October 2005

PetroKazakhstan and all that

Fred Halliday has an interesting report of a conference in Cambridge, although it is more of a survey, albeit knowledgeable, of the whole CIS-space. For what it's worth, this I find characteristic of the openDemocracy site in general: it's good for general orientation and some commentary, but it is seldom that the specialists who write there give the full benefit of their specialized knowledge to the reader, in terms of explicating detailed background or bringing clear analytical power to bear. As always, there are exceptions, but this article isn't one of them

     Amongst the commentaries and reports on the CNPC/PetroKazakhstan affair are an articles at Jamestown Foundation, Asia Times onLine, and Gulf Times, the last of which plays up the Russia-vs.-China angle. According to Tehran Times

Russia and Iran's nuclear program

Takeyh and Gvosdev are right on target when they write:

It should be abundantly clear that Moscow and Washington do not see eye-to-eye on the Iranian question. When [U.S. Secretary of State Condoleeza] Rice declared last Saturday that Iran had no need for even a civilian nuclear program, [Russian Foreign Minister Sergei] Lavrov countered that Iran had a full right to possess a nuclear fuel cycle.

Indeed, the only puzzle is why this should have ever been doubted. It was only "during her recent trip to Moscow that [the U.S. Secretary of State learned that] Russia would actively oppose any push to refer Iran's case to the [U.N. Security] Council." Russia's recent abstention in the IAEA Council was meaningless because it neither cost nor changed anything.

     The Europeans have an excuse, albeit a poor one, for such naîvété: they (specifically, significant and influential sections of West European elite opinion) are still seeing the after-images of the 1848-49 revolutions when Russia suppressed an uprising in Hungary in behalf of the Habsburgs and also convinced Prussia not to accept a liberal constitution. These acts earned Russia the reputation, now disclaimed by candid Russian analysis itself, of being the "gendarme of Europe".

     Unreflective opinion in Western Europe even believes that somehow Russia will save the Continent from the political effects of the steady demographic increase of its Islamic population. This irrational and emotional view is based upon the satisfaction of seeing Russia "rejoin" Europe after decades of Bolshevik/Communist rule. It ignores the cultural fact that the Bolshevik movement was firmly rooted in West European tradition and thought (here I mean not Marx but Rousseau: see for instance J.L. Talmon, The Origins of Totalitarian Democracy), but those who hold that view also inhabit social strata sympathetic to Russia’s suppression of the liberal current in mid-19th century Europe. So it is all of a piece.

      But why should the U.S. Secretary of State have hoped for Russian support on the Iranian nuclear question? Her worldview was not formed by the aforesaid European circles. But also, it is unlikely that her background as a Sovietologist comes into play here. Probably, her social background and career trajectory have simply not allowed her to develop the practical Machiavellianism characterizing such of her predecessors as James Baker and Henry Kissinger. Indeed, her public pronouncements occasionally evoke nostalgia amongst other great-grandchildren of the Enlightenment. Sadly, the times call for a Mazarin, not a Masaryk.

      One more observation may be made. A politically weak Europe is not necessarily antithetical to Russia's interests. The report of sub rosa Russian assistance in transferring nuclear missile technology from North Korea to Iran, so as to extend the reach of the Iranian Shahab-3 missile to Europe, makes sense in this respect. Think "SS-20": the Soviet missile targeted on Western Europe, implanted in Eastern Europe in the late 1970s, which gave no real military advantage but was deployed for the purpose of political intimidation and weakening of political will at both the elite and mass levels. What does Russia lose if Europe is politically weak? It already has the epoch-making but little-noticed North-European Gas Pipeline (NEGP) project in its pocket.

How Chinese economic growth threatens global environment

A Greenpeace report finally puts things together about how the Chinese economic miracle is helping to drive global ecological degradation. This involves not just energy consumption and greenhouse gas emission but also forestry, pollution from personal automobiles and more. See this summary from a mainstream British newspaper.

CPC vs. BTC?

