Washington Times - 07.11.2001

 

 

The Washington Times 

Russia's Caspian power grab

Ilan Berman

Almost unnoticed by policy-makers in Washington, Moscow is once again making a bid for international dominance. Under the strategic guidance of President Vladimir Putin, Russia is trying to gain controlling interest in the major sources of energy in the Caspian and Persian Gulf. So far, its efforts have been as successful as they are daring.

In pursuit of its ambitions, Moscow has exerted a wide range of economic and political pressures on the littoral states of the Caspian. Over the last year, Russia has ratcheted up pressure on Azerbaijan, claiming it to be an active supporter of the Islamist insurgency raging in the breakaway republic of Chechnya. Under this pretext, Moscow has threatened to impose a visa regime restricting access into Russia for the vast number of Azeris who work there. Since both countries understand that such a move would virtually cripple Azerbaijan's fledgling economy, it comes as no surprise that President Heidar Aliev has prudently chosen to play ball. Over the last several months Azerbaijan has softened its opposition to returning to the Moscow-dominated Commonwealth of Independent States (CIS) grouping and, in what is perhaps Mr. Putin's greatest coup to date, signed a declaration in early 2001 officially marking its acquiescence to Russian hegemony on major foreign policy issues, including claims on Caspian territory.

Georgia, which has remained reliant on Russian energy while lacking the financial means to provide adequate compensation, is also in Moscow's sights. In late 2000, during one of the coldest winters on record, the Kremlin threatened to cut energy supplies due to nonpayment. The implications were not lost on Tbilisi. Increasingly, it has broken away from Europe and the United States on regional security and larger diplomatic issues, preferring to stay in Russia's good graces.

With Kazakhstan, Russia has adopted a more nuanced approach, lobbying it heavily to abandon participation in the U.S.-backed Baku-Ceyhan pipeline project (designed to transport oil from Baku, Azerbaijan to Ceyhan, Turkey). Instead, Russian officials have pressured it to adopt a cooperative transit policy and a "unified energy balance" with Moscow, obviating the need for Kazakhstan to participate in American regional initiatives. This, of course, would be another coup for Moscow, since Kazakhstan is the most pivotal of all the Caspian states, estimated to be capable of producing as much oil as Saudi Arabia (7 million to 8 million barrels per day) within about a decade.

And through Itera, a brokerage entity connected to the Russian state-owned Gazprom oil monopoly, Moscow has managed to gain control over a large portion of the cash-poor Armenian and Georgian energy infrastructures over the last year. As a result, not only are these countries growing more dependent on Moscow, but so might Europe be in the near future, since natural gas reserves from the North Sea and the Persian Gulf (currently major sources of energy for European countries) have begun to dwindle.

The logic behind all of this is clear. If exploited to anywhere near its projected potential, additional volumes from the Caspian could put Russia and its CIS allies on a par with the Persian Gulf in terms of oil wealth, making it an energy superpower. Not even the Soviet Union at the height of its power came close to that.

But Moscow's energy policy is not localized to the Caspian. Instead, Russia has increasingly tried to reach into the Persian Gulf and consolidate its hold over energy there as well. It has therefore invested deeply in Iran's energy sector, which supplies roughly 5 percent of the global oil market, signing numerous contracts for gas and oil development. In April 1999, for example, the two countries signed an accord on the scientific and technical exploration of gas fields, including the establishment of joint energy firms, and later that year Russian and Iranian officials held extensive discussions regarding the further expansion of cooperation in gas and oil. Most recently, Russian companies have sought to participate in the development of newly discovered oil deposits in Iran's Khuzestan region.

In Iraq, the world's second-largest producer of oil and a major regional source of natural gas, Moscow has virtually monopolized both existing oil production and post-sanctions reserves. By the close of 1997, Russian firms already had signed contracts for the development of Iraqi fields worth upwards of $3.5 billion, and Russia is currently the single largest consumer of Iraqi crude, with its companies in control of concessions estimated in the billions.

These maneuvers have placed Russia within reach of controlling at least one-third of the region's estimated 650 billion barrels of oil, and one-half or more of the area's approximately 1,800 trillion cubic feet of natural gas. When combined with its own domestic reserves (some 50 billion barrels of crude) and Caspian stores, domination of Gulf oil could allow Moscow to virtually dictate energy terms not only to the CIS and Europe, but to Washington as well.

In pursuit of this policy, Russia has steadily worked to cement its regional position and dislodge American influence. Employing a variety of measures, ranging from diplomatic support to arms sales and military cooperation, Russia has tilted countries like Libya, Syria and Iraq conclusively back into its orbit. In particular Iran, with whom it recently signed an estimated $7 billion arms and cooperation deal, figures heavily in Moscow's calculations.

Russia is making a major play for the world energy market. So far, its biggest asset has been America's inaction. Thus unopposed, Russia stands poised to become no less than the pre-eminent power not only in the Caspian, but in the Gulf as well. It is time for Washington to pay attention.     

Ilan Berman is a fellow at the American Foreign Policy Council.