US's Afghan aid package fuels pipeline politics Asia Times
May 29, 2002
By James BortoWashington - Washington's approval of more than US$1.4 billion for the economic recovery of barren and battle-scarred Afghanistan provides the Bush administration with possible insurance for deepening its petro-political sphere of influence along Russia's borders in the form of a revived Trans-Afghan pipeline.
No one disputes that America is critically in need of alternative sources of oil from outside the politically volatile Middle East. This is particularly true since Iraq's Saddam Hussein recently, albeit temporarily, halted his country's oil exports to the US. With Iran and Libyan leaders also supporting the idea of renewing the 1973 Arab oil embargo, the White House has no intention of standing idly by as frustrated Americans fight long lines and higher prices at the pump.
Since the early 1990s, three countries around the Caspian Sea - Azerbaijan, Kazakhstan and Turkmenistan - have yielded a vast reserve of oil and gas. Because all three are landlocked, however, control over their billions of dollars worth of oil and gas depends on the security and economic influence of the pipelines. For keen Washington energy analysts, the recent deployment of US special operations forces to the state of Georgia can only help enforce a Washington pipeline policy aimed at neutralizing Russian influence in oil-rich Central Asia.
Several important transit lines already exist, including the existing Russian pipeline from Baku to Novorossiisk on the Black Sea, which passes through troublesome Chechnya. US oil companies, which have had difficulty dealing with the Russians, and that includes paying excessively high pipeline fees, have previously proposed alternative pipeline routes that pass through Georgia and Armenia. These pipelines would allow US companies, and not Soviet ones, to control oil and pipeline prices. The geopolitics of putting together deals in this region are so complex that only one of seven new pipelines proposed since 1996 has been built. However, a secure and stable Afghanistan offers the US a new opportunity to fulfill its expanding energy needs.
Afghanistan's US-led reconstruction plan includes not only an economic aid lift-off, but also calls for a closer military presence, brokering warlord divisions, and avoidance of any Russian intervention. Now that the Taliban are no longer an obstacle and the interim government is shaping Afghanistan's economic and political future, the Bush administration plans to accelerate the project referred to by some savvy Texas oil men as the new "Silk Road".
It was in early February that Afghanistan's interim leader Hamid Karzai and Pakistan's President General Pervez Musharraf agreed to revive plans for a trans-Afghanistan route for Iranian gas. The next day, neighboring Turkmenistan chimed in by stating that it hoped the trans-Afghanistan route would soon be built with full American participation.
The demonstrative support for the war on terrorism against the Taliban was most clearly visible in US energy company board rooms. Unocal headquarters, located in Sugarland, Texas, was no exception. Board members were elated when the Taliban were deposed; after all, these were the same individuals who had held up their expensive pipeline project a few years ago.
It is noteworthy that Vice President Dick Cheney, as former CEO of the oil-services company Halliburton, is also a veteran of the American oil industry's presence in the Caspian basin. Cheney met as recently as last spring with many of these companies, including Unocal, whose oil investments in the Caspian basin are now languishing. With almost $30 billion already invested by US oil companies in Kazakhstan, Turkmenistan, Uzbekistan and Azerbaijan, the suggested Afghan route would cost only one-half the amount of the other alternative which would run through Georgia to Turkey's Mediterranean coast.
"Unocal was part of a consortium that had proposed to build a pipeline from fields in Turkmenistan to markets in Pakistan. That line would have crossed Afghanistan. We officially withdrew from that proposed consortium in December 1998 because of many unresolved issues related to the Taliban," according to Unocal's senior spokesman Barry Lane.
As early as October 1995, Unocal Corp and Delta Oil Co of Saudi Arabia inked an agreement with Turkmenistan that was destined to open new markets in Pakistan. The agreement with Turkmenistan involved a detailed plan to develop an oil pipeline from Turkmenistan through Afghanistan to a crude oil export terminal and or refineries in Pakistan on the Indian Ocean. This trans-Afghan pipeline would be engineered to transport crude oil from fields inside Turkmenistan and from the surrounding region.
Almost two years later, in the fall and early winter of 1997, numerous meetings and dinners were held with several ranking Taliban members who traveled to Unocal's corporate offices in Texas to explore this pipeline plan. The Taliban and Unocal were hoping to build a $4.5 billion pipeline network to transport Caspian Sea oil and gas across Afghanistan to the Indian subcontinent. But the position was radically reversed in August of 1998 after the US missile strikes ordered by the Clinton administration hit Afghanistan. A corporate communications release stated that "Unocal will only participate in construction of the proposed Central Asia Gas Pipeline when and if Afghanistan achieves the peace and stability necessary to obtain financing from international lending agencies for this project and an established government is recognized by the United Nations and the United States".
