The Pursuit of Black Gold: Pipeline Politics on the Caspian Sea
MARYBOIES: Welcome to today's Council on Foreign Relations meeting. Would you please remember to turn off BlackBerrys, cell phones, pagers, any wireless devices? And I would like to remind the audience that this meeting is on the record. We have press present here.
Not long after oil was first produced in Baku in the late 19th century, pipelines were recognized as the most efficient means of transport from the Caspian Sea to world markets. The next hundred-plus years saw extensive pipeline construction, particularly with Russian-controlled networks serving Russia, Europe, the Balkans, and elsewhere. A second rush began in the 1990s for Caspian's oil and gas reserves. Where Russia and Iran had once been the only countries bordering the Caspian Sea, they were now joined by Azerbaijan, Kazakhstan, and Turkmenistan. Each had its own energy supply, its own national interests, and in some instances its own pipeline preferences.
Today we explore the issues that surround the pursuit of oil and gas in the Caspian Sea region, with an emphasis on the critical role of pipelines. We have three distinguished panelists with us today.
Evan Feigenbaum, to my far left, your far right, is deputy assistant secretary of State for South and Central Asian affairs. He has served in other senior State Department positions. And with his Ph.D. from Stanford, he has lectured at Harvard University.
Steven Levine, to your far left, has been foreign correspondent in the region for 11 years for such publications as the Wall Street Journal and the New York Times. Three weeks ago he published, "The Oil and the Glory: The Pursuit of Empire and Fortune on the Caspian Sea." I think I saw copies of this book on the table during the reception. I suspect they will be there after this session as well.
And Carter Page, to my direct left, is the chief operating officer at Merrill Lynch's Energy and Power Investment Banking Group. As an investment banker in Russia, he represented Gazprom, among others, advising them on strategic and financial transactions in the energy and power sector.
Tonight's focus is on pipelines. But first I'm going to ask Mr. Page -- will you please give us an overview of the size and potential of Caspian oil and gas resources? And, second, will you tell us whether there are still unresolved issues among the five littoral countries on ownership and development rights?
CARTER W. PAGE: Thank you, Mary. Really, there is significant controversy regarding the level of reserves in the Caspian Basin. Proven reserves are basically viewed to be within the vicinity of 17 to 49 billion barrels, which is essentially just the offshore and this nearby surrounding regions.
There's a much higher variance when you look further afield in the actual nations of the Caspian, including Kazakhstan, Azerbaijan, Turkmenistan. Kazakhstan is estimated to have approximately 40 billion, which in essence is 3.3 percent of the world's total reserves. In comparison, Russia, to its north, represents 80 billion barrels, which is about 6 percent. So, again, a significant portion of the reserves are onshore and it is essentially very much in a state of flux in terms of determining the exact quantity, et cetera.
BOIES: Now, are these proven recoverable reserves?
PAGE: Yes, proven recoverable.
BOIES: And are there estimates of what else might be there?
PAGE: On the possible reserves front, there are even a wider range of estimates, and that can range as high as 250 billion as probably the highest on the far end of that range, although most experts would look in the high one hundreds as a safe estimate.
BOIES: Can you put those numbers in some context, either by comparing them with other countries or with a percentage of world estimates?
PAGE: Well, if you were to compare it against the total proven reserves in the world, that could be as high as approximately 15 percent, but it depends on the exact way you count it and (likes for likes?).
So -- and in terms of your second question on the delimitation issues, as is actually pointed out in Steve's book -- and I'm sure he has thoughts on this as well -- there is actually -- although it is very much in the state of discussion right now and it's under a high level of debate, a lot of the development continues to proceed at this time, so it's sort of a two-sided story in terms of the way in which it's headed.
BOIES: Is there an agreement among the five countries on the legal demarcation of who owns what portion of what underlies the Caspian Sea?
PAGE: There are -- the discussions are ongoing. To call it an agreement at this stage is probably a big too far along.
BOIES: But are there agreements at least among some of the countries? And, if there are, does that matter?
PAGE: There are certainly agreements. And it does help in the sense that it does allow for some -- if you know there's going to be less controversy in one particular bloc, that gives a bit more flexibility in terms of developing those specific areas in the interim period.
BOIES: Well, let me turn to the issue of what is the U.S. national interest in this region, and what are we doing to pursue that interest? And for this I'm going to start with Steve Levine. You've written about this region for over a decade. What is your perspective?
STEVE LEVINE: Well, the American interests, the American policy in the region, actually goes back to when the Berlin Wall came down and Gorbachev declared the Soviet Union open for business and oil men from around the world -- American oil men, and British, Italian, French -- rushed, having sat on the outside knowing all of these reserves were inside the Soviet Union, the Wall has come down, they rushed onto the Caspian Sea into Kazakhstan and Baku, and started trying to do deals.
