PIPELINES AND GEOPOLITICS

Pipelines and Geopolitics

by Paul A. Goble

Backed by the US government, American oil companies have changedtheir strategy for exporting oil from Central Asia and Azerbaijan. Until September, most had favored a single pipeline approach,one that would export oil through Russia or through Turkey. Now,the companies are backing a two-pipeline approach, with oil toflow through both Russia and Turkey. This shift in negotiatingposition solves some of the problems associated with the singlepipeline approach, but it ignores some and exacerbates still others. Consequently, it is likely to be only a halfway house towardthe establishment of a regional petroleum exporting authority,one with many pipelines and an agreed-upon share of revenues forall countries involved regardless of the path that the petroleumactually follows.

The Geopolitics of a Single Pipeline

Following the collapse of the Soviet Union in 1991, Azerbaijanand the Central Asian petroleum producing countries saw the exportof their oil and gas as the best guarantor of their independence,and Moscow saw such exports as both a threat to its position asan oil-exporting country and to its political dominance of theregion. For most of the period from 1992 to 1995, Western oilcompanies lined up on one side of this debate or the other. Somehave backed the existing routes through the Russian Federationas the least costly; others have a pipeline through Georgia,Armenia, or most recently China as a way of getting the oil outwithout a Russian veto or crossing Iran, a country no Americancompany can now do business in directly. The position of eachside in this debate has not been without difficulties.

Those backing the pipeline through Russia have generally ignoredthe political consequences of such a step–consequences both forthe exporting countries and more generally for Europe becauseof the leverage such a route would give Moscow in both areas. Moreover, they have discounted the political instability in theRussian Federation itself–the collapse of central control overlarge parts of the country and the often violent ethnic conflictssuch as in Chechnya, areas through which the Russian route mustpass. And they have tended to ignore the consequences for NATOof the likely to increase in tensions between Greece and Turkeyif the oil passes through the Turkish straits or alternativelypasses through the Moscow-favored pipeline via Bulgaria and Greece.

Those supporting a route that avoids Russia altogether have facedeven larger challenges. Iran has been ruled out as a possibleroute. Instability across the Caucasus and much of Central Asiahas threatened even existing pipelines: pipelines across Georgia,for example, have been blown up with regularity in 1994 and 1995.A proposed route through China to Japan has an unacceptably highprice tag. Thus advocates of a pipeline circumventing Russiahave found few supporters other than Turkey, which has its owngeopolitical interests in the region, and the exporting countriesthemselves.

Moreover, in contrast to the Russian route, the non-Russian onewould require the construction of new pipelines, sometimes fora short distance and sometimes for enormous ones. That fact reshapedthe discussions of oil exporting from the region throughout 1994and 1995, with advocates of the non-Russian route beginning totalk about a short-term flow through Russia and a longer termflow through some alternative route.

Problems Solved and Unsolved

Not surprisingly, the two sides gradually came to theconclusion that a two-pipeline approach would solve their respectiveproblems. Russia would get some transit fees and have some controlover the exports of oil and gas from Azerbaijan and Central Asia,and the latter countries would have some independence in the exportand sale of their oil. Such a balance, American oil companiesand government officials clearly feel, will solve the problemsoutlined above. Unfortunately and for many of the same reasonsthat neither of the single pipeline route approaches would work,such a conclusion is almost certainly too optimistic.

The two-pipeline strategy rests on three problematic assumptions:

–First, it assumes that all sides will be happy to have allsides benefit. That assumption ignores the political dimension.Since the Soviet Union collapsed, Moscow has pursued a policyof frozen instability in the Caucasus and Central Asia, a policyof keeping instability at a level that frightens off Western investorsand governments while allowing Moscow to reclaim its positionsof influence in the area. And this assumption ignores the competitionfor sales among these producing states given the relatively flatdemand for petroleum at the present time. For example, Turkmenistanwould be one of the richest countries in the world per capitaif it could export its enormous reserves of natural gas. Butthe only obvious routes for such exports are through Russia andIran, the first and second largest exporters of natural gas inthe world at the present time.

–Second, it assumes that if the pipelines are built, they willall keep working. Such an assumption ignores the all too realfact that no one–not even the most authoritarian regime–canprevent a determined individual from blowing up or even disablinga pipeline. This is not just the stuff of fiction such as TomClancy’s Red Storm Rising or Eduard Topol’s Red Snow,both of which are premised on the destruction of pipelines inthe former Soviet Union by terrorists. Azerbaijani activistshave blown up pipelines carrying natural gas to Armenia from Turkmenistanmore than a dozen times in the last 18 months. And the abilityof one side to do this suggests that all sides could if they wantedto. Consequently, a two pipeline approach might quickly becomea single pipeline approach as the result of either state or substate-sponsoredterrorist acts.

–Third, it assumes that two pipelines are enough to deal withboth the economic and political problems of the region. In fact,the current two pipeline approach that has been sketched out inthe Western media suggests that the pipelines will pass throughRussia and Georgia but not Armenia and through Georgia but notthrough the breakaway Abkhaz region of that country. The exclusionof these countries and groups only guarantees that there willbegin to make demands either at the negotiating table, in themarketplace, or through some less diplomatic or economic means.

Consequently, while a two pipeline approach addresses some ofthe problems of the single pipeline strategy, it could easilyexacerbate others to the point that the West and the Central Asianand Caucasian countries could turn out to be the big losers.

Is There A Way Out?

The shift in the American position on this questiondoes point toward a way out, at least over the longer term: thecreation of a regional petroleum exporting authority. That wouldinvolve three things: first, the construction of multiple pipelinespassing through as many countries as possible; second, the divisionof transit fees among these countries regardless of where theoil actually flowed; and third, the offer of a long-term commitmentby the West Europeans, the Americans and the Japanese to purchaseoil and gas from these countries. Each of these would help tosolve the current and potential difficulties of exporting oiland gas from the landlocked regions of Central Asia and the Caucasus.

By establishing multiple pipelines, such a regional authoritywould ensure that the oil and gas would continue to flow evenif one or even several of the pipelines were blocked by breakdownsor terrorism. Consequently, no one country or group of countriescould exert a stranglehold on any one exporter. A regional petroleumexporting authority would distribute transit earnings to all countriesin the region rather than just those through which the oil andgas happened to flow, thus limiting the extent to which any oneplayer would have an interest in blocking a pipeline running throughanother. And by establishing a long-term relationship with Westernpurchasers, such an authority would both have greater authorityand an international standing that would limit the ability ofany one country in the region to exploit petroleum for politicalends.

Could such an authority be constructed? The politics–particularlyRussian–and the precedents are not entirely encouraging. Moscowreally does see the pipeline question as an issue of geopoliticsrather than economics. But the sharing of water resources in theMiddle East and among American states along the Colorado basinprovide some possible models of successful approaches to thistype of problem. Clearly two pipelines alone will not solve allthe problems, and those interested in the export of petroleumfrom the region, in the stabilization of the countries involved,and in guaranteeing the continued flow of oil all have an interestin considering how to make the next step.