As part of its initial Taliban pipeline courtship, Unocal conservatively spent $20 million and donated more than $1 million to various Afghan charities. The Texas oil company's lobbying efforts included providing testimony in Washington on a cold wintry morning in February 1998. Unocal's vice president for international relations John Maresca appeared before the House Committee on International Relations in Washington to state its case for multiple pipeline routes for Central Asian oil and gas. Almost four years later, there is a major reshufffling of the petro-political stakes and perhaps in the necessary and costly battle for energy dominance and stability, courtesy of the resurrected trans-Afghan pipeline blueprint.
As part of Afghanistan's pipeline political recovery, some in Washington questioned President George W Bush's new appointment of Zalmay Khalilzad, a former Unocal consultant, as his special envoy to Afghanistan. This is the same consultant who once served as Unocal's point man assisting with the energy company's earlier plans to build a pipeline through Afghanistan. Coinciding with this appointment, a recent Reuters release stated that Afghanistan hopes to strike a deal by the end of May to build a $2 billion pipeline through the country to take gas from energy-rich Turkmenistan to Pakistan and India. Karzai is scheduled to hold talks with his Pakistani and Turkmenistan counterparts later this year on Afghanistan's largest foreign investment project, according to Afghan Minister for Mines and Industries Mohammad Alim Razim.
According to Razim, Unocal is still considered the "lead company" among those that would build the pipeline, which would bring 30 billion cubic meters of Turkmen gas to market annually. Unocal, which led a consortium of companies from Saudi Arabia, Pakistan, Turkmenistan, Japan and South Korea, had previously maintained the project is both economically and technically feasible once Afghan stability was secured.
Back on Capitol Hill, energy companies and numerous consultants are weighing in on whether the former CEO of Halliburton, Dick Cheney, will yield to a formal demand from a Congressional inquiry. In an unprecedented move against a sitting vice president, the investigative arm of Congress filed a suit in federal court last week challenging Cheney's refusal to hand over documents related to national energy policy. Some observers have speculated that these newest developments may actually lead to an Enron investment trail in Central Asia.
The Caspian Sea region is widely viewed as important to world markets because of its large oil and gas reserves. Most energy companies regard the Caspian basin as the Persian Gulf of the 21st century. However, uncertainty over the status of the Caspian has held back oil development in the resource-rich water body, although an $8 billion international consortium is already in production off the shores of Azerbaijan. Furthermore, there is mounting geological evidence that the reserve potential even in Kazakhstan remains substantial. ENI, ExxonMobil, and other energy companies are developing one of the largest oil fields at Kashagan, estimated to contain 50 billion barrels. Conservative forecasts demonstrate that the Caspian shelf holds at least 75 billion barrels of oil.
Halliburton does not intend to be left out of this Caspian rich black gold marketplace. Cheney's former company signed a major contract with the State Oil Company of Azerbaijan to develop a 6,000-square-meter marine base to support offshore oil construction in the Caspian Sea. The base will be used to assist Halliburton's catamaran crane vessel, the Qurban Abbasov, in upcoming offshore pipe-laying and subsea activities, according to a statement the company released in mid-May.
It is the Caspian Pipeline Consortium, which links Kazakhstan's rich oil fields to the Russian ports on the Black Sea, which are most likely to add up to 1.5 million barrels of crude oil per day. Oil from the vast Tengiz field is pumped by the Caspian Pipeline Consortium (CPC) route to Novorossiisk. Unfortunately, numerous oil rich field finds, like those in Kashaghan, have few outlets to the global markets. Meanwhile, all of Russia's leading producers like Lukoil and Yukos have benefited from business relationships with US firms like Conoco, ExxonMobil and Halliburton. For example, these direct benefits include last week's awarding of a $140 million contract to a Russian company, Amur Shipbuilding, by ExxonMobil to refurbish an oil-drilling rig that the US energy company needs to develop for the rich oil fields off Sakhalin, an island near the Pacific coast of Russia.
Moscow's energy authorities are holding later this week an "Oil and Gas Summit: Caspian XXI". There, numerous oil executives and foreign ministry officials from all the neighboring "stans" are converging in Russia's Caspian capital Astrakhan. The purpose is to figure out a cooperative plan for sharing the wealth found in the often contested sea's oil deposits and also to stonewall any plans for any American companies' unilateral participation in the trans-Afghan pipeline. Prior to September 11, the US had actively encouraged the Russians to protect American energy interests and to also assist Caspian countries in developing their own hydrocarbons. Now it has become more apparent to Washington that Russia's ranking oil companies want to keep the black gold or "crown jewels" for themselves.
