June 21, 2002


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G Parthasarathy

The politics of oil

As the Bush administration proceeds with its war against terrorism in Afghanistan, Pakistan and elsewhere, it has found that apart from the ever reliable Tony Blair, it also has a valuable friend and ally in Russian President Vladimir Putin.

Putin spared no effort to reinforce American moves to broker peace between India and Pakistan during the Almaty summit, leading to questions about why he was adopting such a high profile despite knowing India's aversion to permitting the Russians any Tashkent-style mediatory role.

Putin is a supreme realist who knows that in today's world he has to change his country's past adversarial relationship with the United States into a partnership. And in forging this partnership, he knows that apart from yielding on the American Missile Defence Programme and entering into a working relationship with a NATO that is determined to expand eastwards, he will have to play ball with the Americans if his country is to have a significant say in exploiting the immense gas resources of Central Asia.

The long-standing association of members of the Bush administration with international oil and gas cartels is well known. The Bush family acquired its wealth through its Texas links with the oil industry, including the omnipresent UNOCAL. George Bush, Senior, has links with the Carlysle Group specialising in global investments in oil and natural gas. Dick Cheney worked for the giant oil conglomerate Haliburton before he became vice-president. Haliburton has major interests in the construction of oil and gas pipelines. Condoleezza Rice worked for the oil giant Chevron before she moved to Washington as National Security Adviser. Zalmay Khalizad, who is now the American special envoy to Afghanistan, was earlier chief consultant for UNOCAL.

Khalizad has been accused of applying undue influence to secure the election of Hamid Karzai as president in Afghanistan's Loya Jirga. This should come as no surprise. Karzai himself was a UNOCAL employee not so long ago.

How does Tony Blair fit in? Blair himself was a British Petroleum executive before he took to politics!!

But it is not the Bush administration alone that has been influenced by the politics of oil and gas. While swearing by its commitment to human rights, the Clinton administration was also significantly influenced in the conduct of its policies towards the Taliban in Afghanistan and Pakistan by UNOCAL and its promises of access to the gas resources of Central Asia.

The central focus of attention for the Bush administration today is to destroy Al Qaeda and its allies in bin Laden's 'International Islamic Front for Jihad against the Jews and Crusaders'. But at the same time there are those in Washington, Moscow and elsewhere who are now working to convert the challenges of today into the economic and business opportunities of tomorrow.

The oil and gas resources of Central Asia and the Caucasus far exceed those of Saudi Arabia. But these resources can be fully exploited and marketed only after the maritime boundaries of the Caspian Sea are delineated and secure routes determined for pipelines from the landlocked Central Asian and Caucasian countries.

Putin's Russia has a vital interest in this endeavour. The cash-strapped Russian economy depends heavily on the stability of world gas prices. Putin himself has spoken about a "Gas OPEC" to determine and fix international gas prices. And Russia has not hesitated to close its pipelines when Central Asian leaders like Turkmenistan's President Saparmurat Niyazov have tried to challenge its interests.

Russia has seen its traditional markets for oil and natural gas in Georgia, Kazakhstan and Armenia being taken over by American competitors over the past decade. Putin will now skilfully use his relationship with Bush to modernise the Russian energy giant Gazprom -- an enterprise with an annual turnover of $20 billion. The stage is being set for Gazprom to join American giants to exploit the gas resources of Central Asia.

The Taliban and Al Qaeda had barely been ousted from the caves of Tora Bora in Afghanistan when it was announced that General Musharraf, Hamid Karzai and President Niyazov would meet to discuss the development of a gas pipeline from Turkmenistan via Afghanistan to the port of Gwadar, now being built with Chinese assistance on the Baluchistan coast. The three leaders agreed during their recent meeting in Islamabad to have a fresh feasibility study commissioned for the proposed project.

Not surprisingly, top executives from Russia's Gazprom have visited Islamabad in recent days to have a finger in the rather lucrative pie of Central Asian gas. Turkmenistan has after all proven resources of 101 trillion cubic feet of gas!! General Musharraf's visit to Moscow is, therefore, not primarily because of any unrealistic ambition of Putin to be mediator on Kashmir, but because he wants to miss no opportunity to ensure Russian participation in the exploitation of the vast resources of Central Asian oil and gas.

With his warm personal relationship with Bush, Putin will not be averse to striking partnership deals with the likes of UNOCAL on such projects. Gazprom today has a collaborative relationship with Florida's Itera. There is no reason why it cannot have tie-ups with other American partners.

When the project for a pipeline to carry Central Asian gas from Turkmenistan to Pakistan via Afghanistan was first mooted by UNOCAL, the pipeline was to have been up to Multan in central Pakistan. It has now been revealed that negotiations for this project with the Taliban continued till July 2001, even after the Bush administration assumed office.

The main reason the negotiations failed was the Taliban's refusal to strike a deal on handing over Osama bin Laden. Those involved in these negotiations are said to have included Mullah Omar's personal adviser Mullah Sayed Rahmatullah, Leila Helms, niece of former CIA director Richard Helms, former Russian foreign minister Kozyrev, former ambassadors to Pakistan Robert Oakley and Tom Simons, and the Clinton administration's Karl Inderfurth. Acting as intermediary and midwife was the ubiquitous Niaz Naik of Pakistan.

Determined to abort these moves, Osama bin Laden struck at the World Trade Centre and the Pentagon on September 11, 2001.

Thus, the moves to use the Afghan route for exploiting the gas resources of Turkmenistan have powerful backers, who have a natural interest in restoring peace and stability and ensuring that there are "co-operative" regimes in Afghanistan and Pakistan.

But it needs to be remembered that when UNOCAL initially studied the project it was found to be viable only if the gas was to be supplied to the energy hungry Indian market. Even if Pakistan tries to build LNG terminals in Gwadar, the fact that huge transportation costs would make supplies to countries like Japan prohibitively expensive cannot be ignored.

New Delhi should take note of these developments. It will have to devise strategies that enable it to strike hard bargains for meeting its energy needs. It should see that Iran is not excluded from the emerging strategic scenario. The Americans and others need to know that India has multiple options to meet its energy needs.

But in formulating these policies it must make it clear that its markets will be available only when Pakistan renounces policies of compulsive hostility and agrees to the development of wide-ranging, good neighborly ties based on healthy economic interdependence. Quite obviously, for all this to happen, the Pakistani military establishment will have to irrevocably discard its present jihadi mindset. Time alone will tell whether this will happen.

G Parthasarathy

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