Caspian Sea: Oil And
Politics, Is It Worth It?
By Cathie Carlson
Can the Caspian Sea Be Our
Savior?
The Caspian sea is an untouched region
of potentially big oil resources. The
newness of this region could alleviate
problems that would result from a
cutoff of 25% of oil imported to the
U.S. thereby giving the U.S. a respite in
its oil imports while it tries to create a
less oil dependent nation.
The Oil problem will get worse
before it gets better
Problems with the Caspian Sea area:
Geopolitics
Pipelines
Oil dependence from other countries
The lack of desire on the part of
Americans to look for alternative means
Geopolitics and Pipelines
Five countries
border the Caspian
sea and each have
their own agendas
regarding the
politics in the region
Each of the five countries as well as their
neighbors and other countries have their own
agendas especially when it comes to the
pipelines
Russia
Kazakhstan
Turkmenistan
Iran
Azerbaijan
The players include:
The Five Caspian Sea Neighbors
The United States
China
Turkey
Other Regional Neighbors like Pakistan,
Afghanistan, and India
The Oil Companies
Oil Dependence from other
countries
It’s not just the United States who is seeking
more and more oil to meet its needs
Other countries, especially Asian countries,
are going to have additional oil needs in the
coming decades
China and India with their large populations
are going to exceed the U.S. demands for oil
in the coming years
Lack of desire to shift to new
resources
Americans equate cars and driving with
freedom and oil is needed to drive cars
Americans demand less dependence on Mid
East oil but are not as willing to alter their
daily habits
What the Caspian Sea Oil
Provides
Benefits via the Caspian sea:
Provides a safety net while other energy
alternatives are being researched and
developed
The U.S. would be less dependent on
the Middle East and the fragile political
structures that control that region’s oil
The Geopolitical and Pipeline
Concerns
The Caspian Sea
Facts and Figures:
The Caspian Sea is
700 Miles Long
It contains an
estimated 200 billion
barrels of oil and up
to 300 trillion cubic
feet (Tcf) of natural
gas
Much of the area
remains unexplored
and unexploited
Five countries border
the sea
The sea is actually a
lake as it has no
ocean outlet
Disputes over control
of the resources and
boundary issues exist
The Caspian Sea
Problems:
There are only
estimates as to the
reserves; no one
really knows how
much oil exists
Political instability
exists in the region
Pipeline security is
questionable
Pipelines to get the
oil out have become
a political issue
China and the United
States have their
own agendas as to
who should get the
oil and where the
pipelines should go
1. Russia
Russia has the most influence in
the region
The Soviet Union
controlled most of
the region and only
had to share a
border with Iran.
Now four of the
current countries
surrounding the Sea
were once part of
the Soviet Union
Countries like
Turkmenistan and
Azerbaijan are
heavily dependent
upon Russia
Russia controls the
only current pipeline
from the Caspian
Sea
Russia Wants to Maintain its
Influence
Russia has maintained pipeline supremacy in
the region
“Since 1991, Russia has made a concerted effort
to ensure that existing pipelines continue routing
through Russia, and it has largely succeeded.”
All current pipelines pass through Russia
• The pipeline from Baku and the pipeline from Kazakhstan
have all been routed to Russian oil terminals in the Black
Sea
• Russia has maintained this supremacy by encouraging
countries to take advantage of the current system rather
than investing in a new pipeline system
2. Iran
Iran could be a key player
Where Iran once bordered only the
Soviet Union, it now shares its borders
with three newly created states, two of
which border the Caspian Sea –
Azerbaijan, Turkmenistan
Iran is the only country bordering the
Caspian Sea to be a member of OPEC
“Axis of Evil” – The U.S. v Iran
Since the 1979 hostage
crisis in Tehran, the U.S.
has labeled Iran a
terrorist state, a label
which was repeated in
the 2002 State of the
Union address
The U.S. vigorously
opposes any contact
with Iran
The U.S. has imposed
sanctions against Iran
and U.S. companies are
prohibited from
accessing any oil or
investing in any oil
fields in Iran
The U.S. discourages
the laying of oil and gas
pipelines through Iran
3. Kazakhstan
Potential Oil Giant
Kazakhstan boasts the third largest
deposits in the world after the Middle
East and Russia
There are 10bn-17illion barrels of proven
oil reserves and some estimates claim
there are about another 70 billion barrels
worth of oil
Three quarters of the Caspian Sea lies
under the Kazak sector
With Existing Pipelines
An existing pipeline from Kazakhstan
through Russia’s Black Sea port makes
this country one of the most stable in
the region
Kazakhstan is landlocked and must rely
on pipelines to get its oil and gas out of
the country
And Heavy Ties With Russia
The only existing pipelines for oil and
gas are Russia pipelines that go through
Russian terminals thus making
Kazakhstan and the other countries
heavily dependent on Russia
And Heavy Ties With Russia
Russia and Kazakhstan share a border and
share the boundaries for their oil and gas
fields in the Caspian Sea which only increases
the ties between the two countries
Kazakhstan signed a collective security
agreement after it gained its independence
but recently refused to increase military
cooperation with Russia
4. Turkmenistan
Future Uncertain
The U.S.
Department of
Energy estimates
Turkmenistan’s
proven oil reserves
at 546 million
barrels
More than 20% of
its reserves are
under production
The country’s oil
output remains a
fraction of what it
was during the
Soviet era
Oil refining will
become a larger
sector of its
economy than oil
production
Pipelines Critical
Today, Turkmenistan relies almost
exclusively on Russia’s pipeline network
for its oil and gas exports
A more convenient line through Iran
has been proposed
This line would only require 100km of
pipes to link Turkmenistan to Iran’s pipeline
network
5. Azerbaijan
Russia, Iran and the U.S.
