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Kazak Pipeline Tug-of-War

Washington and Tehran vie over distribution of Kazakstan's vast energy reserves
By IWPR Central Asia

A tug-of-war between the United States and Iran over transportation of Kazakstan's huge oil exports is likely to loom large next month at a meeting in Tehran to discuss Caspian Sea energy reserves.


Foreign Ministers of the five states bordering the Caspian - Russia, Iran, Kazakstan, Azerbaijan and Turkmenistan - will consider how much each country should get from the region's estimated 200 billion barrels of crude oil and 18 trillion cubic metres of natural gas.


But Iran wants to discuss more than the size of its Caspian entitlement.


Tehran is keen to secure a share in the transportation of energy from land-locked Central Asian countries, especially Kazakstan, whose recently discovered Kashagan oilfield is said to have reserves of some seven billion tons, making it the largest energy find in the past 30 years.


Iran has suggested that it will carry the region's energy reserves through a pipeline to the Persian Gulf.


Tehran's proposals are opposed by the United States which wants to keep Iran isolated. Washington would prefer to route Kazakstan's oil via Azerbaijan to the Turkish port of Ceyhan.


Many oil experts regard the Turkish route as economically unviable. They believe Washington is promoting it for political reasons, not only to isolate Iran and weaken Russia - which also would like a hand in the transportation process - but also to please Turkey, a staunch US ally.


The Kazak government, which relies heavily on US economic support, has shown a diplomatic impartiality towards the two sides who want to transport its oil. But in the last six months there have been concrete signs of Kazakstan favouring the Tehran option.


One of the clearest indications to date came last June when Kazak Prime Minister Kasymjomart Tokaev told visiting Turkish Foreign Minister that he was considering running a pipeline through Iran. Tokaev said economic and technical details were being worked out.


It is likely to be a 1650-km long pipeline from Kazakstan via Turkmenistan to Iran. At an estimated cost of 1.5 billion US dollars, this would give Central Asian states access to the Persian Gulf.


Kazak indecision the pipeline issue has undoubtedly rattled Washington. In December last year, two high-ranking US representatives visited Kazakstan and bluntly asked about the Baku-Ceyhan project.


Two days after the visit, an Iranian delegation, headed by Deputy Foreign Minister Sadik Harrazi, arrived in Almaty. Harrazi raised the pipeline issue and promised to invest significant resources if the route went through Iran.


" Practically all the experts and oil companies are convinced that the shortest way for transporting oil from the Caspian region runs through Iran," he said.


Sharing out Caspian resources is the main item on the agenda of the five foreign ministers meeting in Tehran in February. Their decisions will be submitted to a subsequent summit in Ashgabad.


To a certain extent, Kazakstan's support for the Iranian pipeline stems from the fact that US sanctions against Iran expire in August 2001. If the sanctions are lifted, Astana wants to be ready for closer oil cooperation with Iran.


Western petroleum companies could also favour the Iranian option. Tokaev has discussed the matter with Menno Gruvel, Vice-President of the French oil company Total. Gruvel, in charge of company relations with Continental Europe and Central Asia, turned up in Kazakstan soon after the visit by the US representatives last December.


Gruvel is thought to believe that pushing the pipeline through Iran is the most economically viable option. His view is shared by some American oil companies.


The Kazak expert Vladimir Molchanski believes that, "the sharks of global business world" favour a trans-Iran route over the Baku-Ceyhan project.


Iran has declared that it is prepared to receive 500,000 barrels of Caspian oil a day. Kazak experts believe that if Astana adopts the "northern route" through Turkmenistan to central Iran, then oil output from Iran will reach the fantastic total of one billion 800 million barrels a day.


For Tehran, this project is interesting not only economically but as a boost to its status in the Caspian region. In essence, Teheran, as a member of OPEC, is not that keen on increasing Caspian oil production since this could significantly dent world petroleum prices.


Iran's main aim is to increase political influence in the region, a development which would displease not only the USA and Turkey but also Russia whose relationship with Tehran currently rests only on the simple principle that "the enemy of my enemy is my friend".


But Moscow and Teheran do not regard their union as solid. They see each other as potential regional rivals if US influence in the Caspian region weakens.


Dosym Satpaev is IWPR project Editor on Almaty