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Caspian Sea: Oil And Politics, Is It Worth It?


Caspian Sea: Oil And Politics, Is It Worth It? By Cathie Carlson * * * Wu and Fesharaki article * * * ExxonMobil website * * Pipelines: Security; Security in ... – PowerPoint PPT presentation

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Title: Caspian Sea: Oil And Politics, Is It Worth It?

Caspian Sea Oil And Politics, Is It Worth It?
  • By Cathie Carlson

Can the Caspian Sea Be Our Savior?
  • The Caspian sea is an untouched region of
    potentially big oil resources. The newness of
    this region could alleviate problems that would
    result from a cutoff of 25 of oil imported to
    the U.S. thereby giving the U.S. a respite in its
    oil imports while it tries to create a less oil
    dependent nation.

The Oil problem will get worse before it gets
  • Problems with the Caspian Sea area
  • Geopolitics
  • Pipelines
  • Oil dependence from other countries
  • The lack of desire on the part of Americans to
    look for alternative means

Geopolitics and Pipelines
  • Five countries border the Caspian sea and each
    have their own agendas regarding the politics in
    the region

  • Each of the five countries as well as their
    neighbors and other countries have their own
    agendas especially when it comes to the pipelines
  • Russia
  • Kazakhstan
  • Turkmenistan
  • Iran
  • Azerbaijan

The players include
  • The Five Caspian Sea Neighbors
  • The United States
  • China
  • Turkey
  • Other Regional Neighbors like Pakistan,
    Afghanistan, and India
  • The Oil Companies

Oil Dependence from other countries
  • Its not just the United States who is seeking
    more and more oil to meet its needs
  • Other countries, especially Asian countries, are
    going to have additional oil needs in the coming
  • China and India with their large populations are
    going to exceed the U.S. demands for oil in the
    coming years

Lack of desire to shift to new resources
  • Americans equate cars and driving with freedom
    and oil is needed to drive cars
  • Americans demand less dependence on Mid East oil
    but are not as willing to alter their daily

What the Caspian Sea Oil Provides
  • Benefits via the Caspian sea
  • Provides a safety net while other energy
    alternatives are being researched and developed
  • The U.S. would be less dependent on the Middle
    East and the fragile political structures that
    control that regions oil

The Geopolitical and Pipeline Concerns
The Caspian Sea
  • Facts and Figures
  • The Caspian Sea is 700 Miles Long
  • It contains an estimated 200 billion barrels of
    oil and up to 300 trillion cubic feet (Tcf) of
    natural gas
  • Much of the area remains unexplored and
  • Five countries border the sea
  • The sea is actually a lake as it has no ocean
  • Disputes over control of the resources and
    boundary issues exist

The Caspian Sea
  • Problems
  • There are only estimates as to the reserves no
    one really knows how much oil exists
  • Political instability exists in the region
  • Pipeline security is questionable
  • Pipelines to get the oil out have become a
    political issue
  • China and the United States have their own
    agendas as to who should get the oil and where
    the pipelines should go

1. Russia
Russia has the most influence in the region
  • The Soviet Union controlled most of the region
    and only had to share a border with Iran.
  • Now four of the current countries surrounding the
    Sea were once part of the Soviet Union
  • Countries like Turkmenistan and Azerbaijan are
    heavily dependent upon Russia
  • Russia controls the only current pipeline from
    the Caspian Sea

Russia Wants to Maintain its Influence
  • Russia has maintained pipeline supremacy in the
  • Since 1991, Russia has made a concerted effort
    to ensure that existing pipelines continue
    routing through Russia, and it has largely
  • All current pipelines pass through Russia
  • The pipeline from Baku and the pipeline from
    Kazakhstan have all been routed to Russian oil
    terminals in the Black Sea
  • Russia has maintained this supremacy by
    encouraging countries to take advantage of the
    current system rather than investing in a new
    pipeline system

