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Saturday, September 26, 2009

Politics Amidst BTC Euphoria*

(Excerpts from Dr.Makni's book, "The New Great Game: Oil and Gas Politics in
Central Eurasia" published simultaneously in Feb 2008 from New York, London and
Swansea. Please ignore footnotes numbering in the text)
The completion of BTC (Baku-Tbilisi-Ceyhan pipeline) has generated success
euphoria in the Western camp. Those opposed to this project, on the contrary have
been moored psychologically. The composition of the CPC stakeholders indicates
conglomerate of the eleven companies, including Russian, who pioneered this
venture. Conversely, a close look at BTC shows that none of the Russian or Iranian
companies co-joined. While Iran’s prospects of participation were obviously
blocked by ILSA (Appendix-1), there was no bar on Russian companies who were eager
to avail a profitable situation. This was one of the few projects where Russian
Govt. and their companies maintained conflicting approach when the government to
stay away from the project, stopped them. An eminent scholar Fredrick Starr39 has
looked at BTC from a different angle after its completion, labeling it as one,
which represents School of Modernity. He appears inclined to condone in some
manner the Jacobean brutalities of French Revolution when in the backlash, Comte
Henrie de St. Simon had made a visionary statement that henceforth engineers and
not the politicians would change the world. As already said he also draws
parallels between BTC and Suez Canal designed and built by French engineer
Ferdinand de Lessups40.

The Russian politicians observed no qualm in criticizing the project vehemently


because it amounted to the curtailment of their natural rights in South Caucasus.
The critics, some within Turkey, US and Europe, expressed serious reservations
about the cost and ability of Caspian littorals to ‘through put’ required
quantities of oil in BTC. Thus, it complicated the politics further. Environment
concern and demographic upheavals were the tools available to the opponents who
were well equipped with such statistics. They maintained and rightly that the
project would uproot 300 villages in backward region of Anatolia in Turkey. Yet
the desire to reach the free market through the BTC, sponsors’ and the investors’
steadfastness prevailed ultimately. However, projected completion is one marvel
for the consortium, as ensuing ramifications once the BTC has become operational
since December 2005 there are bound to arise some fledgling irritants on
transmission, price and sharing revenues. The security fear would remain, though a
separate protection force to patrol along BTC has been constituted.
The recipients of oil revenues i.e. Azerbaijan, Georgia, Turkey, and the crop
harvesters of oil, USA, Europe, can certainly muse at their achievement but those
deprived and bitter critics of the yesteryear would find it hard to absorb the
gripe. Russia, Armenia and Iran appear humbled to the proportionate grade because
US politics through ILSA has worked which Iran had brushed aside, assuming it
would not and the West had no choice but to adopt the South (best) or North
(preferable) exit routes for the Caspian bonanza. Iran will certainly still wish
and possibly act to make BTC ineffective. Russia enjoys hold on some quarters in
insurgency prone Georgia as well as Armenia to whom Azerbaijan has lost 1/5th of
territory of Nagorno–Karabakh. When greater number of petrodollars would reach
Azerbaijan coffers, her priorities at least in one context are predictable and
that is to build military muscle and retrieve the lost territory. In other words,
the imbalance thus created may intensify the hostile politics. Russia has
traditionally stood beside Armenia. In the domain of ‘politicking’ at least, Iran
will obviously extend moral support to Armenia at the cost of added frenzy to
Azerbaijan’s woes with sole intention to undermine the Western interest. Turkey
being the point man of the Western camp shall gain added antagonism against Iran
that is historically so easy to inflate. The pattern of politics suggests that
convergence of views on the orientation of Caspian Region pipelines is almost
perfect as of necessity among Russia, Iran and Armenia thereby giving shape to
their ‘nexus’. The completion of BTC guarantees the economic interests of the
Caspian beneficiaries and their sovereignty.
Nevertheless, there are certain thorny questions, which shall not find answer at
this stage. Would Russia dab her intensity of coercing the Caspian-Caucasus Region
into compliance? In spring 1996, her unilateral act of curtailing Kazak oil flow
through CPC for delivery at Russian seaport of Novorossiysk sent chilling message
through the Chevron spine, which now operated Tengiz oil field along with Kazak
Oil Company. Reason cited by Russia that Kazak crude was damaging the pipeline
being high on sulfur contents, could not hold the ground because same crude had
been running through the Russian pipeline for many years when Russia operated the
oil field41. Similarly, will Iran recognize the value of politically and
economically stable governments of Azerbaijan, Turkmenistan and Kazakhstan once
the latter two would opt to accept the Western Option in executing TCGP and TCOP
projects respectively, remains a big question? The hope glimmers though but it is
likely to fade away because taking reconciliatory approach and recognizing the
ground realities are diametrically opposed to the ‘nexus’ pursued interests. If
TCOP and TCGP were to become reality in certain frame of time after BTC, that
would mean blow to Russian economy which at the moment monopolizes on Turkmenistan
as well as Kazakhstan oil and gas market, though slipping fast from her grip.
Thus, any attempt to downgrade BTC role would buy them US and Europe disapproval
that may retaliate against the ‘nexus’, Russia being most vulnerable to the West’s
economic counter moves.

