Emerging clout
of pipeline politics Oil used as reward and punishment
May 15, 2006 - International Herald Tribune
Author(s): Jad Mouawad
As energy-rich countries feel empowered by high oil prices, they are
increasingly using a blunt instrument to make their influence felt. Call
it the power of the pipeline.
New, superlong pipelines are planned for South America, the Middle
East, Russia and Africa, and oil-producing countries are using them to
forge political alliances, punish foes and extract concessions from
customers.
"Pipelines mean political leverage," said Frank Verrastro, the
director of the energy program at the Center for Strategic and
International Studies in Washington.
On a recent visit to Lithuania, Vice President Dick Cheney lambasted
Russia for using oil and natural gas as "tools of intimidation and
blackmail." Later, on a stopover in Kazakhstan, he urged energy-rich
Central Asian countries to bypass Russia altogether when considering
pipeline routes to the West.
President Vladimir Putin himself made energy security a theme this
year in talks with other industrialized countries. But on the day it
took over the presidency of the Group of 8, Russia cut off natural gas
supplies to Ukraine over a price dispute, freezing out both its
independent-minded neighbor as well as the European Union in the dead of
winter.
In the end, a compromise was reached and Ukraine agreed to pay more
for its gas, until then subsidized by Russia. But Russia's neighbors
also learned a shocking new reality: Whoever controls the taps also
holds the upper hand.
Transnational pipelines have been around for more than a century, but
with low prices and supplies aplenty, they had lost much of their
strategic significance over time. Supertankers, first built in the early
1950s, allowed producers to ship anywhere around the world, and freed
consumers from the whims of a single seller. About two-thirds of the oil
trade is now carried by tankers.
But matters have changed in recent years: Higher demand has put
pressure on energy networks, supplies have had trouble catching up with
consumption, and tensions have risen. Today, every drop counts.
"Pipelines play a critical role in an age of increased tightness in
energy markets, terrorist threats to energy infrastructure, and
political use of energy resources," said Anne Korin, the co- director of
the Institute for the Analysis of Global Security, a research center
based in Washington.
Consider the case of Iran, which wants to build a natural-gas
pipeline to India and is even considering extending the route to China.
The project, spanning about 2,500 kilometers, or 1,600 miles, at a cost
of $7 billion, would provide Iran with a large market for its
substantial gas reserves while helping India meet its growing energy
needs. The pipeline would also add to Iran's political clout.
There are drawbacks. The pipeline must cross Pakistan's Baluchistan
region, a prospect that worries India given the area's history of
lawlessness.
And while Pakistan's current leaders welcome the proposed route
because they would also benefit from Iranian gas, a pipeline might
afford future governments with a vital means of pressuring India. The
United States also strongly opposes the plan. "The last thing the United
States wants is for India to be in Iran's debt," Korin said.
None of this has been lost on Hugo Chavez, the president of
Venezuela, who persuaded his neighbors to look at a 9,600-kilometer
pipeline linking his country to Brazil and Argentina. He has named it El
Gran Gasoducto del Sur, the Great Gas Pipeline of the South. With a
potential cost of $23 billion, the proposal makes little economic sense;
it would be much cheaper to build liquefaction terminals and ship the
gas by tankers.
But Chavez's plan is not only meant to transport gas; it also carries
a political message. The pipeline should be "considered one of the
fundamental steps to South America's integration," according to
Petroleos de Venezuela, the state oil company.
Russia has been particularly adept at balancing its economic needs
and its role as an energy superpower.
When considering an oil pipeline to the East Sea or straight to
China, Russian energy officials waited for two years before committing
themselves. China was initially favored, but after much dithering,
Russia picked the longer and costlier option to its eastern seaport of
Nakhodka, instead of the Chinese route to Daqing. The reason: The plan
allows oil exports to Japan as well as to other potential markets,
including the United States and eventually China as well.
Then there is the matter of what Cheney called "blackmail."
Last month, Putin suggested that Russia might redirect future exports
to Asia instead of Europe because of what he called "unprincipled
competition" blocking the expansion of Gazprom, Russia's biggest energy
company, in Europe.
"To the extent that you are concerned that countries like Russia
might be using energy as political tools, one of the best ways to
protect yourself is to create alternate pathways to move energy to
markets," said Steven Pifer, a U.S. deputy assistant secretary of state
for European and Eurasian affairs from 2001 to 2004.
In the 1990s, that sort of thinking led energy planners in the United
States to support construction of a pipeline to carry oil from the vast
reserves of Azerbaijan, Kazakhstan and Uzbekistan, which are all
landlocked around the Caspian Sea, through Turkey, while avoiding Russia
to the north, as well as Iran, which would have provided the shortest
route, to the south.
"In all these cases," Korin said, "you have a big problem with
Central Asia, where there is lots of energy but few politically pleasant
and unproblematic ways to get the supplies out if you don't want to be
overly reliant on Russia or on Iran."
It took nearly a decade to build the $3.9 billion pipeline, which
starts in Baku, Azerbaijan, snakes through Georgia, and ends at the port
of Ceyhan, Turkey. Oil will start flowing this summer.
A big drawback for pipelines is that they are relatively easy targets
for terrorists. In Iraq, hundreds of bombings have frozen exports from
the northern Kirkuk fields. In Colombia, one pipeline, running from the
north to the eastern Caribbean port of Covenas, has been ruptured by so
many attacks that it has been nicknamed "the flute."
But such concerns will not stop new projects. Pifer, who also worked
at the National Security Council, where he oversaw Russian affairs in
the Clinton administration, recalled that in the 1990s the United States
distributed a bumper sticker around Central Asia. It read, "Happiness is
multiple pipelines."
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