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“Petropolitics” by the Caspian: What Interests are at Stake?

 

The potential to become a new source of energy supplies has attracted the attention of various international actors to the Caspian politics arena. But a zero-sum game of 'realpolitik' is likely to increase instability and produce no winners in the long run.

 

By Israel H Seguin

 


 

At times when the Middle East is more insecure and instable, the Caspian region has become the subject of international disputes due to its extensive energy resources, despite the fact that oil and gas deposits are still to be explored. It is this potential to become the new great source of energy supplies that has attracted the attention of various international actors to the Caspian politics arena.

In order to study the complex situation that has emerged in the Caspian Sea, a four-level approach has been suggested: the micro-level or the analysis of the complex and heterogeneous societies located in the region; the second level that looks at the inter-state relations among the states that border the Caspian Sea (what is known as the inner-circle of Azerbaijan, Kazakhstan and Turkmenistan); the third level which corresponds to the relations among bordering states and their near neighbours (the outer-circle), and the fourth level that interprets the politics of the Caspian region as an interplay among external actors and the littoral states to the Caspian Sea [1].

This article concentrates on analysis of the fourth level, and looks in particular at the actions of three foreign powers in the region: Russia (the ever-present power of conquest, domination and dependency for the region), the United States (playing a more significant role since the breakdown of the U.S.S.R.), and China (the new big player). The economic and political interests of these players have shaped a complex game based on two main objectives: consolidating political influence and ensuring economic benefits. It is the purpose of this article to examine how the foreign powers are playing this game in Central Asia, by looking at how each player pursues a different strategy in terms of the way oil and gas deposits have to be explored and distributed (called variously “pipeline politics” or “petropolitics”).

Russia: losing control

There have always been several linkages between Russia and the Caspian Region. Slavic minorities living in each of these countries; shared borders (the Russia-Kazakhstan border is one of the longest in the world); security issues; and the strong dependence of the Russian economy on oil and gas exports; all are aspects which bind Russia together with its neighbours. These elements constitute the basis of Russia’s permanent interest in Central Asia. On the one hand, the mosaic pattern of the Central Asian ethnodemography, with bulky pockets of Russians and Russian-speaking populations, have made Moscow aware of the dangers of treating the new states with indifference [2]. On the other hand, the Islamic tide spreading through Central Asia with its Turkic Muslim population occupying land-locked territory in the Volga-Ural region represents a significant security concern for the Russian government [3].

In addition to security concerns, economic factors are important: economically, Central Asia relies heavily on Russia and, at the same time, Russia’s economy and budget have become heavily dependent on foreign trade, particularly on oil exports [4]. Dependency on energy resources highlights Russia’s interest in playing a big role in the managing of Caspian potential resources. In spite of this, Russia had been unable to pursue a coherent policy or to set consistent priorities until recently.

Russia has aimed to influence any decision on the extraction and distribution of the oil and gas deposits in the region. For some time Moscow supported the construction of the “northern route” for a pipeline from Azerbaijan to the Russian port of Novorossiisk via Dagestan; but it did not succeed as the United States and the Caspian states did not share the same preference. Some of the difficulties Moscow has faced in dealing with the Central Asian states can be explained by the Russian government’s lack of a defined objective.

One of the major instances with respect to the problems of agenda-definition appeared when in the early 1990s the Ministry of Foreign Affairs stated that the Caspian had to be treated as a lake under the international law, and therefore its resources belonged to all littoral states and could only by exploited by consensus decisions. This represented a geopolitical strategy by which Russia looked to maintain a dominant presence. At the same time, however, the Russian Ministry of Fuel and Energy signed an agreement with Azerbaijan in November 1993 confirming Baku’s right to the disputed fields. The Ministry openly approved the signing of the development contract between Baku and the Azerbaijan International Oil Consortium in September 1994 to the chagrin of the Ministry of Foreign Affairs [5].

Political and economic interests have driven Russia’s policy toward the struggle for influence in the Caspian Sea. However, while the political considerations outlined above essentially put Russia on the defensive, willing to obstruct any foreign influence in the Caspian, economic priorities present Moscow with new opportunities [6].

