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The Global Competition for Control of Central Asian Oil Reserves
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3 Oct. 2005 - 10:23:00 PM

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This Podcast focuses on the growing competition for supply of Central Asian oil supplies because it involves a number of factors which are coming to prominence at the beginning of the 21st century.  These factors include, not in any order of priority, the increasingly desperate search for oil reserves, the key geo-political position of Central Asia, especially the area around the Caspian Sea, the pressure on China to expand its influence, and possibly its control, westwards into the Central Asian states, and the pressure in the region for recognition of the rights of the inhabitants, including the right to be fairly represented and the freedom to practice their religion.

Central Asia is today one of the key strategic crossroads of the world, it controls the old silk route between China and the Mediterranean and the routes south to the Indian Ocean from Russia, and what is more it has some of the largest, and least developed, oil reserves in the world, including the Kashagan Field, the only super-giant oil field located outside the Persian Gulf region.  New pipelines now criss-cross the region and plans for longer and larger ones are on the drawing boards of oil companies. Billions of dollars are now being invested in this sparsely populated region.  To the south lies the emergent power of Iran, increasing its influence in Iraq and threatening the oil producing States of Arabia, and the U.S. dominated state of Afghanistan, to the north is the still powerful Russian Federation, which governed the region for most of the 20th century, while to the east lies the fast growing Chinese state, which has consolidated its imperial power in Xinjiang and Tibet, and is looking to develop its influence beyond its western frontier, and to the west of this region is the troubled region of the Caucasus, with its internecine warfare. 

In order to avoid being crushed by these great powers the rulers of the region have to play a dangerous game of balancing one power against another, and that is one reason why they have allowed the U.S. to have some bases in the region, to provide another balance, against China and Russia.  

Central Asia, little known by the rest of the world, is one of the most strategically important areas of the globe, a key point at which to influence and control the heart of Asia.  In the 19th century the competition between Britain and Russia for dominance in Central Asia was known as the “Great Game”; officers, in disguise, often meet their deaths at the hands of local rulers.  The pressure to dominate is as real today as it was in the 19th century, the powers, apart from the Russians, differ, but this game is deeply serious.

In other articles and Podcasts, and on’s Web pages, I make it clear that the world faces a period when demand for petroleum products will exceed the capacity of the oil producing states to pump crude, the point at which the demand curve outstrips the output curve is known as “peak oil”.  This point was occurred in the Continental U.S. many years ago, and America now imports over half of its crude oil, from countries including Venezuela, Nigeria, Angola and the Middle East.  The United Kingdom is now at the point where it is starting to become a net importer, so its peak has been passed, but the world as a whole will experience this phenomena in the first half of this century, possibly sooner than later if demand from China[1] and India continues to grow; we will only know after the point has been passed.  It is this factor, the lack of reserves, which has driven the oil majors to develop the oil resources of the states that border the Caspian Sea, particularly the Kashagan, Tengiz, Karachaganak and Korolev Fields of Kazakhstan and the off-shore fields of Azerbaijan. 

Oil and gas has also been found in Turkmenistan and Uzbekistan, but it is Kazakhstan which will be one of the largest producers of crude oil in the world, rivalling the large producers in the Persian Gulf.  In addition to its very large fields it also has at least six other major fields and it is estimated that there are up to a 100 more potentially commercial oil fields awaiting exploration and assessment in Kazakhstan’s sector of the Caspian Sea.  It is estimated that by 2015 Kazakhstan’s oil production will reach 3 million barrels a day, over a billion barrels a year.[2]  Caspian crude is of high quality, comparable to Brent crude, and relatively accessible.  The Kashagan Field is a “super-field” once in full production it will be the second largest in the world, almost the size of the world’s largest, the Ghawar Field in Saudi Arabia, which some reports indicate may be reaching the end of its productive life. Kazakhstan also has a very large natural gas field in the north of the country.  Kazakhstan’s oil production may however create environmental problems, there are large amounts of “sour gas” and millions of tons of sulphur are already stockpiled, this is already causing pollution, and future increases in oil production will only worsen the problem.  The Kashagan is also in an active earth-quake region and the oil is currently under enormous pressure, up to 1,000 atmospheres, there are fears that removing the oil could trigger earthquakes in the region.[3]

Central Asian oil production also suffers from huge transportation problems, the area is land-locked and many of the neighbouring countries are violate.  There is also reluctance to allow the Russians to have the ability to close pipelines, if they run across Russian territory.

