Insurance Policy for Oil and Gas

The states of the Caspian Sea region are rich in energy resources and eager to maintain the independence from Moscow they achieved when the Soviet Union broke up in 1991. The West wants to diversify its sources of oil and natural gas and at the same time try to head off a reassertion of Russian dominance in Central Asia or the penetration of revolutionary Islamic ideology from Iran.

These interests have now joined in the proposed construction, with U.S. financial help, of oil and gas pipelines from Azerbaijan to Turkey. If built, the pipelines could each year move hundreds of millions of barrels of oil and billions of cubic meters of natural gas to Western markets.

The pipelines would bypass Russian territory and obviate an oil swap deal with Azerbaijan proposed by Iran. Traversing Georgia and Turkey to the Mediterranean port of Ceyhan, they would also avoid the need for tankers moving through the narrow and crowded Bosporus. Turkey and Georgia would earn transit fees and taxes. The oil producers, which could include Turkmenistan and Kazakhstan along with Azerbaijan, would see their incomes rise.

Moscow worked hard to prevent this week’s pipelines agreement, recognizing that it threatens Russian dominance over Caspian energy. American backing for the project, and the blessing for it that was personally delivered by President Clinton at the Istanbul meeting of the Organization for Security and Cooperation in Europe, has become another irritant in U.S.-Russia relations.

However, the key aim, as Clinton said, is to increase the security of the West’s energy resources by providing additional transit routes, especially routes that bypass the Persian Gulf. This is a prudent insurance policy in a region fraught with risks.