International Institute For Caspian Studies
 

 

 

 

Caspian Oil and New Energy Politics

DANIEL SHERMAN
ENVIRONMENT | 05.25.00

The Caspian Sea region has long been considered by many to be the next oil and gas frontier. This week confirmed that speculation when it was reported that a consortium of Western oil companies had found a vast petroleum reserve in the northern Caspian Sea off the coast of Kazakhstan. It may very well be the largest oil discovery of the past 20 years. This find follows the Clinton administration's two-year promotion for the building of a $2.4 billion, 1,080-mile Baku-Ceyhan pipeline to transport the growing volumes of Caspian oil to European markets.

The Caspian Sea region's sizable and untapped resources, combined with its unique political status following the breakup of the former Soviet Union, catapulted the area into the media limelight and to the center of policy debates a few years back. Oil politics in the region is a post-Cold War geopolitical game between an emboldened Washington and a weakened Moscow over the control of strategic and lucrative oil pipelines.

The stakes are high. Today a modest producer, the Caucasus region could become a significant suppler of oil to world markets, which would help meet rising energy demands. The drive by U.S. oil companies to exploit these resources has produced a political realignment of historic proportions, including an unprecedented American presence in a region dominated by Russia since the 19th Century. The breakup of the Soviet Union created a power vacuum that unleashed a number of new rivalries and alignments that have been seized upon and successfully manipulated by the U.S. alone. The regiont remains a flash point for conflict and chaos and poses risks and policy dilemmas that will only intensify with the completion of the Baku-Ceyhan pipeline.

The U.S. has thus kept an eye on the stability of the region's governments, encouraging the 'nation-building process.' The region remains a potentially volatile area riven with instability, poverty, ethnic conflict, armed separatist movements, and an intense rivalry between Russia and Iran. The Caspian countries welcomed American oil giants and eventually the U.S. as a way to secure its financial and political independence. Ethnic tensions, such as those between Armenia and Azerbaijan, continue to simmer beneath a surface of slowly developing national identities that threaten not only control of the western oil export route, but also the stability of the entire region.

Western oil companies have been coveting these reserves for the last decade, often lobbying the US government to take on a larger role. The Chicago-based Amoco Corp. has played a significant role in pushing the U.S. closer to Azerbaijan, and reflects the growing political complexity involving oil companies and governments vying for a piece of the pie. Many American oil firms view a pipeline running south to Iran as the cheapest and fastest exit route for Caspian oil, but Clinton has maintained the U.S. policy of isolating the Islamic state.

The U.S., despite its nation-building rhetoric, is clearly involved for energy security reasons. If it takes democracy to ensure this region remains stable, so be it. While roughly half of our needs are met with imports (much from the Persian Gulf), there has been a fundamental shift in our reliance on Middle East oil. The fact remains that the stability of the world economy will continue to rely on the steady flow of reasonably priced oil from the Persian Gulf, but the availability of vast oil reserves has diverted attention elsewhere for the time being. The tie that binds the U.S. closer to the Caspian region is likely to tighten because there are at present few alternatives.

While finding new reserves is important and newsworthy, it underscores a larger problem facing the country whose prosperity was built upon and remains largely dependent on the availability of cheap oil. With reserves running low worldwide, this find is significant. Unfortunately, it will likely push back efforts to find much needed alternative energy sources for the future. More emphasis is placed on finding new pockets and protecting these regions (our national security they tell us) than creating viable solutions to a multi-trillion dollar problem.

Gas prices surge and we get unnerved, but this is merely a warning of things to come. This winter the global price of crude tripled while production levels were steady. Imagine what will happen when production begins to fall. While it could be decades before we run out of oil, we will run out of cheap oil sooner rather than later. When that happens and prices rise permanently, it will hit even harder than the temporary oil crunch of the 1970s (which contributed to decade-long stagflation).

This is why we must put our technological knowledge to work developing advanced energy alternatives. Research into new forms of energy will be the dot com phenomenon of the 21st century. We either start investing in new energy forms now or else face the consequences later. Can you say oil-induced recession?

* * *

 

Back to article list