2. Iran
Iran could be a key player
  • Where Iran once bordered only the Soviet Union,
    it now shares its borders with three newly
    created states, two of which border the Caspian
    Sea Azerbaijan, Turkmenistan
  • Iran is the only country bordering the Caspian
    Sea to be a member of OPEC

Axis of Evil The U.S. v Iran
  • Since the 1979 hostage crisis in Tehran, the U.S.
    has labeled Iran a terrorist state, a label which
    was repeated in the 2002 State of the Union
  • The U.S. vigorously opposes any contact with Iran
  • The U.S. has imposed sanctions against Iran and
    U.S. companies are prohibited from accessing any
    oil or investing in any oil fields in Iran
  • The U.S. discourages the laying of oil and gas
    pipelines through Iran

3. Kazakhstan
Potential Oil Giant
  • Kazakhstan boasts the third largest deposits in
    the world after the Middle East and Russia
  • There are 10bn-17illion barrels of proven oil
    reserves and some estimates claim there are about
    another 70 billion barrels worth of oil
  • Three quarters of the Caspian Sea lies under the
    Kazak sector

With Existing Pipelines
  • An existing pipeline from Kazakhstan through
    Russias Black Sea port makes this country one of
    the most stable in the region
  • Kazakhstan is landlocked and must rely on
    pipelines to get its oil and gas out of the

And Heavy Ties With Russia
  • The only existing pipelines for oil and gas are
    Russia pipelines that go through Russian
    terminals thus making Kazakhstan and the other
    countries heavily dependent on Russia

And Heavy Ties With Russia
  • Russia and Kazakhstan share a border and share
    the boundaries for their oil and gas fields in
    the Caspian Sea which only increases the ties
    between the two countries
  • Kazakhstan signed a collective security agreement
    after it gained its independence but recently
    refused to increase military cooperation with

4. Turkmenistan
Future Uncertain
  • The U.S. Department of Energy estimates
    Turkmenistans proven oil reserves at 546 million
  • More than 20 of its reserves are under
  • The countrys oil output remains a fraction of
    what it was during the Soviet era
  • Oil refining will become a larger sector of its
    economy than oil production

Pipelines Critical
  • Today, Turkmenistan relies almost exclusively on
    Russias pipeline network for its oil and gas
  • A more convenient line through Iran has been
  • This line would only require 100km of pipes to
    link Turkmenistan to Irans pipeline network

5. Azerbaijan
Russia, Iran and the U.S.
  • Russia
  • As a former Soviet state, Azerbaijan has many
    links with Russia
  • These links include one of the new pipelines
    Russia built that goes from Baku through Russian
    terminals to the Black Sea

  • Iran
  • Only 100 kilometers of pipeline would be needed
    to link Azerbaijan to Irans pipeline networks to
    the Persian Gulf
  • Iran would prefer to import oil for its northern
    regions (supplied by Azerbaijan) so it could free
    up its southern oil fields for export via the
    Persian Gulf

  • The United States
  • Azerbaijan does not currently supply oil to Iran,
    instead it sends its oil through pipelines from
    Turkey to the Mediterranean Sea
  • The Baku-Ceyhan pipeline is favored by the United
  • This pipeline would run from Baku to the Turkish
    Mediterranean port of Ceyhan
  • As a result of the September 11th attacks, this
    proposal has been give new life and construction
    of the almost 3 billion pipeline may begin soon

Pipeline Turmoil Geography, Politics and
Why are pipelines such a big deal?
  • In landlocked central Asia there is no point in
    pumping oil and gas if you cannot get it to
    market. All the pipelines in the area run over
    Russian soil and, until now, the Kremlin has been
    playing hardball limiting the access to pipelines
    and charging usurious tariffs.