For these reasons, the opponents of BTC, TCOP and TCGP would perhaps have no
choice but to see, on one hand, BTC as a necessary evil to tolerate as a
compromise solution and on the other hand to vigorously interdict the efforts of
extending Western Option to the east of the Caspian, connecting Kazak-Turkmenistan
oil and gas to Baku through Caspian Sea. Incidentally, the pivots of politics,
discussed earlier, are readily available to them. In the short term, Azeri–Turkmen
bickering over Azeri ‘Kyapaz’ oil field that is claimed by Turkmenistan makes the
TCGP prospects murky. Discovery of gas at Azeri ‘Shah Deniz’ field has improved
Azerbaijan status from a net gas importer to a gas exporter42. This aspect will
have dampening effect on their mutual discord. The West led by USA considers these
geopolitical developments an opportunity to create situation in the Southern
Caucasus conducive to the world peace through achieving economic and political
stability out of erstwhile authoritarian states.
The success in Georgia to an extent triggers such hopes, which stand to,
consequently, neutralizing Russian coercive diplomacy in the region with no
particular flare for democratization process. Turkey being an important ally and
Azerbaijan now leaning to the West, NATO has, by implication, become an instrument
of stability with its professed war on terrorism. The West, mainly USA and Turkey,
perceives that their casting of shadow on the Caspian politics is nothing but a
necessity for the region in particular and the world in general. This way the West
not only augments security scenario in the region but also the security of
hydrocarbon resources, which have become so vital assets for the world at the dawn
of third millennium. General John J Sheehan’s comments cannot be brushed aside,
that he made in September 1997 when he led a contingent of 82nd Airborne Division
to conduct an airdrop in Kazakhstan. He said, “The message, I guess is, that there
is no nation on earth that we can not get to43.” While the general may have been
overestimating US capabilities as a traditional military self-glorification, yet
the neighbors including Russia took solace in toned down comments that it was
merely the US’s force projection exercise. The defense analysts are left with
little doubt, what the ‘general’ meant.

