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Guzzling the Caspian

September 27, 2002



With little fanfare in the midst of so much attention on Iraq, construction started last week on a $3 billion pipeline that marks a US victory in the geopolitical jockeying over world oil supplies.

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By 2005, the 1,091-mile pipeline will transport oil from Central Asia's Caspian Sea across Georgia, Azerbaijan, and Turkey to the Mediterranean port of Ceyhan. The Caspian is widely assumed to be the world's third- largest reserve of oil and gas.

Here's the victory part: The pipeline bypasses Russia and Iran, and provides a benefit to the other, weaker nations on that inland sea.

The US has used its diplomatic muscle over eight years to make this pipeline happen, even with the risk that the pipeline might not be commercially viable. It's all a part of the US strategy to reduce its dependency on oil from the Persian Gulf – especially from Iraq – and the price-setting dictates of OPEC.

Indeed, Iraq now is the fastest-growing source of imported oil to the US. And the US has become dependent on imported oil to the tune of 52 percent of its usage, up from 37 percent during the Gulf War.

Developing oil production in non-OPEC nations – including Russia – will reduce the ability of big producers, such as Saudi Arabia, to use oil as a political or economic weapon.

When all the planned pipelines for Caspian oil become operational, experts estimate they will supply roughly 4 percent of world reserves. And that 4 percent will influence how the price is set.

This one pipeline also will foster economic and political stability in the region itself, adding an estimated $100 million per year to cash-poor countries, such as Azerbaijan. In fact, countries like Azerbaijan and Kazakhstan, largely Muslim and moderate, already are moving toward modern education and have universities attracting students from other parts of the region.

Still, the good news of Caspian oil goes only so far. The US must steadily reduce its oil addiction through clean-energy alternatives and conservation. Projections, however, show a steady rise in oil consumption. That makes oil geopolitics even more necessary.

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