United States: gaining influence

The United States is the world’s largest oil consumer and importer. This fact alone advances the importance of the Caspian Sea for Washington. It is yet more significant when conflicts and instability in the Middle East stress the need to look at other possible sources of energy. Because the region has become so important to the U.S. government, analysts have come to the point where there is an orchestrated effort by Washington to exaggerate the significance of the region’s hydrocarbon wealth. A study by the International Institute for Strategic Studies stated that despite their near universal quotation, the U.S. Department of Energy figures are generally perceived to be an order of magnitude away from reality [8]. This could be interpreted as an intentional effort to promote the development of projects in the region.

The involvement of the United States in the Caspian has been conditioned by previous alignments. The U.S. government has supported progress towards autonomy for the newly independent states so that they can become less dependent on Moscow’s directives. By the same token, the U.S. has pushed for the division of the Sea into national sectors to undermine Russia’s position as regional arbiter. Additionally, Washington has been strongly opposed to transporting oil and gas supplies via Iran even though American oil companies believe that Iran provides the easiest, fastest and cheapest route of transportation [9].

Keeping in mind the above, the game of “petropolitics” played by the United States has developed with a three-fold approach: to eliminate any Iranian role; to strengthen economic and political ties between Turkey, a NATO member, and the three Caspian states (Azerbaijan, Kazakhstan, and Turkmenistan); and to support the economic development of these states for economic independence from Russia [10]. With these clearly identified interests, the U.S. government has supported two main projects for transportation of oil and gas from the Caspian basin to the global market. The first of the projects is the Baku-Ceyhan oil pipeline, from Azerbaijan to Turkey via Georgia, bypassing Russia and Iran; while the second is the Trans-Caspian gas pipeline, from Turkmenistan to Turkey via Azerbaijan. These projects, nevertheless, have been criticized for not making any economic sense. Of the eight oil companies composing the sponsor group for the Baku-Ceyhan project, only Azerbaijan’s SOCAR and Turkish Petroleum Corporation unequivocally backed the project, while the support of the other members was half-hearted at best [11].

The role of the United States is gaining importance as the Caspian states seek to counter the influence of Moscow. At the same time, the U.S. government is aiming to support any policy which serves to reduce Russia’s hegemony in the region. But in the process, by pushing political interests over economic ones, Washington has designed a non-efficient agenda. Rather than engage with the oil companies and take account of the independent studies which have criticized the project, the State Department has instead tried to pressure them into paying for a pipeline they do not want [12].

China: introducing a balance of power

China’s ongoing process of industrialization has made the country one of the major importers of oil and gas. In contrast to Russia and the United States, China’s involvement in the Caspian region has been based on a strong convergence between foreign policy objectives and energy policy incentives. The government in Beijing has assumed that China’s political presence and influence can be enhanced at the same time as it secures new supplies of energy. Petroleum may become a tool of foreign policy and establish China as a major player in Central Asia [13].

Nonetheless, as any project that would seek to develop export routes through China is likely to offer strongly competitive speed and low cost, scholars have questioned the real objectives of the Caspian states when including China in the discussion of possible routes of transportation for oil and gas. This raises the question of whether the Central Asian states are just using the discussion with Beijing as a bargaining chip in negotiations with other states or whether it is an excuse for developing closer ties with China.

Many commentators have emphasized the importance of factional politics in China’s foreign policy decision-making process, which pits realists against liberals, nationalists against internationalists, and those supporting the promotion of national interests overseas against those giving priority to self-preservation [14]. In spite of this, China has not faced any obstacles to performing an active role in the Caspian region.

This is more obvious when we look at how China has dealt with security issues. In 1996, China, being worried about stability in its common borders with the Central Asian States (particularly in the Xianjiang zone) due to the uprising of Muslim fundamentalism in the region, proposed the creation of the Shanghai Five Group (since 2001 the Shanghai Cooperation Organization) to Kazakhstan, Kyrgyzstan, Tajikistan, and Russia. The agenda of the annual sessions conducted in each member state in turn have been gradually extended from the issues of interaction in the border regions to the prospects of mutually beneficial cooperation in political, economic and cultural spheres.

