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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Strategic priority: the US banking on pipelines that bypass Russia

19 September, 2006 - 00:00
RICHARD LUGAR

The US is determined to diversify not only sources of fuel supply but also delivery routes of “black and blue gold.” Currently focusing on the hydrocarbon-rich Caspian region, Washington considers it a strategic priority to choose oil and gas supply routes from Kazakhstan and bypass Russia and Iran.

“Even as options for increasing existing export routes through Russia are pursued, it is a strategic priority of the US to work with the Kazakh government and private industry to open westward export routes across the Caspian and over land through Azerbaijan, Georgia and Turkey - avoiding territory subject to Russian or Iranian control,” states a report prepared by Richard Lugar, Chairman of the US Senate Foreign Relations Committee, who released it in Washington after visiting Kazakhstan, Azerbaijan, and Georgia. Earlier, the Republican senator called Russia, as well as Iran and Venezuela, a “hostile regime.” The senator said in defense of his claim that these countries may use their resources, including oil and gas pipelines, as “an overt weapon.”

“With anywhere from 9 to 40 billion barrels in oil reserves and 67 to 106 trillion cubic feet of natural gas, Kazakhstan has the potential to become a large source of energy exports for world markets and provide Europe and the US with an important new energy supply,” the document points out. Senator Lugar negotiated with the leaders of Kazakhstan, Azerbaijan, and Georgia. The negotiators must have achieved mutual understanding because US companies are investing most heavily in the production of “black and blue gold” in this region, while US legislators always tend to promote their own national companies.

Will Sen. Lugar’s words be reinforced by real financial backing? Why does the US want to build oil and gas pipelines that would bypass Russia? Is it realistic to build a gas pipeline across Ukraine in order to supply Caspian gas to Europe? In the following interview a Ukrainian expert provides answers to these questions.

COMMENTARY

Mykhailo HONCHAR, vice-president, Strategy-1 Foundation:

“Lugar never makes casual statements. Diversifying fuel transportation routes from the Caspian region to the world market has always been a priority in the US’s Caspian policy. But while the term ‘diversification’ was once used as a polite evasion of the phrase ‘bypassing Russia and Iran,’ now such intentions are being stated more openly. I think the root cause lies in the problems that Russia has created for the Caspian Gas Transportation Consortium (CGTC), in which US companies play a leading role. As you know, Russia, a member of this consortium, has put the skids under this project — it is linking any further development of the CGTC to the Russia-sponsored Burgas-Alelexandropolis project, which the US, naturally, does not like.

“It is clear that after certain discussions the Lugar Energy Report will be used to develop a specific program for carrying out a number of projects. First of all, the plan for a trans-Caspian gas pipeline, unlike the trans-Caspian oil pipeline, does not present any environmental hazards.

“The fantastic idea of a gas pipeline running from the Caspian Sea to Europe on the Black Sea bottom and across Ukraine may well turn into a realistic project — of course, if there are appropriate investments from US companies and the Caspian countries, which I don’t think is a problem. A consortium has already been set up to write a feasibility report on this route. This gas pipeline is essentially a northwestern ramification of the existing Baku-Tbilisi-Erzurum line to Suspa (Georgia) across the Black Sea to Feodosia and then across the Crimea and continental Ukraine along the Odesa-Brody-Plock oil pipeline.

“Can Russia somehow hinder this gas pipeline project? Russia undoubtedly still has ways of exerting a strong influence on Kazakhstan. There will be sort of a backstage tussle because Moscow is not in favor of this project. But at the same time, Russia has done very little in all the post-Soviet years to shore up the existing gas transportation system, which has in fact reached the upper limit of its capacity.

“Russia has always pursued a policy of keeping Central Asian gas in Central Asia. Now that it has its own problems with gas resources, especially in wintertime, Russia is going to bolster itself with Central Asian gas. So, like before, Russia will surely resist the construction of a trans-Caspian gas pipeline. At the same time, practice shows that Central Asian regimes are in principle able to pursue quite a flexible policy of not irritating Russia too much while carrying out projects with the Americans. An example of this is the Baku-Tbilisi-Ceyhan oil pipeline.

“Europe will be interested in this gas pipeline even though it will not be mega-powerful. The full capacity of this pipe is an estimated 32 billion cu m a year. This can really allow the countries of Central and Eastern Europe to diversify traditional supplies from Russia. This is also very important to the enlarged European Union because its eastern outskirts are still heavily dependent on one — Russian — source of gas supplies, while Western European countries use more diversified sources.

“The EU has the Caspian region high on its priority list because it is located nearby and can play an important role in increasing fuel supplies. The European Commission’s document “An External Policy to Serve Europe’s Energy Interests” states that the EU should promote technical assistance, modernization, and construction of major energy infrastructures in neighboring countries. There are also plans to support new gas delivery projects: the commission has already made a decision on some of them, while others, which envision Caspian routes, are still on the drawing board.

“If Ukraine includes this project in its EU Action Plan, the European Union will undoubtedly react to it in the context of its overall policy for diversification and energy security. Incidentally, this project was discussed during President Yushchenko’s visit to Azerbaijan. We can begin right now to prepare for the implementation of this project. First, gas is supposed to come from the Shag- Deniz deposit in Azerbaijan and then from the Caspian Sea’s eastern coast.

“In principle, this enterprise is unofficially called the northwestern branch of the Nabuko project, which will be realized only if our leadership shows political will and makes concerted efforts to turn Ukraine into a desirable transit territory. It is important to forestall ill- coordinated actions of politicians so that this country does not turn into a high-risk territory where the political pendulum swings back and forth all too often.

“The Ukrainian government is taking its first steps in this direction, but it is important that they be systemic and consistent — not like in the case of the Odesa-Brody pipeline: we say ‘original direction,’ then use it in the reverse mode, and all the time we are explaining something to somebody. This is not the way partners should behave.”

By Mykola SIRUK, The Day
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