Russia
As a former Soviet state,
Azerbaijan has many
links with Russia
These links include one
of the new pipelines
Russia built that goes
from Baku through
Russian terminals to the
Black Sea
Iran
Only 100 kilometers of pipeline would be
needed to link Azerbaijan to Iran’s pipeline
networks to the Persian Gulf
Iran would prefer to import oil for its
northern regions (supplied by Azerbaijan)
so it could free up its southern oil fields for
export via the Persian Gulf
The United States
Azerbaijan does not currently supply oil to Iran,
instead it sends its oil through pipelines from
Turkey to the Mediterranean Sea
The Baku-Ceyhan pipeline is favored by the United
States
• This pipeline would run from Baku to the Turkish
Mediterranean port of Ceyhan
• As a result of the September 11th attacks, this proposal
has been give new life and construction of the almost $3
billion pipeline may begin soon
Pipeline Turmoil:
Geography, Politics and More
Why are pipelines such a big
deal?
“In landlocked central
Asia there is no point in
pumping oil and gas if
you cannot get it to
market. All the
pipelines in the area run
over Russian soil and,
until now, the Kremlin
has been playing
hardball limiting the
access to pipelines and
charging usurious
tariffs.”
Which Way to Go?
There are four pipeline options
North-Northwest
Westbound
Eastbound
Southbound
Pipelines in the Region
North-Northwest: Linking pipelines
to Russia’s existing system
Pro
Russia has an
existing system
This is the easiest
option and the
fastest way to to
transport oil and gas
out of the region
Con
It’s system is complex
and poorly maintained
The countries who have
used this system resent
Russia’s control of the
export market and hard
currency
Many of the countries
would prefer to bypass
Russia altogether
Russia’s Pipelines
Westbound: Baku-Ceyhan
Pro
Most favored option
by the U.S.
Con
Expensive
Target is primarily
Europe and
companies are wary
of investing in a
mature market with
limited growth
Eastbound : Long-distance pipelines
used to transport oil to China and
eventually Asia-Pacific
Pro
An 1,800 mile proposed
pipeline from Kazakhstan
and a 4,200 mile
proposed pipeline from
Turkmenistan to China
would be the most direct
way to link Central Asia
and the Far East
Con
This is the most
expensive and
geographically
difficult alternative
Southbound: Two pipelines – one to Iran
and another to Pakistan and India
though Afghanistan
Pro
Pipeline through Iran
is the most
economical of all
options
Pipeline to India
would ease burden
on that energy
hungry country
Con
The U.S. opposes
any pipeline through
Iran and therefore
few investors have
been attracted
India wants to
bypass Pakistan
completely
The Other Players: The U.S.,
China, and the Oil Companies
The United States
The United States is trying to create ties
with some of the former Soviet
countries in order to contain Russian
dominance in the region
Ironically, the U.S. presence in the
region due to September 11, has eased
some of the pressure to follow Russia’s
lead by some of the Caspian states
The United States, ctd.
U.S. presence has been seen by some
to provide an excuse to side with the
U.S.
Unfortunately, the U.S. policies against
Iran have locked U.S. companies from
that market. An Iranian pipeline would
only harm the companies even more
China
China will increasingly be searching for
oil
The Asia-Pacific region as a whole is
dependent on Middle East oil
More than 90% of the region’s oil comes
from the Middle East as opposed to 25% of
the United States’ oil
China, ctd
Kazakhstan as China’s neighbor and as
the nation most dependent on a foreign
country’s pipeline is just as likely to look
East as to look West to sell its oil
The Oil Companies
All the large oil companies have
expressed interest in investing in the
region
The oil companies are expected to
invest the billions of dollars to create
and maintain the needed pipelines
Politics have added difficulties to the
investment possibilities in the regions
ExxonMobil Sites
The Oil Companies, ctd.
U.S. oil companies are prohibited from
investing with Iran
But other companies are not
Political instability in the region makes
companies hesitant to invest
Fear of MidEast like problems compound
the region’s image as unstable
Pipeline Security
The present and
future pipelines will
cross many borders
The issue is who will
protect the pipelines
and who will pay for
the security
Legal Issues
The Status of the
Caspian Sea: Is it a
Lake or a Sea
If it is a sea then the
three mile limit of
the territorial waters
applies
Boundary disputes
are an issue
between many of
the countries in the
region
Legal Issues - What can be
done?
Regional discussions and treaties are
the best means of solving the boundary
disputes
Contracts between oil companies and
the countries need to address issues of
infrastructure, pipeline security and
pipeline transportation
Legal Issues – What Can be
Done?
The United States needs to eliminate
the barriers it has imposed on U.S. oil
companies in order to prevent
investment in Iranian oil.
This would involve Congress as well as
the President.
Summary
The Caspian Sea is filled with
possibilities but two big problems stand
in its way to becoming the savior to US
dependence on Mideast oil
Pipelines need to be built
Politics affect everything in the region and
at this time hampers a productive solution
to the pipeline problem
Summary, ctd.
The U.S. and China seem to the key outside
players in that they have the money to invest
in pipelines and the desire to have the oil
If the oil flows West then China’s dependence
which is far greater than the U.S.’s, on the Mideast
would remain the same
If the oil flows East then there would be more oil
for the U.S. but the dependence on that region
has at the least remained the same and at the
worst grown