US, Russia Vie for Rich Oil Fields in Caspian Sea
The Caspian's oil reserves are second only to those in the Gulf. Russia wants first crack at them. Last in a series.
A SWANKY Hyatt Regency hotel opened its doors in May in this windy Caspian Sea port, just in time to fill its rooms with hordes of visiting Western oil company executives.Skip to next paragraph
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Down "Oil Boulevard," lined with the decaying mansions built by oil barons of the 19th century, oil men of today gather at Charlie's restaurant to eat steak or pizza and listen to country music.
For the second time in history, this capital hums with the oil business, luring people and money from around the globe. The fields that were the largest source of the world's oil at the turn of the century are played out. But new fields offshore promise even greater riches.
With the oil and gas fields of Kazakhstan and Turkmenistan, on the opposite shore of this gray inland sea, the Caspian is believed to hold reserves second only to those of the Persian Gulf.
According to a well-informed Western diplomat here, there is at least $200 billion worth of oil under the Caspian, "and probably several multiples of that."
It is a rich prize, one that has sparked a struggle for control that pits Russia, until the collapse of the Soviet Union the ruler of this region, against the West, led by the United States.
The neighboring regional powers, Iran and Turkey, are also in the fray, aligning themselves with Russia and the US respectively. This geopolitical battle is reminiscent of the oil wars over the Persian Gulf, one which will shape the destiny of the entire Transcaucasus, if not beyond.
"If the West gets the oil and strengthens the independence of the states in the region, then Russian influence will decrease," explains Archil Gegeshidze, national security adviser to Georgian President Eduard Shevardnadze.
A big deal
The battle was joined in earnest last September when after two years of talks, punctuated by one coup in Baku and several attempted coups, the Azerbaijani government signed a contract with a consortium of 11 foreign firms to develop three huge offshore fields.
The Azerbaijan International Operating Committee, as the consortium is called, is led by British Petroleum and Norway's Statoil, but it includes five major US firms holding a combined 44 percent stake in the project.
The US government has become increasingly involved in backing this project. Earlier this year, the US publicly supported the construction of a pipeline that would transport the Caspian oil through Turkey to the Mediterranean Sea, completely avoiding Russian territory. The Russians see this combination of the Western firms and the Turkish pipeline as a major threat to their security interests, particularly to Russian domination of a region that has traditionally been under their control.
"US involvement makes it more of an issue for the Russians," says Laurent Ruseckas, oil analyst at Cambridge Energy Research Associates in Cambridge, Mass. "It's become practically like NATO expansion," which Russians say threatens their security by taking steps to include Central European states in the defense alliance.
Russia is exerting pressure on two fronts: by challenging the legal right of the states bordering the Caspian Sea to own the offshore resources beyond their territorial waters, and by trying to block any pipeline route that is not under its control.
Immediately after the Azeri oil contract was signed, the Russian government issued a formal protest, saying the Caspain is not a sea as defined by international law but a lake. Referring to earlier treaties between the Soviet Union and Iran regarding the Caspian, the Russians contend that there must be communal use of the sea and that no state can act unilaterally.
Moscow has garnered the support of two other littoral states for this stance - Iran and Turkmenistan - and is putting heavy pressure on Kazakhstan as well, hoping to isolate Azerbaijan.
Until recently, however, there was division within the Russian ranks, with the powerful Energy Ministry, backed by Prime Minister Viktor Chernomyrdin, a former state gas industry boss, showing more flexibility. They are represented in the consortium itself by the Russian state oil firm Lukoil, which has a 10 percent share of the project.