But as they started trying to do them, coups would happen, governments would fall, deals would be suddenly scuttled and it became clear that Russia was having something to do with these problems and there really was a request by the oil companies: "Won't you, Washington, help down here?" There was resistance in Washington. This was during the Clinton administration, and Strobe Talbott had a Russia First policy. But eventually the administration did decide to get behind these countries, the "Stans," Central Asia, and the Caucasus. And the way it decided to do it was to build a pipeline to help make them economically independent and by extension politically independent -- give them breathing space from Russia.
BOIES: Now, as I understand it, the U.S. government was ahead of the private oil companies and the private gas companies in wanting to build the pipeline that is now in service from Baku through Georgia down south through Turkey into the Mediterranean, and that initially the oil companies were concerned that by doing that they would so terribly offend the Russians that it would create more problems than it solved.
LEVINE: This is what the oil companies would like -- want one to believe in it. It really is the revisionism that the oil companies, particularly BP and Exxon, raised once the U.S. did become very active. You see the U.S. active now -- Evan is very active on this topic of the pipeline. This is nothing compared to what was going on during the '90s. The oil companies invented the pipeline in 1990, 1991, 1992. They already knew that the place was landlocked. They needed to be able to get that oil out. And on the back of envelopes and on napkins they were drawing how are we going to do it. And a BP man actually drew the first rendition of the Baku-Ceyhan pipeline on a napkin, and he still has that napkin.
BOIES: Mr. Feigenbaum, you are our State Department representative here as deputy assistant secretary for at least a portion of the region. As I understand it, the five Caspian nations actually fall within three different bureaus of the State Department. You are here of course speaking for the entire State Department. Has U.S. policy or objective in this region changed, or is this administration continuing that of the Clinton administration? And how would you summarize what our mission is today?
EVAN A. FEIGENBAUM: Well, I'm going to speak principally about the Central Asian side of the Caspian, but I think some of what I'm going to say applies to all of it. I'm going to talk a lot about oil and gas tonight, and I do think it's important at the outset that we step back and we remember that we don't just have an oil and gas policy; we have a foreign policy in this part of the world of which oil and gas is one very important, but by no means the only, component. And, indeed, we have a truly multidimensional approach to this part of the world. We do security cooperation and assistance. We even have an airbase in Kyrgyzstan that provides a lot of direct logistical support for the war in Afghanistan. We do economics and trade. We do energy security and diversifications we're going to talk about tonight. We do transnational issues, like water. And we do, yes, democratic reform and human rights. We do all of these things.
But more, I think if you look at where we focus both programmatically, but also where we focus our money, the more than $100 million in U.S. assistance that we provide, at least to the five Central Asian states, we're focused in many ways on issues that wedge across the seams of these different baskets. And just to give you an illustration that makes that a little bit more real, take something like the rule of law, which has implications for oil and gas companies. I was in Tajikistan last year and I was meeting with a very senior Tajik official, and he -- I started to talk, like many American officials do, about the rule of law. And he interrupted me in the middle of my sentence and he said, "There you go again with your democracy agenda. I don't want to talk about democracy. I want to talk about investment and trade." And I said, "Well, I am talking about investment and trade because American companies will not invest here if you can take a contract and simply rip it up; if there is no judicial redress in the event of a contractual dispute. So if you look at where we focus programmatically, if you look at where we put our money, we're increasingly focused on building capacity in these countries in ways that really, I think, have implications for more than one basket.
Now, as you said, I'm on -- on a day-to-day basis I'm the principal U.S. government guy who does Central Asia. And what I often say about at least that side of the Caspian -- I won't pretend to you that it's the number one region in the world in American foreign policy -- it's not. But what it is is it's an interesting, I think, microcosm of a lot of the issues that really are very challenging to American foreign policy, and I think we can get into this a little bit. I don't know if you have a mental list of what you think is important in American foreign policy, but when I make a list in my head, with the exception of Iraq, my top 10 include things like Russia resurgent in its neighborhood, China's regional and global footprint, Iran, the future of Afghanistan, energy security in a world of high prices and expanding demand, debates about Islam, challenges within Islam, terrorism, democracy promotion in really difficult environments. And so what's interesting to me about this part of the world from a broader perspective is that all of these issues, all of these challenges, in one way or another manifest themselves. And they come together in this part of the world in really interesting, and I think very complex, ways.
But for us I think what I would say today -- and I think, Steve, you might say this at least about the 1990s, too, because I think it's been true across administrations -- for us the beginning, middle, and end of what we do is really focused on supporting the sovereignty and independence of the countries of the region. We're trying to give them choices, we're trying to give them options. These are very old societies, but they're not very old states -- only 16 years of history. And so from our vantage point, being sovereign, being independent, means having options -- not just one pipeline, but more than one pipeline, more than one market, more than one trading partner, more than one highway, more than one infrastructure. And so almost everything the United States is doing in this part of the world is designed to build capacity, but also to create options and opportunities by, I think, giving these countries more choices. And that's as true in the oil and gas sector as it is in the other sectors, too.