After barrels of ink have been spilt in the 1990s explaining in the first instance why the Baku–Tbilisi–Ceyhan (BTC) pipeline could never be built and, since then, why there would never be enough oil to fill it, the Caspian Pipeline Consortium (CPC), which runs the line from northwest Kazakhstan to the Black Sea has decided to double its present capacity three years ahead of schedule because it turns out that there is enough oil in Tengiz, not to mention Kashagan, to command that capacity and CPC wants to compete for it. In this connection, it is noteworthy that "ConocoPhillips, Eni, Total SA and Inpex Corp.[, which] own 49.8 percent of Kashagan venture, &hellip also hold 15 percent of the Baku–Tbilisi–Ceyhan pipeline."

      But CPC will be unable to put a double-capacity line into service before 2009 at the earliest, whereas Kashagan producers will need to export beginning in 2008, while BTC will need non-Azeri throughput for its present single line until then while its own production ramps up to present capacity. Meanwhile, a SOCAR spokesman anticipates that a doubling of BTC throughput to 2 million barrels per day (bpd) would be possible early in the next decade, if some crude from Kazakhstan, whether Kashagan or Tengiz, were available to pick up the slack after the Azeri offshore fields reach production capacity sufficient to (over)fill current BTC throughput volume.

Gazprom trying to move into South Asia

The head of Gazprom is making his first ever trip to Pakistan in order to sign a Memorandum of Understanding concerning the company's investment in the long-talked-about Iran-Pakistan-India (IPI) pipeline. Gazprom is a major shareholder (along with TotalFinaElf and Petronas) in Iran's South Pars field, which would furnish the gas. This is part and parcel of an informal Russian-Iranian alliance against Western geo-economic penetration into Central and South Asia. The invitation to Russia is Pakistani state policy, although it is hardly surprising that no reports have surfaced of Russian interest in participating in the possible Turkmenistan-Afghanistan-Pakistan pipeline.

Be wary of translations

A Russian news agency has reported in an English-language dispatch, concerning a meeting by the Armenian secretary of energy with his U.S. counterpart, that the latter "expressed his readiness for negotiations over the ways of development of Armenian power engineering and interest in construction of Iran-Armenia gas pipeline."

     It would be understandable to interpret this as stating that the U.S. would be interested in supporting construction of said pipeline. However, the Russian original reads, in full and correct translation:

[U.S. Energy Secretary] Samuel Bodman reflected a readiness to examine, through familiarization with the American experience in this sector, ways to develop Armenia's power engineering [industry]. The American side also was interested in the situation and the construction program of the Armenia-Iran gas pipeline.

Now that is slightly different. It would be possible to suppose that the difference is due to a poor translation, until one observes, also in the original Russian, a sentence totally omitted in the translated text: "[The Armenian Energy] Minister also suggested organizing an Armenian-American forum in the field of power engineering, in which the participation not only of the private sector but also of financial organizations would be advisable/expedient [tselesoobrazno]." This omission makes it clear that the other mistranslation was no mistake, but instead designed to mislead.

India, Iran and Europe

What seems a surprise is that India's rise to sustained attention on the global world energy agenda has happened so much sooner than at least some observers (admittedly this report was written before 11 September 2001 and thus while the Taliban still held power in Kabul) expected it to happen.

     An article earlier this year by an RFE/RL analyst gives background to relatively recent developments concerning (and threats to the realization of) the Iran-Pakistan-India gas pipeline. Political pressure from third parties aside, it is interesting that Tehran insists on exporting "lean" gas (i.e., gas not containing such other petrochemicals as propane, ethane or butane) whereas India wants gas enriched by them; and the Tehran insists on a "take-or-pay" contract, meaning India must pay for contracted gas even if it does not take delivery, while India prefers a "supply-or-pay" contract, meaning Iran is responsible for delivery of gas through third countries or must pay for contracted gas even if it is not delivered. (Iran has been burnt on take-or-pay contracts with Turkey in the past but has no recourse because its Constitution does not recognize jurisdiction by international courts.) Qatar is a competitor with Iran for the Indian market, and Oman and Kuwait are potential recipients of Iranian gas other than India. Ukraine is also a possible market for Iranian gas, through Armenia and Georgia and then either through Russia or under the Black Sea. (I have written about these issues in the past but the materials are not on the website. I will do my best to post them soon and then insert links into this weblog entry.)

