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Central Asia: Caspian Resources Provide Alternative To Middle East

The region around Central Asia's Caspian Sea contains underground treasures of oil and natural gas. This is enough reason for nations and international businesses to covet influence there. But RFE/RL's London correspondent says an even more powerful reason for the world's attention to the region is the alternative it offers to total reliance on the unstable Mideast. Correspondent Ben Partridge describes an international organization's recent findings.

London, 5 January 2000 (RFE/RL) -- A new study says the main reason the world is so interested in the oil and gas reserves of the Caspian Basin is that they provide an alternative to Middle East supplies.

Economists at the Organization for Economic Cooperation and Development, the OECD -- representing the world's developed nations -- prepared the study. It assesses the importance of the oil and gas reserves of the Caucasus and Central Asia, of growing concern since the 1991 collapse of the Soviet Union.

The study, called "The Changing Face of Energy Geopolitics," says proven oil reserves in the Caspian Basin amount to about 3 percent of total world reserves. It says the region also has about 7 percent of world reserves of natural gas.

The study says the Caspian reserves are not large enough nor accessible enough to promise great influence on world energy prices over the next decade. Oil and gas companies prospecting in the region must overcome hard logistical problems. Since the Caspian nations lack direct access to a seaport, their oil and gas exports must travel first by pipeline.

Even so, the study says, governments and industries around the world are watching developments in the Caspian closely. That is because of anxiety about instability in the Middle East. If war or other turmoil should interrupt Middle East supplies, the Caspian region could bridge any resulting gap.

The study estimates that total Caspian production of oil could more than triple the region's 1997 output by the year 2010. It says natural gas production -- and export -- also is likely to soar.

The study says the Caspian region is made even more important geographically and politically because of its proximity to Iran. It says Iran is poised to exert renewed influence in the region, especially since it can play a key role in helping to open up the Caspian oil and gas fields to international competition.

The study predicts that Western governments will move away from sanctions against Iran towards more constructive engagement. U.S. oil companies are likely to press for this.

The United States and Western Europe have company in wanting to forge links to the Caspian region. China sees it as part of its plans to resurrect the old Silk Road trading route. That could awaken old rivalries, similar to the power struggles of the 19th century.

What about Russia, which has watched with misgivings as international players have moved into this geo-strategic zone? It is an area that Russia still regards as its own backyard.

The study says Russia is in a difficult position. If Russia seeks revenue from investment in the Caspian region and transit taxes on oil and gas in pipelines crossing Russian territory, it will encourage a rival to its indigenous industries. But if it opposes development in the region, it risks opening its sensitive southern flank further to influence from political and economic rivals.

Political, ethnic or other strife in the Caspian region would have -- in the study's words -- "repercussions far beyond its immediate shores." If multinational oil firms lose money due to upheaval of the kind, for example, that is to fund new projects in areas of perceived instability. And if pipelines crossing the Caucasus and Central Asia fail for whatever reason, the shortfall in supplies could have drastic consequences for countries without adequate reserves. The study predicts that Middle East producers of oil -- Saudi Arabia, Kuwait, Iraq, and others -- will grow in importance in the new century, as world dependence on the Gulf increases.

The Caspian is important not only for the contribution it makes to world energy markets, but also because of, as the study puts it, "the wide-ranging network of interrelated domestic, regional and global-scale rivalries" that are competing for its potential output.