Broadening Spectrum of the Politics


Mostly scholars opine that China has expanded her role in the region that remained
largely unnoticed so far. Jumping in the Central Eurasian arena has become her
necessity because of burgeoning economy, which has been forecast to grow about 8
%. On the contrary, her indigenous oil and gas inventory is terribly short to
support massive growth of its economy. As seen in the previous statistics tables
for oil and gas, some figures set the record right. China has scanty oil reserves
of 17.1 Gb that make her share barely as 1.4 % of the world total. Similarly, her
oil production is by compulsion, modest but comparatively larger than her reserve
ratio that is figured as 4.5 % or 3.5 million bbl per day of the world total. When
her inventory of consumption is seen, it tells all. With meager indigenous
reserves and production, her consumption has surged to 6.68 million bbl per day or
8.2 % of the world total, registering an increase of 15.8 % over 2003. Similarly,
in natural gas her production is 40.8 Bcm or 1.5 % of the world total per year,
registering an increase of 18.5 % over 2003. However, Chinese economy consumes 39
Bcm each year or 1.5 % of the world total, registering an increase by 19 % over
2003.
The statistics prove that in order to allow her economy boom, China is left with
no choice but to squeeze every ounce of oil and gas. Her rapidly expanding economy
shall also consume inevitably the huge stocks of energy as well. While her gas
production is keeping pace with her consumption, the yearly surge in 2004 over
2003 had been colossal i.e. 19 %. In other words, her proven gas reserves
estimated to be of 2.23 tcm that make only 1.2 % of the world total proven gas
reserves shall deplete fast because of ever-increasing consumption. Assuming that
energy efficient measures enable China to steady her current rate of consumption,
which at the moment appears a hypothesis though, her gas reserves shall last for
only two years time. Her daily consumption of the petroleum products is second
largest in the world; 5.5 million barrels per day, which is projected to reach
12.8 million barrels per day by 2025. The most significant deal China struck with
Kazakhstan was the mutual agreement on KCP, which is scheduled to be completed by
late 2005. She is also likely to become Azerbaijan partner in oil and gas. March
2005 visit to China by Ilham Aliyeav marked the priority, both the countries
accord to each other. Obviously, Beijing is most interested in Azerbaijan oil.
After signing some PSAs between the two Governments, SOCAR has permitted a Chinese
oil company to work at Garachukhur oil field. China is thus, placed in a
profitable situation. Having contiguous borders with three of the five Central
Asian states, her energy stalking is naturally camouflaged by growth of massive
bilateral trade. Chinese trade volumes have doubled with Kazakhstan, grew by 127 %
with Uzbekistan while Kyrgyzstan has become third largest trading partner with
Xingjian44. Thus, it affords her a platform from trade and ethnicity commonalities
point of view that she may not be trampling the Central Eurasian sensibilities
with which her relationship is expanding no less. Still the same advantage in part
has become a Damocles sword for China, charting a course for her to tread it very
meticulously. Otherwise, the conspiracy theorists, at an opportune moment may
ignite the ethnic turmoil, which has brewed in Xingjian over the past centuries,
shattering her dreams to exploit the riches of her Central Asian province. In this
scenario, China would stand bracketed with Russia, Georgia, Azerbaijan, Iran and
Armenia who sit on one kind of flash point or the other in Central Eurasia that
would be gravely ominous for her economy. Her political rivals would gloat over
the situation.
EU has emerged yet another ingredient of the Central Eurasian politics. The
Union’s perception of ‘wider Europe’ stands served when Georgia and Azerbaijan
have been integrated through BTC. The perception to revive old ‘Silk Road’ by
proposing TRACECA and INOGATE hinges on such dreams like BTC success that has
laboriously emerged as reality from the ‘pipe-dream’ status. BTC is thus a vital
ingredient of European energy security as well. When stake would be high, EU focus
on Caspian politics would obviously be a foregone conclusion. India, of late, has
emerged as extremely needy for hydrocarbon energy though by the scale of her
indigenous resources, she ranks almost insignificant in oil and gas scenario. Her
economy has tremendous potentials to grow which grew 4 % in 2002, surged to 8.2 %
in 2003 and is projected to grow by 6.2 % in 2005. Her dependence over oil for the
total energy consumed is 30% with imports of 1.4 million barrels per day, which is
