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Oil snub to US in the
pipeline
By Hooman Peimani
In his late June meeting with Kazakh Prime
Minister Imangali Tasmagambetov in Astana, Iranian
ambassador to Kazakhstan Morteza Safari announced his
country's readiness to begin negotiations on a major oil
pipeline project. It was a significant meeting in terms
of global business and geopolitics.
The proposed
project would provide a connection between oil-producing
Kazakhstan and the Iranian Persian Gulf oil terminals
(via Turkmenistan) through which Kazakh and also Turkmen
oil could be exported to international markets. Iran and
Kazakhstan have long been interested in the project,
although it has remained on paper mainly because of
American opposition. According to the Kazakh government,
Total, a French oil company operating both in the
Caspian region and in Iran, is planning to undertake a
feasibility study on the proposed pipeline, in itself a
positive sign of the project's feasibility.
Even
though there is no certainty about its implementation in
the near future, Kazakhstan's recent statement of
interest and that of a major European oil company
reflect an emerging realism both in the Caspian region
and in Europe over the issue of exporting Caspian oil.
The region's economic needs, its geographical realities
and the European Union's growing political and economic
rivalries with the United States seem to be whittling
away at Kazakh and the European concerns over American
objections to the involvement of Iran in Caspian oil
exports. This trend, if it continues, will pave the way
for the pipeline's construction.
Finding
reliable export routes for Caspian oil and gas has been
a major preoccupation for the three energy-exporting
Caspian countries, Azerbaijan, Kazakhstan and
Turkmenistan, since their independence in 1991. As
landlocked countries, they have to rely on their
neighbors with access to international waters for their
exports. Geography dictates only four potential direct
routes for oil pipelines leading to seaports from where
Caspian oil could be exported by oil tankers. The
Chinese one is practically out of the question as it is
too long and too expensive to be a long-term route,
while the Georgian one is only suitable for limited
short-term exports as Georgia suffers from major
security problems, including two independence movements,
among other restrictive factors.
The Russian and
the Iranian routes are both feasible and economically
sensible, with the Iranian route being shorter and safer
(as Iran, unlike Russia, suffers no Chechnya-style
instability on the route). However, the American policy
of excluding both countries from the Caspian oil
industry has created severe obstacles to the use of
these economically sensible routes, with Iran
practically removed from consideration as an export
route.
In recognition of Caspian countries' need
to maintain friendly ties with Russia, the Russian route
has been used since the mid-1990s. However, the
Americans have since sought to promote an indirect,
long, expensive and unreliable route via Georgia and its
neighboring Turkey in the form of the
Baku-Tiblisi-Ceyhan pipeline to bypass both Iran and
Russia. With all its shortcomings, the majority of oil
companies operating in the Caspian region have shown no
interest in the proposed pipeline, which enjoys the
support of its immediate beneficiaries (Azerbaijan,
Georgia and Turkey) and the United States. Because of
its high cost, the pipeline will be profitable only if
Kazakhstan opts to export through it, but the Kazakhs
have refused to commit themselves.
Kazakhstan
has the largest proven oil reserves of the Caspian
region. As a result, it could potentially become the
most prosperous regional country if it secured reliable
long-term oil export routes. Undoubtedly, Iran's
geography and its internal stability make it the
shortest, cheapest, safest and most reliable route for
the Kazakhs who are currently heavily relying on Russia
for their oil exports and who wish to increase them. No
wonder the Kazakhs have expressed interest in a pipeline
to Iran's Persian Gulf oil terminals. Turkmenistan, a
friendly country sandwiched between Kazakhstan and Iran,
is also interested, as it would provide that country
with its own export route through a neighboring country
with which ties have been expanding steadily since
independence.
Iran, Russia and Turkey have been
competing to establish themselves as the main export
routes for their obvious economic and political
benefits. Without any exception, all oil companies
operating in Kazakhstan, including the American ones,
are interested in using the Iranian route for its
mentioned characteristics. Yet the American ban on
cooperation with Iran for American companies and the
threat of sanctions have resulted in a limited amount of
oil exports via Iran through swap deals. Thus Iran
receives Kazakh oil at its Caspian oil terminal for its
northern refineries and deliver to designated buyers the
equivalent amount of oil at its Persian Gulf terminals.
Swap deals could expand several-fold, but a pipeline
would still be more reliable, as well as a future
necessity for Kazakhstan. That pipeline would be used in
addition to the existing operational Russian pipelines
connecting it to the Black Sea to ensure Russian
friendship and for export to Eastern Europe.
Iran and Kazakhstan signed an agreement for the
construction of the Kazakhstan-Persian Gulf pipeline in
the 1990s, but it has not been implemented due to lack
of investors. Nevertheless, Kazakh President Nursultan
Nazerbayev has reiterated his country's view of Iran as
a "promising" export route over the last few months,
including in last April during US Secretary of State
Colin Powell's visit to the country.
The
Americans are still against the project, but a reliable
export route is becoming increasingly vital for
Kazakhstan as it needs to decrease its reliance on
Russia for political and economic reasons and to create
export capabilities for its growing oil exports. Despite
American opposition, certain developments are
contributing to a more suitable situation for the
implementation of the pipeline project. The rising
European Union (EU) is finding its interests in conflict
with those of the United States on a growing number of
issues and in many regions. In search of political
influence and economic gains, the EU has become inclined
to challenge American views on certain matters,
including ties with Iran.
Consequently, the EU
opted to expand political and economic ties with that
country during its June foreign minister meeting in
Luxembourg without regard to American opposition.
Against this background, the decision of Total to
conduct a feasibility study (if it happens, and if it
receives full EU backing), will likely lead to the
implementation of the pipeline project given the strong
interest of Iran and Kazakhstan.
Dr Hooman
Peimani works as an independent consultant with
international organizations in Geneva and does research
in international relations.
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Part 1: The rules of the game