From a purely political perspective of the Central Asian and Caspian states, China may be used as a counterweight to Russia, as there is the added advantage that closer relations with China are unlikely to irritate Russia as much as their contacts with the U.S. In this sense, China’s entrance into Caspian geopolitics is likely to have a marked impact on the balance of power in the region.

Three’s a crowd?

The Caspian Sea is located in a region with diverse populations, weak states, and is exposed to the influence of Islamic extremism and terrorist groups. Moreover, the military and strategic balance of power in the region is very fragile. External actors have involved themselves in a region where economic interests have to be attuned with security strategies. Competition for influence in the region defines the new game for oil resources, that of “petropolitics”.

For instance, in November 1996 Boris Berezovsky, then deputy secretary of the Russian Security Council, came to Baku, apparently to encourage President Aliyev of Azerbaijan to agree to joint sovereignty in the Caspian (the legal status defended by the Russian government). On his heels, however, came James Collings, then the U.S. Department’s point man for the New Independent States, to pronounce for the first time Washington’s clear support of sectoral division and national sovereignty in the Caspian sectors of the sea, which was the legal status preferred by Azerbaijan [15].

Even though potential economic gains attracted attention to the region, political objectives continue to be relevant. The United States has supported projects without “economic sense”, but with strategic significance. Russia and China have sometimes reached consensus on stability and security concerns and policies for the region. This was the case when in the late 1990s Russia agreed to China’s active participation in the security dialogue on Central Asia through the Shanghai Forum. Rather than shut out its neighbour, Moscow was wise to engage China as a force for regional stability and a partner in economic cooperation. Finally, China has been aware that it can call on Russia’s support to counterbalance the U.S. and Japan; and, looking west, it sees Russia as a vital stabilizing force in Central Asia [16].

Petropolitics of the Caspian region is a complex new game in which economic gains are affected by political objectives (the U.S.), or allow for a more pragmatic perspective (Russia), and in which economic interests can grant political power (China). All these games are being played at the same time. How the game will end up depends on political developments inside Washington, Moscow and Beijing. If political contexts advance to a ‘realpolitik’ scenario, we will probably face the eruption of more conflicts than are needed.

The Central Asian states can assume for some time that they can benefit from a zero-sum game to strengthen their bargaining power vis-à-vis the three external powers. In the long term, however, such a scenario can add more instability and produce no winners. That will be a lesson that all actors in the inner and outer circle of the Caspian politics will have to learn.
 



References

[1] H. Hrair Dekmejian and Hovann H. Simonian, Troubled Waters: The Geopolitics of the Caspian Region (London: Routledge, 2003), pp.8
[2] Ibid.
[3] Dimitri Trenin. 2003. Russia’s Policy in Central Asia. Journal of International Affairs 56 (2): 119-31
[4] Ibid.
[5] Ibid.
[6] Ibid.
[7] Paul Kubicek. 2004. Russian Energy Policy in the Caspian Basin. World Affairs 166 (4): 207-217
[8] Gawdat Bahgat. 2002. Splitting Water: The Geopolitics of Water Resources in the Caspian Sea. SAIS Review 22 (2): 273-292
[9] Ibid.
[10] Ibid.
[11] Alec Rasizade. 2001. The Bush Administration and the Caspian Oil Pipeline. Contemporary Review 279 (1626): 21-5
[12] Ibid.
[13] Ibid.
[14] See Alec Rasizade. 2001.
[15] See Abraham Becker, Russia and Caspian Oil: Moscow Loses Control (Washington: RAND, 1998)
[16] Philip Andrews-Speed, and Sergei Vinogradov. 2000. China’s involvement in Central Asian Petroleum. Asian Survey 40 (2): 377-397

 

Israel Hernandez Seguin is a staff-member of the Mexican Council on Foreign Relations. He is Senior Assistant to the Director-General in charge of the Institutional Program and the Council’s Publications. He has a B.A. in Political Science and International Relations from the Center of Research and Teaching in the Social Sciences (CIDE).