likely to soar to 2.8 million barrels per day by 2010. Her natural gas consumption
has registered rapid increase. From only 0.6 Tcf per year in 1995, her consumption
is projected to increase to 1.2 Tcf by 2010 and 1.6 Tcf by 2015 annually. India
has shown interest to import Caspian Region oil and gas for which it is a
lucrative market45. TAP pipeline plan if executed ever, beside the one she is
negotiating with Iran, is a possibility for her to join as a very economical
alternative. However, her deep-rooted reservations about this option being faced
with an adversary of the past prevent her to join the cause though Pakistan is
inclined to offer all possible sureties for uninterrupted gas supplies. In Central
Eurasian context, of late the giants have had clashing posturing. India and China
were seen biding for the same oil company when China won the deal. It nevertheless
marks the frenzy with which India is now poised to commit herself in the game.
Jyoti Malhotra rightly remarked, “The Sino-Indian competition over control of
Petro-Kazakhstan has been in the news recently, with India’s Oil and Natural Gas
Corporation (ONGC), having lost out to China National Petroleum Corporation (CNPC)
in a dramatic cloak-and-dagger maneuver a couple of weeks ago. Turns out that when
the weekend ended (around the India’s Independence Day on August 15), India ONGC
had been on top with $ 3.9 billion bid for company control. But when Monday
morning dawned in Almaty, CNPC had come in from the cold with a $ 4.18 billion
offer that Kazakhstan could not possibly refuse46.” India appears in aggressive
stance to seek extra oil that could guarantee her economic growth for years to
come.
The politics of purchasing oil and gas giant companies may give a momentary relief
to the winner but in the end, the emerging economies may find with certain amount
of bad taste that strategic partnership would have been better option than the
play of politics to unseat each other. Central Eurasian assets are naturally
contiguous to China and at close quarter to India. It is thus possible that both
would be vying to benefit from each other’s follies if not gains through wisdom.
Nonetheless, they have found an interesting battlefield of politics, from NEFA (a
sector on Indo-China border) to Central Eurasia, geographic variations not
withstanding. China on her part has not made any concerted effort to veil her
designs. Her bid of $20 billion to acquire Unocal was spurned only at the last
moment when US nationalism or patriotism personified by Chevron interceded to
prevent Unocal going in the Sino baggage. While all goes on, China’s ingress in
adjoining Central Eurasia would remain a rocky passage.
Chevron ambush to the Chinese bid cannot be taken in simple business chemistry. It
only indicates how determined was USG to keep Chinese influence at the scale that
it does not run counter to the US interests. Similarly, Russia’s allergy to the
build up of foreign influence is no longer a secret. As regards China, despite
that, Russia now has peaceful borders with her, she would carefully watch China’s
moves lest China attempts in cashing her economic influence, backed by her nuclear
force projection and ethnic infiltration. In the same context, Russia maintains
series of ‘first principles’ with external and internal connotations. Externally
Russia, “has sought to demonstrate to the world is that Central Asia has remained
exclusively in the sphere of Russian interests and that it will not allow any
rival power to emerge in the region. Internally these principles have sought to
convince the newly independent states of Central Asia as well as the public in
Russia that there is an external threat from other regional powers and that Russia
is only capable of protecting them against absorption of these powers47.” Though
not spelt out with same clarity and ferocity, by implication, Russia at least on
her part still suffers from her ‘imperial’ stupor as regards Caucasus Region as
well. Relating these perceptions to the rush for energy, hydrocarbon factors amply
manifest that energy stampede shall occur and so shall the Caspian Region remain a
favorite rendezvous to contest oil politics.
The coverage so far has been restricted to the regional politics that cannot be
isolated from the transnational element of geo-strategy. In other words, extended
debate becomes imperative in the backdrop of geo-strategic dimensions of the New
Great Game and the actors’ role to support exclusive exterior maneuvers of their
own under the garb of apparently benign, friendly and peaceful diplomacy. No
surprise if it turns out to be malignant, ‘fiend-ly’ and ‘piece-full.’
*BrigGen(Retd)
Dr. Muhammad Aslam Khan Niazi,PhD---Pakistan

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