The Caspian Basin has perhaps 4 percent of the world’s oil reserves and 6 percent of world reserves of natural gas. Russia hopes to lock up the routes to market for all these hydrocarbons.
The Soviet Union did little to develop Caspian energy resources, relying instead on Russian oil and gas. But post-Soviet Russia has shown itself more nimble, and perhaps more entrepreneurial, than Western companies and Western governments in moving to exploit the region’s resources.
Ten years after the Soviet collapse, Caspian oil still has essentially no route to market except through Russia. A Western-backed pipeline, from Baku on the Caspian through Georgia and across Turkey to Ceyhan on the Mediterranean, is still just a dotted line on the map and an unfunded prospectus in an i-banker’s in-box. Meanwhile, an old Soviet route brings Caspian oil from Baku to the Black Sea port of Novorossiisk, which has links into southern and central Europe. Now the hub at Novorossiisk also receives oil from the vast Tengiz field in Kazakhstan, via a new 1,000 kilometer pipeline the Russians opened last year.
Last week in Moscow, Vladimir Putin talked about doing for gas what Russia has done for oil. In public remarks to Saparmurat Niazov, Turkmenistan’s Oriental despot and president for life, he proposed a gas export “alliance” among Turkmenistan, Kazakhstan, Uzbekistan and Russia that would “exert effective control over the volumes and direction” of exports “through a single export channel.” That channel, of course, is the Russian pipeline system run by Gazprom, the monopoly that already controls 20 percent of the world’s natural gas.
The proposal to Turkmenistan fits in with Russia’s $3 billion “Blue Stream” gas pipeline across the Black Sea floor. That line, now under construction, will carry gas from southern Russia into Turkey. Gas from Turkmenistan could replace the Russian exports in the Russian market.
A rival Western-backed Trans-Caspian Pipeline Project (TCPP), like the geographically parallel Baku-Ceyhan oil pipeline, is still just a dotted line. Neither the private developers (Bechtel, GE and Shell) nor official export-credit agencies like the U.S. Export-Import Bank want to finance a deal with the corrupt and financially hollow government in Turkmenistan. Gazprom’s pipeline-construction arm, owned largely by the children of former Gazprom chairmen Viktor Chernomyrdin and Rem Vyakhirev, has no such scruples.
The strategic risk for the West in Russian capture of Caspian and Central Asian gas is greater than the risk in oil. Crude petroleum moves easily around the world, and a supply cut-off at one source can often be made up from another. But natural gas is very difficult to ship. Customers at the European terminus of a Russian pipeline are locked in to that supply. The Caspian-Central Asian gas “alliance” could increase Russia’s leverage, already significant, over European energy supplies.