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KAZAKHSTAN - The Caspian Issue & Regional Implications.

The governments of Kazakhstan and Russia are yet to agree on a final median line across the seabed to demarcate their sectors of the northern Caspian. In 1999, they agreed to do some modifications to a line already drawn. They have since been studying the same geological data on that region.

The key agreement on dividing the seabed resources of the northern Caspian was signed on June 6, 1998 by Russia's then President Boris Yeltsin and his Kazakh counterpart Nursultan Nazarbayev.

That marked a new turn in the "Great Game" between Russia and the US, with Yeltsin having responded favourably to overtures from Nazarbayev. Now Nazarbayev is expecting yet another turn in this game after a warming of relations with Russia's tough new President Vladimir Putin.

Together with two other Central Asian rulers and the president of China, Nazerbayev and Putin recently concluded a deal for their five states to jointly combat Islamic militancy and separatism in their territories (see News Service of this week's APS Diplomat).

On the other hand, Putin could block Kazakh plans to export oil and gas across the Caspian and through Azerbaijan and Turkey. The July 1998 agreement specifically states that other Caspian issues such as pipelines or telephone cables will have to be governed by subsequent agreements. This could deal a blow to a US-proposed system of trans-Caspian oil and gas pipelines to the West.

Washington has worked hard on promoting the trans-Caspian system, or "corridor" as US experts prefer to call it. This is to consist of oil and gas pipelines from Kazakhstan and Turkmenistan to run under the Caspian waters to a point near Baku. From there, overland oil pipelines would run all the way to Turkey's Mediterranean terminal of Ceyhan, with gas pipelines to reach Europe through Turkish territory.

The "corridor" is being promoted specifically for the Central Asian and Caucasian states to by-pass both the Russian pipeline system and Iran. In the "Great Game", these two states are rivalling a US-Turkey alliance, with China stepping in with its own agenda.

The US Trade and Development Agency has put up $750,000 to help fund feasibility studies for this project. For its part, the Clinton administration has sold the idea to each Central Asian leader who has visited Washington since 1997: Saparmurad Niyazov of Turkmenistan, Nazarbayev of Kazakhstan and Gaidar Aliyev of Azerbaijan.

All the major US oil companies have become involved in Caspian E&P ventures, together with big European companies, whether in Azerbaijan, in Kazakhstan or in Turkmenistan. Some of these companies have lobbied strongly for a convincing US role in selling the "corridor" idea. But, at the same time, other major US companies are lobbying in favour of Iran as a route for Asia/Pacific bound exports from Central Asia and Azerbaijan (see Part 3).

To get the July 1998 agreement, President Nazarbayev had to trade Russia's recognition of Kazakhstan's offshore mineral rights for a Moscow veto over the "corridor" or any other pipeline project proposed to be built under the Caspian waters.

Moscow may have a valid reason for vetoing such projects, as in the case of Tehran. The Caspian Sea is earthquake prone. The seabed is unstable, with mud volcanoes having caused it to rise, according to some geologists. The sea itself has risen by three metres since 1978. In some places, the sea has advanced inland by more than 70 km, with the resultant flooding having caused serious problems to oil operators.

Then there is the problem of pollution with more than 4.5 MCM/day of sulphurous natural gas being flared. The oil to be produced from the Kazakh sector of the northern Caspian is expected to have a large content of hydrogen sulphide, which can kill in seconds. Resultant mountains of sulphur on the coast could make that part of Kazakhstan a potentially dangerous area.

On July 7, 1998, the head of the working group on Caspian issues at the Russian foreign ministry, Yuri Mirzlyakov, was quoted as saying: "We thought of undersea pipeline in the 1980s, and concluded that it was not feasible on environmental grounds... We consider such a pipeline to be very dangerous".
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Publication:APS Review Oil Market Trends
Date:Jul 17, 2000
Previous Article:KAZAKHSTAN - The Current Potential.
Next Article:KAZAKHSTAN - Historical Background.

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