The Great Energy Game
As demand soars, central Asia's oil and gas reserves are a magnet pulling in the world's powers
Chinese activity in central Asia has mushroomed. China beat out Russia's Lukoil last year to acquire Petrokazakhstan, which owns a few small oil fields in central Kazakhstan. The office of one of China's state-owned oil companies, CNPC, is across the street from its embassy in the Kazakh capital and is just as big. "China has two major producers on its borders. It would be like the U.S. going to Canada or Mexico," says Erica Downs of the Brookings Institution.
"Better deals." And the Chinese know how to bargain. "They can bring to the table offers that can't be matched by international oil companies," says Bob Ebel of the Center for Strategic and International Studies. "They can sell military equipment, make loans. They know they are latecomers to the game, so they offer better deals."
With the money comes political influence. The Shanghai Cooperation Organization, created by Beijing in 2001 as a buffer against the United States, includes Russia, four of the five central Asian republics (Kazakhstan, Kirgizstan, Uzbekistan, and Tajikistan), and Iran as an observer. It was after its meeting last July that, with China and Russia cheering on the sidelines, Uzbekistan expelled American forces from its air base supporting operations in Afghanistan. Kirgizstan, the other country in the region with a U.S. base, has discussed a similar move.
Kazakhstan, for one, is milking all it can, playing all three superpowers off one another. "If it's a game, it's a friendly one," says Kazakh spokesman Vassilenko. "Ever since we became independent, we have pursued an open policy and are open to cooperation with all countries."
But still, as more oil is pumped out, Kazakhstan must choose between exporting it north through Russia, east through China, or west through an expanded BTC pipeline. The United States is gearing up to make its pitch. Later this month, Nazarbayev will come to the United States for the first time since 2001, visiting the White House and the Bush family compound in Maine. Energy, obviously, will top the agenda.
The same choices go for natural gas. This fall, a gas pipeline will open along roughly the same route as the BTC, bringing gas from the Caspian through Turkey to Europe. The U.S. government hopes it will eventually connect under the Caspian to also pipe gas from Kazakhstan and Turkmenistan, pioneering a "new generation of energy investments in the Caspian beginning with Azerbaijan," according to Matthew Bryza, deputy secretary of state. But although Turkmenistan has central Asia's largest gas reserves, it also has an unpredictable dictator who has profited from transit fees. Previous attempts in the 1990s to reach an agreement with him broke down. "The U.S. is trying to promote non-Iranian, non-Russian supplies to Europe, but sound policy needs to be based on sound economics," says Ed Chow, a consultant and former Chevron executive. "If you're an oil and gas producer, how do you decide which way to go? After you spend 1 to 2 billion dollars crossing the Caspian, you need to pay the Azeris, the Georgians, and the Turks to get gas to Austria. How does that compare to [a cheaper]alternative-pumping central Asian gas to China?"
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