Saturday, April 08, 2006

Russian Triumph in the New Great Game

Russia has gained a triumph in what has been referred to as the New Great Game in the great power struggle over energy resources in the Caucasus and Central Asia, Eurasianet reports. During his recent visit in Moscow, Kazakhstan's president Nazarbayev promised to increase oil exports via Russia, thus threatening future supplies to the western-sponsored BTC-pipeline.

In June 2005, the new oil pipeline Baku-Tblisi-Ceyhan was officially opened. At the mind-boggling cost of $3.6 billion, the new pipeline was seen as the "deal of the century", providing a vital link between the Caspian Sea oil fields and the rest of the world by way of Georgia, Azerbaijan and Turkey. This was to become the "Silk Road of the 21st Century", according to Turkey's president Sezer. Above all, the BTC-pipeline allowed western oil companies to circumvent dependence on Russian pipelines to transport oil from the Caspian Sea basin. This was a great blow to Russian economic interests in the region and presented a geopolitical threat to Moscow's position in Southern Caucasus and Central Asia.

Why is this new deal with Kazakhstan president Nazarbayev such a triump for Moscow? By increasing oil exports to Russia, Kazakhstan diverts oil production that could potentially be transported through the BTC-pipeline.

The BTC-consortium has for long been trying to involve Kazakhstan in channeling the country's oil production by the BTC-pipeline. This has been BTC's calculation from the outset, and therefore Nazarbayev's decision now threatens the long-term economic viability of the BTC. Over the last years, critics have been questioning whether the BTC-project, based on inflated oil-prices, would be financially sustainable in the long run. It now remains to see, how this will effect the BTC.

From a wider perspective, Russia has gained an important success in the geopolitical and economic struggle over Central Asia. For western powers and economic interests in the region, the future prospects of influence and business has now turned somewhat more bleak than a year back, when the BTC held the promises to open up Central Asia's reources to the world. Whether Moscow will use its regained influence to make money or as a political lever on an oil-dependent West, will have great consequences for the future of Eurasia and, potentially, the world economy.


W. Shedd said...

One question - Aren't Kazakhstan's oil resources under developed anyway .. so that increased pipeline demand would be a future requirement as production grows in any case?

It is all Borat's fault ... damn that Sacha Baron Cohen! Damn him!

Vilhelm Konnander said...

Dear Mr. Shedd,

It's always so nice to have further factors added to one's analysis, and as usual you are completely right. Kazakhstan's apparently immense and underdeveloped energy resources is the underlying issue at stake. Who gets influence at this point may also gain a greater role in the future. So, if something should be added, it is that Russia now has a far better position than just a year back in getting a big cut in resources that in due course will be developed. This is not merely a question of pipeline capacity. It is a question of influence - an influence Moscow would gladly use to bar the BTC or other actors from the energy resources of Central Asia, if and when they only get the opportunity.



La Russophobe said...
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