Central Asia/Russia


	May 29, 2002	atimes.com

Central Asia/Russia

Caspian oil not seen to threaten Middle East
By N Janardhan

DUBAI - Russia and the Central Asian republics may have a considerable combined oil reserve, but many experts say this is not enough to pose a real challenge to the firm grip of the Middle East on the world oil market.

Although there are those who have raised the alarm of Caspian oil threatening even the security and stability of the Middle East, more experts say that such a scenario remains far-fetched. According to these experts, this is largely because the countries that have stakes in the Caspian's black gold first have to solve problems such as territorial disputes, inefficient governance, corruption, endless red tape and nearly non-existent infrastructure.

Comments Palestinian official and political analyst Anwar Abdul Hadi: "As it stands today, the danger of Russian and Caspian oil on Middle East security is more a fear than a real threat, greatly hyped by the West."

In truth, even Western experts such as David Goldwyn, former US assistant secretary for energy in the Bill Clinton administration, rule out the possibility of Caspian oil diminishing the profits, as well as the importance, of the Organization of Petroleum Exporting Countries (OPEC) anytime soon.

Speaking after a seminar on the "Middle East in International Security Policies" organized by the Zayed Center for Coordination and Follow-up in the United Arab Emirates last week, Goldwyn said that despite the Caspian region's bright oil future, the Middle East would remain "critical". OPEC, he added, would still be in control of the market.

But Goldwyn also said, "OPEC's reaction to new entrants from Central Asia is crucial. It should realize that the significance will be in additional supplies that will have a bearing on the prices, hence the effect [will be] more economical."

Most conservative estimates put the Caspian Basin's oil reserves at about 70 billion barrels - one of the most abundant after those of the Middle East. While that is just about 10 percent of OPEC's untapped stocks, some experts have said that it is enough to threaten Middle East producers. After all, point out these experts, Kazakhstan and Azerbaijan alone are expected to top non-OPEC production in the next five years and pump as much as Kuwait and the North Sea - 3.1 million barrels per day - by 2010.

These experts also argue that an increasingly energy-hungry China could turn to Russia and the Central Asian countries to meet more and more of its needs in the years to come. According to some estimates, China's domestic requirements are expected to double to 21 million barrels of oil per day, or 16 percent of total world energy demand by 2020.

That such a big order would not go to the Middle East could upset the security of the OPEC region, one theory goes. Once the Middle East is no longer deemed important to meet the energy needs of the rest of the world, there would no longer be a compelling reason for outsiders such as the United States to ensure that most of it remains at peace.

"The threat to Middle East security is indeed two-fold," asserts Dr Koehi Hashimoto, president of the Japan-based New International Political System. "Apart from the Chinese demand growing and being fulfilled from non-OPEC supplies, it is important to note that the European Union and North America have already cut dependency on Middle East oil by about 25 percent during the last 10 years."

To be sure, OPEC's influence has been on the decline since the 1970s, when the oil shocks of that decade saw many oil-consuming countries cheering on the efforts of non-OPEC producers even as they searched for renewable sources of energy. Then came the 1980s, during which organizations like the International Energy Agency were set up and helped create a consumer cooperative. The past decade, meanwhile, saw the disintegration of the Soviet Union, which raised the promise of huge Caspian Sea reserves with less Russian influence.

Yet Hashimoto himself concedes that China does not really have a choice but to "to look to OPEC countries, especially Iran and Iraq, in order to ensure regular supplies".

Other countries in Asia that are dependent on the Middle East for their energy needs may not also be that comfortable in shifting to other suppliers who may not be as reliable as the OPEC members. These countries would probably even discourage any military support or action in the Middle East that could lead to instability or disruption in the balance of power there. In the meantime, other experts like Goldwyn think that instead of threatening security in the Middle East, new oil supplies such as those coming from the Caspian Basin would only enhance global energy security by easing the pressure on the world energy markets.

Goldwyn also believes that at the very least, it is in the OPEC's interest not to raise prices. By resorting to oil price hikes, he said, the OPEC would not only retard growth all over the world, but would also end up hurting itself because non-OPEC production would rise. Thus, he told IPS, "price stability is key to [the] Middle East's status as an energy giant".

At the same time, many experts say that more than Caspian oil, it is Saudi Arabia that could - and does - affect world supplies of the energy source. Saudi Arabia has one fourth of the world's proven oil resources, and is its largest oil producer. It has thus been called the "swing producer", since it can change the demand-supply equation as it wishes.

(Inter Press Service)