Bombing forces U.S. to rethink oil use

By Jonathan Power

LONDON (JP): The Saudi Arabian bomb has truly shaken up the Washington political establishment, even though in all probability the desert kingdom is a lot more stable than the quick shifting sands of American opinion suggest. Nevertheless, the subsequent debate has produced some good points -- a telling reminder that if America were more sensible about its gas guzzling and the ridiculous give-away taxation or pricing policy that encourages it Washington wouldn't have to catch a cold every time someone in Riyadh sneezes.

But looking ahead, the intrigue of the Middle East is nothing compared with the politics of oil in the Caucasus and Central Asia -- and that, in the decades ahead, is where much of the big action could all too easily be. If you are into geo-strategic rivalries, ethnic feuding and elusive independence, tune into this station.

Straddling Europe, the Near East and Asia, the Caspian region is one of the largest underdeveloped sources of oil in the world. As the Persian Gulf oil is exploited to the point where its capacity and world demand bang into each other with what could be dangerous consequences then this Central Asian oil is going to become a crucial alternative supply.

The nineteenth century's "Great Game" was the deadly rivalry between Russia and Britain, in part fueled even then by the competition for Caspian oil. The Caucasus and Central Asia were not only the point of access to the riches of India but a prize worth fighting for in itself.

Today's Great Game is being replayed with the oil-rich, but very much Third World, countries of the former Soviet Union, again trying to establish their independence, using energy as leverage. Their difficulty is that they're landlocked, so even if they get the oil out of the ground they need their neighbors on either side if they are to exploit it.

This leads "to a complex series of maneuvers and kaleidoscopic alliances and counter-alliances, designed to gain access to, and influence over, some of the most valuable resources in the world" -- so writes Rosemarie Forsythe, who used to be director of Russian Affairs in the Clinton Administration's National Security Council, in a paper just published by the International Institute for Strategic Studies.

Russia has used its muscle, again and again, to assert control over the oil policies in the region: coups in Azerbaijan, stifling Georgia's moves towards autonomy, economic and political pressure in Kazakhtan. As Steve LeVine observed in a Washington Post article, "By blocking and delaying new projects, the Russians have managed to win entry into practically every major energy deal -- with little or no cash investment on their own part."

For all that, the indications are that in the new Great Game, Russia, paradoxically, does not yet seem to have a "grand plan." There appears to be in Moscow two vigorously contending schools of thought. The first group, centered on foreign minister Yevgeny Primakov, sees oil as a zero sum game rather than as a possible cooperative effort through which everyone can benefit. And it has won many of the early rounds in the in-fighting in Moscow. A second school, centered on prime minister Viktor Chernomyrdia, is more open to Western oil company participation.

The big and truly divisive political question is not so much oil today but oil tomorrow. Who will control, and over whose territory will they run, the big and long, new pipelines since existing pipelines are inadequate?

On this it looks as though, for the time being at least, the Chernomyrdia school has the upper hand, partly because Russia itself increasingly relies on western partners for oil exploitation and partly because the war in Chechnya has revealed all too clearly that military muscle can be counter-productive. All this favors the West, even if one doesn't factor in the allegation that Chernomyrdin has his own financial stake in the oil moving out the fastest way, which means the way the West wants.

Clearly, if the Communists had won the presidential election, the pendulum would have swung the other way. Still the West has its work cut out if it's going to make sure Moscow's policy continues to lean in its favor. This may mean western financial guarantees for financing multiple pipeline routes and more assistance for the region's infrastructure, legal framework and technical expertise.

It also means a more serious effort to fold Russia into the institutions of the West -- in particular the G7, the Western heads of government club, and the organization for Economic Cooperation and Development. There's only four years before the next Russian presidential election and four years in the Great Game is only the flick of an eye.