west when portions long ago stolen for scrap are replaced. One of them runs to the Russian Black Sea port of Novorossiysk via Chechnya (which may help explain Moscow's bloody intervention). In anticipation, Moscow has suspended its active opposition to development of the Baku fields. It may also hope to expand this line and its revenu es when Baku goes to full production, 700,000 barrels per day in 2010.
Subplot: Oil exported from the Novorossiysk terminal would normally move out of the Black Sea through the Bosporus Strait. Turkey has restricted passage after some tanker accidents and now says it will close the straits altogether for environmental reasons. Turkey, coincidentally, hopes to get a sizeable piece of the pipeline action for itself. Washington has already endorsed a proposed line from Baku to Turkey's Mediterranean port of Ceyhan. It would, however, run through Armenia, which is at war with Azerbaijan. Turkey is ethnically related and politically linked to Azerbaijan, yet its relations with Armenia, historically bad, have somehow decidedly improved. Russia, meanwhile, has prepared an end run around Turkey, making arrangements to ship Novorossiysk oil to Burgas in Bulgaria, where it would go into a pipeline to the Greek Aegean port of Alexandropoulos.
The second possible ''early oil'' pipeline from Baku, theoretically available also to Tengiz if Kazakstan were determined to defy Moscow, runs northwest through Georgia to the port of Batumi. Turkey would, reportedly, itself buy much of this crude and ensure that the rest got out of the Black Sea via Ceyhan or by making an exception for it to traverse the Bosporus in tankers.
Money, security, and Moscow
On Oct. 9, the Baku consortium is to decide which of the pipelines is to be rebuilt for the ''early oil.'' It seems almost certain that the Russian route will be opened. Moscow's ability to cause trouble is too obvious. But the second could be restored as well. The arithmetic is favorable. The estimated cost to repair both: $250-300 million. The later big, full-production pipeline would cost over $2 billion. With an investment of under $8 billion, the consortium counts on earning ultimately $40 billion.
Money, however, is meaningless if it is not secure, and security is in Moscow's hands. Blunt diplomatic notes, delivered at the end of July to the governments of Azerbaijan, Kazakstan, and Turkmenistan made this clear. The Russian note said unilateral projects for the exploitation of Caspian Sea resources that ignore the Caspian's juridical status are exposed to dangers including those of material destruction. And, it went on, the Russian Federation reserves the right to restore order and eliminate the consequen- ces of one-sided steps.
Russia claims the right to keep the peace and preserve security inside the old borders of the Soviet Union, excepting the Baltic states. It has not been squeamish. Moscow overthrew the first government of independent Azerbaijan and supported Armenia in the war over Nagorno-Karabakh. It has backed Abkhazian separatists against Georgia and is suspected of having had at least a finger in a recent attempt to assassinate the Georgian leader Eduard Shevardnadze, who would love to have the pipeline opened thro ugh his country.
Subplot: Moscow has beaten off Turkey's bid for leadership in Azerbaijan and in the four Turkic republics of Central Asia. This summer, President Suleyman Demirel of Turkey urged a meeting of their presidents in Kyrgyzstan to end their dependence on Russia. He offered them the use of Turkish territory for the export of their oil and gas. The response was eloquent silence. They know that Russian military power is too close, that Russia has contacts with their restive ethnic minorities, and that Moscow's threshold of tolerance for real independence is pretty low.