Boston, 26 August 1998 (RFE/RL) -- When the dust settles from Russia's ruble crisis and the world oil slump, the map of planned energy investments in the region may look entirely different.
In addition to economic troubles, there has been a sudden shift in the strategic equation in the aftermath of U.S. missile raids on Afghanistan and Sudan. As a result, plans for pipelines and petroleum projects costing thousands of millions of dollars could fall by the wayside, despite years of maneuvering by both Russia and the United States.
The first casualty among the pipelines is US-based Unocal's project to transport gas from Turkmenistan to Pakistan. Last week, the company put its activities on hold, citing the attack on suspected terrorist camps in Afghanistan after the bombing of U.S. embassies in Africa.
The announcement will disappoint Turkmenistan President Saparmurat Niyazov who vowed only days before that the project would go ahead this year. In reality, the $2 billion pipeline plan has been in trouble since May when Pakistan conducted its nuclear tests. The action prompted U.S. sanctions and an economic crisis. Pakistan's ability to pay for imported gas has been in question ever since.
But other energy investments look equally doubtful as oil prices continue at low levels due to falling Asian demand. After four years of fierce bidding for Caspian Sea oil projects, there are now many reasons for caution. Recent drilling has yielded less oil than expected. And although oil companies plan for the long term, they can hardly be encouraged by the lower revenues that their investments are now likely to bring.
The U.S. and Azerbaijani governments have been pressing the companies to commit themselves to a costly pipeline plan in October to transport oil from Baku to Turkey's port of Ceyhan. Politics and government financing may still convince the companies to take part. But the economic justification is now decreasing rapidly.
There are also questions about the wisdom of boosting the world's oil supply at a time when many countries are cutting production to keep prices firm. If political pressure is taken out of the picture, postponement of the pipeline project would be the logical choice. A smaller line through Georgia to the Black Sea is an alternative. But as U.S. concerns about terrorism increase, all Western pipelines could become tempting targets for attack.
Russia's economic crisis may also damage it as both a business partner and a competitor, clouding the situation further. Nearly all of Moscow's plans for energy domination and security may have to be put on hold. Until now, Russia has been able to play political games to control the region's energy exports. Now, it must struggle just to survive.
In February, giant Gazprom withdrew from the Afghanistan pipeline project and gave up its 10 percent interest. The loss for the company was the first of many due to Russia's financial squeeze. Officials recently announced that Gazprom's capital spending will be cut by 50 percent.
Gazprom's ambitious Blue Stream project to build a pipeline under the Black Sea to Turkey also appears to be in danger. The line would compete with Turkmenistan to supply gas to Turkey through Iran. In addition, Gazprom's strategic role in Iran may be at risk. Although Gazprom joined French and Malaysian companies last September in a $2 billion deal to develop Iran's South Pars gas field, there has so far been no sign that it can come up with its $600 million share. Gazprom has postponed bond sales on Western markets due to the finance crisis. The delay is likely to halt Russia's plan for a Yamal Peninsula gas pipeline dead in its tracks. Last year, French and German banks loaned the company $7 billion for the huge project, taking future gas deliveries as security. Like other Russian debts, these could now face delay.
Without the Yamal pipeline, Russia may have to abandon its dream of ending reliance on Ukraine as a transit country for gas exports to Western Europe. That could be good news for Ukraine and other hard-pressed republics that rely on Russia for their supplies of gas.
There is also good news for Turkmenistan because of the World Bank's energy initiatives for Russia. According to a bank official, the world lender is trying to encourage Gazprom to use less expensive Turkmen gas for exports instead of developing more costly Yamal Peninsula gas.
Russia has embargoed Turkmen gas for over a year by refusing to export it at a fair price. That stand could now soften because of Russia's economic woes. If the problems persist, Moscow may be forced to base its decisions on rational factors such as cost and availability of gas instead of the politics of dominating the former Soviet space.
Despite the great changes that have been predicted, new routes for energy may now come more slowly because of economic constraints. Both energy demand and Russia's power have weakened. The result may be greater reliance on existing resources instead of development dreams.
(Michael Lelyveld is national correspondent for the Journal of Commerce. This analysis was written for RFE/RL)