     The RFE/RL analyst, and much North American commentary and analysis in general fails to mention the Nabucco pipeline project, on which construction began a few months ago. One reason for this is deserved skepticism that the project may not be fully realized anytime soon. (Nabucco, the title of an opera by Verdi, is the Italian name for the Babylonian king known in English as Nebuchadnezzar (605–562 BCE), architect of the possibly fictional Hanging Gardens of Babylon—of which no record exists in contemporary accounts and no archeological trace has been found—who conquered Jersualem in 586 BCE, razed the First Temple and, through what is now called "forced population transfer", initiated the period known in Bible studies as the Babylonian captivity of the Jews.) The Nabucco project is supposed to take natural gas to Europe from the Caspian Sea region including Iran, and putatively Iraq not to mention Egypt and North Africa, via Turkey, Bulgaria, Romania, Hungary and Austria. Earliest deliveries are projected for the end of the current decade, but schedules for these things have a way of slipping. Parts of the pipeline designated for Nabucco may be built, but there are significant strategic obstacles to the realization of the whole project. Every segment of it will require multilateral international negotiations. Even the relatively simple Baku–Tbilisi–Ceyhan pipeline was long in the making, and only strategic political and economic decisions by main European players made it a reality in the end.

Global Warming and Energy Exploration

Some editor in the general press has finally decided to pay attention to the fact that global warming, most recently highlighted by news of the polar icecap melt, will encourage, indeed is encouraging along with general technological development, the search for and exploitation of petrochemical deposits in terrain and climate heretofore too forbidding to be considered:

Claims of expanded territory are being pursued the world over, but the Arctic Ocean is where experts foresee the most conflict. There the boundaries of five nations - Russia, Canada, Denmark, Norway and the United States - converge, the way sections of an orange meet at the stem. (The three other Arctic nations, Iceland, Sweden and Finland, do not have coasts on the ocean.)

Or, in five words or fewer: Cuius regio, eius energia. (Okay, it should really be cuius regio, eius oleum but that just doesn't have the same allusive sonority.)

CACO Integrates EurAsEc

The Central Asian Co-operation Organization (CACO, comprising Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan and since October 2004 Russia) has taken a decision to meld itself into the Eurasian Economic Community (EurAsEc, which includes also Belarus and has until now excluded Uzbekistan). CACO, established in February 2002, started out in 1994 as the Central Asian Union (KZ+KG+UZ) and changed its name to the Central Asian Economic Community when TJ joined in 1998.

      EurAsEc on the other hand started out as the Group of Four (Belarus, Kazakhstan, Kyrgyzstan, Russia), an attempt to implement a CIS Customs Union, before expanding its membership and changing its name. EurAsEc now includes, as independent states, the nine republics in Gorbachev's 1991 Nine-plus-One Agreement: minus Azerbaijan, Turkmenistan and Ukraine (but of which the last two, with Moldova, have observer status in EurAsEc).

...but Lukoil Wants to Play Too

Lukoil, which was partner of PetroKazakhstan in developing the Turgai deposits that will be pumped through Atasu-Alashankou, has asserted a pre-emptive right to purchase those assets and is reportedly in negotiations to buy CNPC's stake. Recall that CNPC was recently chosen by PetroKazakhstan over an Indian suitor for its operations in KZ. Meanwhile Lukoil is going to acquire the assets of Nelson Resources in KZ before CNPC has a chance to bid for them.

Kazakhstan-China Energy Ties Tighten...

Not only is the Atasu-Alashankou pipeline making definite progress towards being finished  by the end of the year (or soon thereafter), with an initial throughput of 210,000 barrels per day that is projected to double when full capacity is reached, but also Kazakhstan is looking at China as an important future export market for natural gas. Uzakbai Karabalin, head of the state oil and gas firm KazMunaiGaz, asserts that gas output would skyrocket from 6.5 billion cubic meters (bcm) in 2003 to more than 50 bcm by 2015, and that "the Chinese side has been offered several routes" for KZ gas shipments into China's "East-West" (or better, "West-East") pipeline from Xinjiang to the Han population centres on the Pacific Rim.