BOIES: What leverage does the United States have to help build diverse options for the producing countries with respect to pipelines? It's important both for producing countries and for ultimate consumers to have a diverse option, an array of supply lines. But what leverage does the United States have in that region to accomplish that result?
FEIGENBAUM: Well, on oil and gas I think the most powerful leverage is the private sector. I mean, you take a place like Turkmenistan -- and Steve and I were talking about this a little bit before. There are two issues. One issue is the pipeline. But the other issue really is extraction of the gas out of the ground. And for many of us in the U.S. government, we are as focused on the upstream, on extraction from the ground, as we are on transportation options, because the logic of that is that if the gas is there, then the pipeline will logically follow.
And so when you talk about leverage, there are technologies and skills that American companies, that multinational companies have that we think are unique. And so we think a country like Turkmenistan, as it thinks about the next phase of gas production, ought to think creatively about not just its transportation options, but also about how it gets some of those kinds of multinational companies to help with extraction as well. So the most powerful leverage we have, frankly, is the private sector. And you see it not just on oil and gas. You go to a place like Kazakhstan. The United States is the number one foreign investor in Kazakhstan. And a couple of years ago U.S. companies were providing 30 percent of all FDI in Kazakhstan -- of all foreign direct investment.
But what's interesting about it to me is that it used to be just oil and gas, and it's principally still just oil and gas. But it's not only oil and gas anymore. You have FedEx opening up a regional delivery hub. You have AESdoing power generation. You have a company called Access Industries doing coal. You have Philip Morris interested in tobacco. So -- GE is building locomotives. So the mix of American investment in some of these countries is changing at a time when countries themselves I think are trying to think about how to create some options and alternatives for themselves. The most powerful tool we have is the private sector in the first instance. But the second is that we as a government can try to send signals to the financial markets about risks and about the diplomatic environment, and that's partly what happened on the Baku-Tbilisi-Ceyhan pipeline.
BOIES: At the risk of sounding like the gentleman from Tajikistan, when I first raised the issue of the U.S. policy in this region with you, you responded by discussing the rule of law, and you have just completed with referring to other kinds of issues that we have in that region. What priority does the U.S. government put on the energy resource and the pipeline issue in particular in the Caspian region?
FEIGENBAUM: Well, I don't like to get into the business of ranking the hierarchy of priorities. I mean, I think it's important. It's been a critical part of why we're interested in this part of the world. But it's one among several things that we do. And, as I said, energy diversification is intimately related to a broader strategic agenda we have, which, again, is to support the sovereignty and independence of the countries in the region. So in that sense we're trying to really create options and opportunities for them omnidirectional.
You mentioned that we reorganized the State Department. I'm the deputy assistant secretary for South and Central Asian affairs, and I'm part of an effort, as Secretary Rice once put it, "put the Asia back in Central Asia." And it's not inconsistent with thinking about energy policy in terms of bringing resources westward. But part of supporting sovereignties, part of supporting choice, is to link these countries to the global economy in every direction on the compass. And so you know if you think about the history of Central Asia, at least for the last 200 years, this is a region that has been oriented to the north and to the west. And I think we're mindful of that. We're respectful of that. But it just so happens that the most dynamic economies in the world today happen to be to the east and to the south. So there's a cliche about Central Asia that its geography is a curse. And I'm not saying that if you can get the infrastructure right of facilitate trade links across borders both to the east and to the south, and over time will begin to give these countries that are landlocked, that have really been shut out of what we think of as globalization in a lot of ways, access to the global economy in ways that were unthinkable before 1991. So we're trying to do things multidimensionally, but also on the omnidirectionally. But you're right that the focus of American energy policy remains linked to the west.
BOIES: Well, let me ask our co-panelists. Carter and Steve, do you think the United States has the right policy as enunciated by Evan? And do you think the United States has assigned the right priority to the issues?
LEVINE: Am I going first? I'm not constrained like Evan, so U.S. policy -- sorry to speak for you, but U.S. policy is the pipeline, and it's pipeline-driven within a strategy, and the strategy is to make this area a pro-western swath of territory between Russia and Iran, driven by the establishment of an independent economic channel. And everything else is really -- I hate to call it window-dressing, but it's secondary to that.
But I've got a question to actually ask Evan, and that's just in terms of identifying that region as strategically important to the U.S. -- and when I say the region, meaning really Caucasus and Central Asia -- is it strategically important enough that NATO, for example, should formally be expanded one by one that direction?
FEIGENBAUM: That's a loaded question. (Laughter.)