Which Way to Go?
  • There are four pipeline options
  • North-Northwest
  • Westbound
  • Eastbound
  • Southbound

Pipelines in the Region
North-Northwest Linking pipelines to Russias
existing system
  • Pro
  • Russia has an existing system
  • This is the easiest option and the fastest way to
    to transport oil and gas out of the region
  • Con
  • Its system is complex and poorly maintained
  • The countries who have used this system resent
    Russias control of the export market and hard
  • Many of the countries would prefer to bypass
    Russia altogether

Russias Pipelines
Westbound Baku-Ceyhan
  • Pro
  • Most favored option by the U.S.
  • Con
  • Expensive
  • Target is primarily Europe and companies are wary
    of investing in a mature market with limited

Eastbound Long-distance pipelines used to
transport oil to China and eventually
  • Pro
  • An 1,800 mile proposed pipeline from Kazakhstan
    and a 4,200 mile proposed pipeline from
    Turkmenistan to China would be the most direct
    way to link Central Asia and the Far East
  • Con
  • This is the most expensive and geographically
    difficult alternative

Southbound Two pipelines one to Iran and
another to Pakistan and India though Afghanistan
  • Pro
  • Pipeline through Iran is the most economical of
    all options
  • Pipeline to India would ease burden on that
    energy hungry country
  • Con
  • The U.S. opposes any pipeline through Iran and
    therefore few investors have been attracted
  • India wants to bypass Pakistan completely

The Other Players The U.S., China, and the
Oil Companies
The United States
  • The United States is trying to create ties with
    some of the former Soviet countries in order to
    contain Russian dominance in the region
  • Ironically, the U.S. presence in the region due
    to September 11, has eased some of the pressure
    to follow Russias lead by some of the Caspian

The United States, ctd.
  • U.S. presence has been seen by some to provide an
    excuse to side with the U.S.
  • Unfortunately, the U.S. policies against Iran
    have locked U.S. companies from that market. An
    Iranian pipeline would only harm the companies
    even more

  • China will increasingly be searching for oil
  • The Asia-Pacific region as a whole is dependent
    on Middle East oil
  • More than 90 of the regions oil comes from the
    Middle East as opposed to 25 of the United
    States oil

China, ctd
  • Kazakhstan as Chinas neighbor and as the nation
    most dependent on a foreign countrys pipeline is
    just as likely to look East as to look West to
    sell its oil

The Oil Companies
  • All the large oil companies have expressed
    interest in investing in the region
  • The oil companies are expected to invest the
    billions of dollars to create and maintain the
    needed pipelines
  • Politics have added difficulties to the
    investment possibilities in the regions

ExxonMobil Sites
The Oil Companies, ctd.
  • U.S. oil companies are prohibited from investing
    with Iran
  • But other companies are not
  • Political instability in the region makes
    companies hesitant to invest
  • Fear of MidEast like problems compound the
    regions image as unstable

Pipeline Security
  • The present and future pipelines will cross many
  • The issue is who will protect the pipelines and
    who will pay for the security

Legal Issues
  • The Status of the Caspian Sea Is it a Lake or a
  • If it is a sea then the three mile limit of the
    territorial waters applies
  • Boundary disputes are an issue between many of
    the countries in the region

Legal Issues - What can be done?
  • Regional discussions and treaties are the best
    means of solving the boundary disputes
  • Contracts between oil companies and the countries
    need to address issues of infrastructure,
    pipeline security and pipeline transportation

Legal Issues What Can be Done?
  • The United States needs to eliminate the barriers
    it has imposed on U.S. oil companies in order to
    prevent investment in Iranian oil.
  • This would involve Congress as well as the

  • The Caspian Sea is filled with possibilities but
    two big problems stand in its way to becoming the
    savior to US dependence on Mideast oil
  • Pipelines need to be built
  • Politics affect everything in the region and at
    this time hampers a productive solution to the
    pipeline problem

Summary, ctd.
  • The U.S. and China seem to the key outside
    players in that they have the money to invest in
    pipelines and the desire to have the oil
  • If the oil flows West then Chinas dependence
    which is far greater than the U.S.s, on the
    Mideast would remain the same
  • If the oil flows East then there would be more
    oil for the U.S. but the dependence on that
    region has at the least remained the same and at
    the worst grown
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