Page 2 of 2 US standing in Caspian drips away
By M K Bhadrakumar
Tashkent on September 1-2, Uzbekistan and Russia agreed to build a new pipeline
with a capacity of 26 to 30 billion cubic meters (bcm) annually to pump Uzbek
and Turkmen gas to Europe. Such a pipeline will undermine the US efforts to
develop a trans-Caspian energy route bypassing Russia. Again, Russia's LUKoil
has announced plans to produce 12 bcm gas in Uzbekistan's Kandym and Gissar
fields annually.
All in all, therefore, Rice's visit to Kazakhstan took place against a grim
backdrop. Neither Azerbaijan nor Kazakhstan appears interested in US entreaties
to re-route energy exports to bypass Russia. Both hope to maintain good
relations with the US but that cannot be done by picking a quarrel with Russia.
At a press conference with Rice in Astana on Sunday, Kazakh Foreign
Minister Marat Tazhin stressed relations with Russia will remain a top
priority. "Our relationship with Russia, I can formulate, is just excellent. We
have very good political relations. Russia is our strategic partner� At
the same time, I should underline that our relationship with the United States
has a stable, strategic character."
Neither Tazhin nor Kazakh President Nurusultan Nazarbayev apparently made any
commitments to Rice regarding US-sponsored pipelines. On the contrary,
addressing the media jointly with Russian President Dmitry Medvedev following
the Russian-Kazakh border region forum in Aktyubinsk, Kazakhstan, on September
22, Nazarbayev said Kazakhstan will be increasing its oil production by 12
million metric tons in 2009 and it proposes to pump the additional oil via
Russia. "It is very important that Kazakh oil should pass through Russia", he
said.
Kashagan puzzle
Nazarbayev hinted Astana would use the Russian-controlled Caspian Pipeline
Consortium (CPC) to carry Kazakh crude from the Kashagan deposit in 2012-2013
to the Russian terminal on the Black Sea. Nurlan Balagimbayev, adviser to
Nazarbayev, said on Thursday that Kazakhstan is interested in buying an
additional 13.7% of stakes belonging to both BP and Oman in the CPC, in which
Russia holds 24% besides Chevron, Shell and ExxonMobil.
Rice would have utilized her visit in Astana to check out Kashagan. Kazakhstan
and a group of Western oil companies led by Italy's Eni are due to finalize
details on Kashagan's future by October 25. A new operating company is expected
to be formed and individual companies - Eni, Shell, ConocoPhillips, Japan's
Inpex Holdings and Kazkhstan's KazMunaiGas - are likely to control different
aspects of the operation such as production or shipping.
Kashagan is estimated to hold 7 billlion to 9 billion barrels of recoverable
reserves and is undoubtedly the jewel in the crown of the Caspian Sea Basin.
Several different routes are likely to be needed for delivering oil from
Kashagan to customers, involving the construction of major new oil pipelines.
Rice would have easily anticipated the keen rivalries that lie ahead in advance
of the 2013 production start date of Kashagan. The battle for Kashagan is about
to be joined.
The transportation route for the Kashagan will have a vital bearing on the
long-term economic viability of the BTC pipeline. But Astana has shown no hurry
so far in committing Kashagan oil to the BTC. Kazakhstan may well be playing
for time and synchronizing with Russia's expected completion of the pipeline
from East Siberia to the Pacific (ESPO) by 2012 for routing oil to the Asian
markets.
Russian Energy Minister Sergei Shmatko said on Wednesday that Kazakhstan's
state-owned oil pipeline operator KazTransOil is interested in transporting
Kazakh oil through the ESPO. "Our Kazakh partners are looking at the project
with great interest and enthusiasm. We are happy about that", he said at a
function launching a section of the ESPO between Talakan and Taishet. The
Taishet-Talakan section of the ESPO line was completed in September, while the
remaining stretch to Skovorodino, near the Chinese border, is scheduled to be
completed by end-2009.
Will Astana decide to ship its projected oil output - 150 million tons a year
by 2015 - through ESPO? If that happens, China will be a huge beneficiary and
the geopolitics of the Caspian will undergo a historic transformation.
Russian-Kazakh "oil alliance"
Rice put on an appearance, saying, "This is not some kind of contest for the
affection of Kazakhstan between the countries of the region". But it is very
obvious that Washington is nervous Kazakhstan is showing alarming signs of
shifting towards Moscow. Astana supported the Russian action in the Caucasus
and cut down its investment in Georgia. If Rice was hopeful of encouraging
Kazakhstan to stand up to Russian "bullying", she was disappointed.
On the eve of Rice's arrival in Astana, Nazarbayev said, "I personally was a
witness to the fact that Georgia attacked first. I was in Beijing on August 8
with Mr Putin, when we first heard the news. I think the coverage of those
events was biased. Whoever you may blame for the conflict, the facts are bad
enough."
Since assuming office in the Kremlin on May 7, Medvedev has visited Kazakhstan
three times. During his last visit, he promised, "We [Russia and Kazakhstan]
will keep building up the production and the export of hydrocarbon raw
materials, build new pipelines when it is beneficial and necessary, and attract
large-scale investment into the fuel and energy sector."
On Wednesday, while on a visit to Almaty, Kazakhstan's largest city, the
influential head of the CIS (Commonwealth of Independent States) committee of
the Russian parliament, Vadim Gustov, floated a new idea that the two countries
needed to develop a common energy market. He said an "oil alliance" would be
mutually advantageous.
"A common energy market of Russia and Kazakhstan would help develop energy
cooperation, supply cheap energy resources to the domestic markets and increase
energy supplies to third countries", Gustov said. According to him, Russia and
Kazakhstan should develop and adopt a joint concept of the energy market, which
could serve as basis for Euroasian Economic Community space.
Evidently, Washington is barely keeping pace with the Russian diplomacy. To
make matters worse, the financial crisis at home has eroded US credibility. An
entire ideology of economic development that US diplomats propagated in the
region stands discredited.
There is huge political symbolism when Iceland expresses "disappointment" with
the Western world and turns to Moscow for a 4 billion euro (US$5.5 billion)
loan to salvage its economy from imminent bankruptcy. Such images make a
lasting impression on the Central Asian steppes.
M K Bhadrakumar served as a career diplomat in the Indian Foreign Service
for more than 29 years, with postings including ambassador to Uzbekistan
(1995-98) and to Turkey (1998-2001).
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