Battle for Influence in Central Asia & Harnessing Energy

"Our long-term goal must be to prevent this region becoming an arena for chaos, competition and conflict"
- Richard Holbrooke

The geopolitical and economic importance of the Central Asian and Caucasian republics has attracted increased international intention, especially since the dramatic insertion in 2001 of US military power into areas of the region near Afghanistan, to counter what Washington says is a direct and substantive threat to US national security.

Added to this, the international community's oil focus has expanded eastwards from the Middle East to the Caspian Sea, binding the Eurasia region with Iran and Russia. This has led to big rises in investments - domestic and foreign - and increased scrutiny mainly by the international media.
The importance of the Caspian Sea to the region has been emphasised often, raising various security concerns as well as the spectre of the "Great Game" but in a guise different to the 19th Century's rush for domination of Afghanistan and the surrounding area.

Then there is the oft-mentioned problem of how newly oil-rich states will use their new wealth, while glancing at some well-established producers such as Nigeria, where corruption is endemic and most of its people live just on, or below, the poverty line.

Richard Holbrooke, a former US ambassador to the United Nations and a former US Assistant Secretary of State, in his keynote address called for world powers to work together to prevent Central Asia from becoming an arena of conflict.

He said the US, Russia and China had a vital interest in avoiding strategic competition in the region, although economic competition was legitimate, adding that the United States had no designs of hegemony over the region.

"Our long-term goal must be to prevent this region becoming an arena for chaos, competition and conflict," Ambassador Holbrooke said.

Ambassador Holbrooke and other speakers dismissed the term 'Great Game' as an irrelevant 19th Century imperial concept but stressed the importance of the huge energy resources of Kazakhstan, Central Asia generally and the Caucasus.

"Energy is just a resource. How it is used will determine the future of the region," Ambassador Holbrooke said. He praised Kazakhstan's political and economic development but said other countries in the region were a source of concern to the United States, including Iran, which needed to be contained.
The real test of the countries of Central Asia would be their ability to carry out an orderly and peaceful transition of political power from one government to the next, he said.

In the session on harnessing energy resources in the Caspian and Central Asia, chairman Charles Hodson said that oil provided the "brightest promise" for eliminating poverty in the region. One in every four people in oil-rich Kazakhstan lived below the poverty line, while the figure was possibly four in every five people in Tajikistan.

Most speakers raised the problem of international terrorism and the need for all nations involved in the Caspian venture, and even some beyond through which pipelines would be built, to understand these challenging realities. These realities also include drug trafficking.

Ariel Cohen, from the Heritage Foundation, said corruption sometimes was the downside from windfalls from large scale oil production. "The media has a role in the public debate on how oil funds are being spent and who benefits," he said.

He referred to an article he had written, which said "best management practices and financial controls in the taxation and expenditure stages of oil revenue accrual and disbursement are essential."
The history of oil-rich states, from Saudi Arabia to Nigeria, provides ample evidence of a cycle of high revenue/high expectations/high expenditure followed by an oil market slump, a decline in revenue, and social unrest caused by fiscal and budgetary adjustments.

"These states… failed to use centrally managed oil revenues to jump-start development and prevent precipitous declines in their GDP per capita. Saudi GDP per capita peaked in 1981, when both the U.S. and Saudi Arabia had a per capita GDP of about $28,600. In 2001, U.S. GDP per capita was $36,000, while Saudi Arabia's was less than $7,500," Mr Cohen said.

But he said it would be wrong to suggest that recoverable reserves from the Caspian could even match those in the Gulf. "The Caspian will never be able to compete. The only way they can compete is by having greater security and more stability, then there will be some additional growth in investments. Investments would come here rather than to the Gulf."

Khalaf Khalafov, Azerbaijan's Vice-Minister for Foreign Affairs, said it was necessary for international cooperation to help deal with regional issues such as terrorism. "Non-regional states will also have to take care of these matters… The issues of energy resources is of crucial importance for the world," he said.
Kairat Abuseitov, Kazakhstan's First Vice-Minister of Foreign Affairs, said he believed it was impossible to develop Central Asia without the active participation of Iran, Turkey and the southern Caucasus, especially for transportation infrastructure.

"In Kazakhstan, the most important thing is that the majority of what (funds) we get from the Caspian is used for the needs of the people living in this country," Mr Abuseitov said.
As for getting Caspian and related oil and gas to the West, the plan is for pipelines both to the Black Sea and to Ceyhan, on South-eastern Turkey's Mediterranean coast.
The quantity of shipments from the Black Sea will depend heavily on the capacity of the Bosphorus waterway, straddling Europe and Asia, and controlled by Turkey under the 1936 "Montreaux Convention".