The US national energy plan drawn up last year and now revived calls on the Bush administration to undertake initiatives aimed at increasing oil and gas imports from alternative sources of supply. With Afghanistan's billion-dollar economic aid package, the new government will at least insure that some infrastructure requirements will be safely met. But the new coalition of warlords is also very cognizant that Afghanistan's wealth is found not in what in holds or produces, but largely in what may pass through it.
Some policy shapers and also energy consultants believe that if the pipeline transit through Afghanistan can be jump-started again there will be also clear dividends for America which may include the following: With the absence of the Taliban, the international investor community, including foreign banks and governments may now be quite predisposed to this oil-driven pipeline. The cost of such a pipeline may run as high as $2 billion or more with as much as $500 million of it spent in the ravaged and poor Afghanistan; It will enable the US to create a safe and secure transit point for oil reserves found in the Caspian shelf, and; With fees being paid to all parties, many energy consultants and policy shapers suggest that this project might also become a "peace pipeline" since it will also provide much needed economic benefits in the form of transit fees to the saber-rattling and warring states of Pakistan and India.
Adding ballast to this scenario, World Bank president James Wolfensohn spoke in Kabul only two weeks ago about financing a fuel pipeline to channel massive gas reserves from Turkmenistan through Afghanistan to India and/or Pakistan. Wolfensohn was in the Afghan capital to open the financial institution's Kabul office and to confirm $100 million of World Bank grants for the interim administration.
It was in 1996 when Unocal won its initial contract to build a 1,005-mile pipeline in an effort to exploit the vast Turkmenistan natural gas fields. The pipeline would extend through Afghanistan and Pakistan, terminating at Multan, with a proposed 400-mile extension into India. Of course, the project was halted when the Taliban regime became unmanageable. With the Taliban no longer a political impediment, the primary stumbling block to the Caspian-Pakistan pipeline is removed.
" I cannot state strongly enough that Unocal did not negotiate with the Taliban or any other faction in Afghanistan. Unocal met with the factions so they could be acquainted with our company and the proposed pipeline. But no negotiations were conducted. There was no globally recognized government in Afghanistan that could negotiate a pipeline franchise," added Unocal's spokesman Barry Lane in an Asia Times Online interview .
The US Energy Information Agency confirmed several years ago that Afghanistan's significance from an energy standpoint stems from its geographical position as potential transit route for oil and natural gas exports from Central Asia to the Arabian Sea. This potential includes the possible construction of oil and gas export pipelines through Afghanistan.
S Frederick Starr, chairman of the Central Asia-Caucasus Institute at Johns Hopkins University, advocates that whatever nation shapes this pipeline map will influence a huge part of the world. In regard to Unocal's previous exploratory efforts in Afghanistan, Starr added, "Unocal's relationship was killed as much by the failure of Unocal's president at the time to develop a working relation with [Turkmen President Sapar] Niyazof as by events in Afghanistan. I don't expect any real breakthroughs now until the price of hydrocarbons rises enough to warrant the investment. That can happen, of course, and could open a new page."
There remain far more questions than answers: Will Russia continue on its course in supporting America's war on terrorism? With continuing instability in the Caucasus and in developing repressive regimes like Kyrgystan, how long will an American presence even be tolerated? Can the competing warlords in Afghanistan manage such an ambitious pipeline project, ensure its security, and will these proposed transit fees replace the opium cash crops? Will Pakistan and India stand down and accept a shared peace pipeline?
With so many questions and so many more looming, it was not surprising that at last week's Unocal annual meeting, chairman and CEO Charles Williamson reiterated that Unocal has no plans or interest in becoming involved in any projects in Afghanistan, including natural gas or crude oil pipelines.
But Ian Bremmer, president of the Eurasia Group, a New York think tank, reinforces the views that all multinational energy companies will continue to capitalize on the lucractive reserves discovered in the Caspian Sea and will be engaged in both back-door channels and politically sensitive development of appropriate transit points for shipment of their black gold.
There is ample evidence to support Washington's desire to fuel its petro-politics agenda in Central Asia. Cemented with diplomatic detente with Russia, and strongly reinforced with US troops positioned in Georgia, Uzbekistan, Tajikistan, and Kyrgyzstan, the revisited Silk Road winding through Afghanistan may yet prove to be an American-led commercial corridor. But as author and journalist Ahmed Rashid writes purposely in his book Taliban, "peace can bring a pipeline, but a pipeline cannot bring peace".