In May 2005 the 42 inch wide BTC (Baku-Tbilis-Ceyhan) pipeline delivered its first oil, its construction cost $4 billion.[4]  This pipeline starts in Azerbaijan and crosses Georgia, ending at the port of Ceyhan on the Mediterranean coast of Turkey. But this is only the start of the pipeline building race that will be needed to exploit the potential of Central Asian oil; particularly that produced in Kazakhstan. Of all the countries interested in Kazakhstan China probably has the most to gain and it will shortly complete a 1,000 kilometre oil pipeline from central Kazakhstan to Xinjiang in NW China, this will be the first pipeline from Kazakhstan that does not cross Russian territory.  China is also offering to extend this pipeline for a total distance of 3,000 kilometres to run from the Caspian to the Chinese coast, feeding the world’s second largest oil importer (after the U.S.).  Although Western countries like Shell and Agip are using their resources in money and technology to bring these giant fields into production it looks as if China will consume much of their production.[5]

The importance of Kazakhstan’s oil fields for China has been illustrated by the competition between Chinese and Indian companies for the ownership of PetroKazakhstan, a Canadian company.  The China National Petroleum Corporation (CNPC) agreed to buy PetroKazakhstan for $4.18 billion in August 2005[6].  CNPC already owns substantial assets in Kazakhstan.  The Indian company The Oil and Natural Gas Corporation had previously, it is reported, bid $3.6 billion for the company.  The New York Times reported that Western oil executives have complained that “they may find it hard to buy oil fields at commercially viable prices if bidding soars because of the involvement of state-owned companies” driven by strategic planning.[7]

The other states of this region are also players in the oil game, Azerbaijan for example is dependent on oil for 80% of its exports, and the biggest investor is BP, which also owns the largest share in the BTC pipeline.[8]  The region is politically unstable, and has its share of authoritarian governments, including the government of President Islam Karimov in Uzbekistan, whose troops shoot over 700 protesting people in May 2005.  In Kirgizstan, Georgia and Ukraine local protests forced changes of regime, Mr Karimov has ruthlessly protected his control of the country.  His actions have also caused embarrassment to the U.S. which has proclaimed Uzbekistan an ally in the “War Against Terrorism” and has stationed troops and aircraft in that country.  However President Nursultan Nazarbayev of Kazakhstan also has a reputation for controlling his opponents, out of 77 members of the national parliament, there is only one opposition member, as Stalin told Churchill at the Yalta Conference in 1945, “one party is much better.”  In January 2004 the Democratic Choice of Kazakhstan Party was closed down by government action, as it had questioned the conduct of parliamentary elections.[9]

Oil is not the only strategic mineral in Kazakhstan, it also has very large uranium reserves, the second largest in the world, 17% of the world’s total.[10]

Russia continues to exercise real power throughout the region, and still maintains military bases in many of the countries of Central Asia.  Its cosmodrome at Baikonur in Kazakhstan is due to remain its main space launch facility at least until 2050.  Russian power remains the main counter-weight to China.

It appears that the U.S. is having trouble committing sufficient troops to Afghanistan (and its NATO allies, with few exceptions) are reluctant to commit their men to active operations.  With its operational overstretch in Iraq America now lacks the manpower to act decisively in Central Asia, unless it is able to withdraw forces from Iraq, or it introduces conscription (something that will be very unpopular in the U.S.).  However, if America sees China as its main potential opponent in any future war, then it needs the ability to retain its small commitment to the area, and possibly in cooperation with the Russians, to create a sufficient defensive shield to protect the status quo.  Peter Aldous writing in Nature in June 2005,[11] said that Chinese dependence on Russian oil and gas could eventually bring the two powers to the brink of war, my own concerns are that the energy shortages that China faces (see my Podcast and article on China’s energy needs) and the overriding desire of the Chinese to secure access to Kazakh oil reserves on strategic grounds, could see a conflict between these powers on the steppes of Kazakhstan. 

The Podcast also available via iTunes – type “negotiation” in the search under “Podcasts”.



“The Dust of Empire, The Race for Mastery in the Asian Heartland,” Karl E Mayer, Public Affairs, New York, 2003

[1] China’s oil imports have grown at 30% per annum in the last two years – The Far Eastern Economic Review, June 2005 – “China’s Energy Woes: Running on Empty” – Philip Andrews-Speed.

[2] UPI, 27 July 2004, report by Martin Sieff.

[3] The Guardian (London) 4 Dec. 2002, “Kazakhstan: Oil Money Threatens to Make Killing Fields” – Paul Brown.

[4] The Independent (London), “The Pipeline that Will Change the World,” 25 May 2005

[5] The Times (London) “Report on the Future of Oil and Gas,” 20 September 2005.

[6] PetroKazakhstan Press Statement, 22 August 2005.

[7] The New York Times 16 August 2005, “China and India Vie for Kazakhstan Oil.”

[8] The Economist 9 July 2005, “The Oil Satrap.”

[9] Human Rights Watch fax to President Nazarbaev, 7 January 2004.

[10] UIC Nuclear Issues Briefing Paper # 75 September 2005

[11] Nature 435, 1152-1154 (30 June 2005) “Energy: China’s Burning Ambition” Peter Aldhous.

© Copyright 2005 by Negotiation.Biz

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