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Unnecessary oil Akezhan KAZHEGELDIN, Kazakhstan Prime Minister 1994-1997 The Caspian states are already calculating future profits from big Caspian oil, while they should start thinking about possible consequences of this oil for the world market and any of these countries instead. Speaking of the two major “players” in the region, Russia and Kazakhstan, we have to admit that in present we have more questions than answers. It is clear that we should not expect serious investments into the region until the problem of Caspian Sea status is solved. Negotiations prove that it's not time for solving it yet. The thing is not whether the political leaders of the "Caspian Five" have the good will or not. The problem is that principal interests of some of these states in new situation haven't shaped yet. The agreement can certainly be signed, and everyone will argue its commentations afterwards. Everyone will understand the document in his own way and no agreement will follow. Thus, I think that there is no need to hurry up. We need to argue and talk as much as needed. Someone can contradict me that delaying negotiations will put off full-scale development of the Caspian shelf. But does the strategic necessity to involve Caspian resources into the world energy market right now really exist? It is not obvious at all from Russia's and Kazakhstan's points of view. Fuel and energy complexes of these countries are facing similar problems. Firstly, this is the deficit of investments into the explored on-shore fields. Steep expectations for Caspian fields will result in outflow, or insufficient investment into Western Siberia and Western Kazakhstan where there are resources and national manpower, where industrial and social infrastructure is developed. Besides, the struggle for investments, and then for markets, will by all means result in the decrease in prices for oil. The common origin, structural links, the very geography of both Russian and Kazakh Fuel and Energy Complexes (FEC) predetermine the necessity for their cooperation. Meanwhile today, latent competition, oil and oil products smuggling, exhausting political dispute on quotas, etc. characterize the relations between Russian and Kazakh. Until these problems are solved, until both states join the World Trade Organization and sign the Energy Charter, the Caspian region will remain a stumbling block. Today, Russian and Kazakh oils are peaceful neighbors in a pipeline only, and in the world market these two countries are competitors, moreover as oil production in the region increases, the competition becomes more and more fierce. It is western customers who are to benefit from such competition, though cooperation and joint policy would enable our two countries at least to overtake an appropriate sector of the Western European market. Being not OPEC members, Russia and Kazakhstan could influence world energy policy more significantly if they act together. Instead of these pivotal issues, professional community and politicians have been discussing enthusiastically the routes of pipelines. The pipelines are seen as some magic axes for not only oil industry but also geopolitics to revolve around. The adherents of this theory will shortly become frustrated. There are no such axes in the world today. Even in the last centuries the two great channels - Suez and Panama - appeared to be unable to secure special status for Egypt and Panama. Moreover, you cannot expect this nowadays. In my opinion, the future of ambitious Baku-Ceyhan project is predetermined. The Project has been developed under political pressure and is expected to transport 20 m tons of Kazakh oil. How are they going to produce these 20 m tons at the current level of development and to bring them to Baku then? It would be super-squander to lay pipeline across the sea bottom for the sake of these questionable 20 m. The construction of the pipeline to the Black Sea will be completed soon. At the first stage the pipeline will enable to pump to the North 28 m tons of Kazakh oil annually, and at the second stage - up to 67 m tons. In the best days of Soviet era, Kazakhstan produced up to 32-35 m tons. You cannot trust the statistics of recent years that either has been over-estimated for some political purposes, or under-estimated due to the fact that oil money is not repaid to the country. Besides, now the estimated volume of oil takes into account gas condensate, too. Anyway Chevron expects no more than 9 m tons from Tengiz for Caspian Pipeline Consortium, and LUKOIL experts add 1 m ton extra. Nobody knows what the pipe is to be filled with to reach the design capacity. It is quite obvious, however, that the situation will provoke both parties to blackmail. Russia will decide that it is able to influence Kazakhstan by regulating its access to outer markets. In anticipation of that, according to media reports, Kazakhstan has been discussing the "south route" for its oil with Iran. You can't help singing sharp when you are playing two horns simultaneously. One way or another, Kazakhstan will be forced to make its choice of strategic partner, as "multi-vector" in business is much more harmful than it is in policy. Besides, after international sanctions against Libya are lifted which can be expected very soon, after Iraq crisis (that wont' last forever, anyway) is resolved, after Iran is back to the world market as an equal partner, it may turn out that no one needs Caspian oil. Of course, unless someone sets the task to make the market collapse and to bring back ratty prices of the recent past when mineral water was more expensive than oil. Russia and Kazakhstan will be able to oppose these trends only if their FEC act jointly. Till then you should wait with Caspian oil. http://www.vremya.ru/2001/33/11/9079.html
Vremya Novostei, 23 February 2001
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