Well, you know, I mean, I don't think that's really something we're thinking about, at least for my countries. My countries are on the right half of the Caspian and they're all part of NATO Partnership for Peace. They're more and less active within that context, but there's also a lot of bilateral military cooperation we do with those countries.
But to my mind, no, we're not looking to expand NATO into Central Asia. I can't speak about the left half, except to say I don't think that's really where we focus. But we do think it links to NATO, just like links to the Organization for Security and Cooperation in Europe, just like links, I said, in every direction on the compass would be supportive of sovereign choices and of a little bit of strategic independence for these countries. And that's a good thing.
PAGE: I think the facts actually speak to both Steve and Evan's answer. From an economic perspective, really, oil and gas is far and away the largest place for both investment as well as trade amongst the regions and internationally. So really energy and power is really the main game.
However, on the other hand, as Evan was saying, it is a diversified policy in terms of looking at a range of potential initiatives and continuing to drive that forward. And I think, you know, as alluded to, it's going to take a long time for these projects to kind of come to a full fruition. You know, it's only been less than 20 years since independence, which is a very short time. So, step by step, these issues will continue to evolve. And it feels like we're heading in the right direction, but it'll take some time.
BOIES: Now, Steve Levine just told us, in his view, that the strategy is the pipeline. And Evan Feigenbaum has said, many times and many places in the region, that the important point is to have alternative supply routes, not just pipelines controlled by any one country. Obviously, he's thinking of Russia when he says that.
Well, let me focus on a specific example, and that relates to Turkmenistan and Kazakhstan. As you know, for nearly a decade the United States has supported a trans-Caspian pipeline that would travel west from Kazakhstan and Turkmenistan to Baku and then on to either Georgia or Georgia and Turkey, bypassing Russia.
But in May of this year, Russia signed an agreement with Kazakhstan and Turkmenistan instead to have a coastal pipeline that would head north and connect to the Russian network. Is that agreement a setback for the United States? And I understand that it was said at the time that just because there's an agreement with Russia doesn't rule out an agreement to bypass Russia as well and build another pipeline. But even with that comment in mind, was it a setback, what happened in May of this year with Russia?
FEIGENBAUM: It's interesting the way you framed the question, because the question is about Turkmenistan, but you really framed it it's all about Russia. It's not about Turkmenistan at all; Turkmenistan is almost incidental. Do lines go through Russia? Do they bypass Russia?
You know, again, for us, I think a lot of the issue here is that, in a case like Turkmenistan, if the Turkmen have gas that can be extracted from the ground, gas that can be sold on the market, gas that can light the homes at night, the Turkmen ought to be able to get market prices for their exports.
And so one question we think the Turkmen ought to be asking themselves is, are they getting market prices for their exports, as they look around at the gas market? And, you know, it's not a secret -- American policy has been consistent on this for a very long time -- we tend to think that transport monopolies disadvantage producers. We've been pretty open about that. But it's not anti-Russian to say so. It's just anti-monopoly. And particularly as we've approached Turkmenistan since last December, we're really not interested in disturbing the existing contracts. What we're interested in principally is future production, and that's why I made that point about the upstream because a lot of people don't know how much gas Turkmenistan actually has. And as I said, we think that the next phase of Turkmen production is going to be particularly challenging and that there are technologies that are going to be needed that multinational companies can help to contribute both to extraction. And then diversification issues are related to that.
But I think, for me, the beginning, middle and end, as I said, is, again, these countries themselves. And we have a tendency -- the media particularly have a tendency to talk about Central Asia as if Central Asians didn't exist. And I think it's important to put Central Asians back at the center of the equation, because goodness knows Central Asians do. They think a lot about their own interests, and they're pursuing their interests and their goals. And they're doing that both in this sector but in other sectors, too.
BOIES: Before the question period, let me just turn to some other countries, and that is, don't China and Iran and Pakistan, and even others, play a factor here? And you can each pick a country or pick the same countries. But if I could ask each of you to comment on the role that's played, either by China or Iran -- let's go in that direction.
MR. : You want to do China, yeah.
BOIES: Evan, do you want to start with China?
FEIGENBAUM: I've been talking an awful lot. (Laughs.) So why don't we start at the other end of the panel?
BOIES: You are from the State Department. We'd like to hear from you.
FEIGENBAUM: I'll do China. I can do China, because I spent 20 years of my life working on China before I started to work on Central Asia.
China is interesting. You know, I mean, if you think about borders in this part of the world, in 1991 you had this erection of international borders in places where international borders hadn't existed before. And as you travel around the region, you find that for a lot of countries it was really traumatic; things that used to be easy, because they were decided in Moscow, things that we think about as just the building blocks of economic life, how to share water, how to irrigate a field, how to cross a border. These things were easy because Moscow decided. And suddenly they became very difficult, and you had to have these complex intergovernmental agreements among countries. So borders were traumatic. But on the other hand, international borders fell in ways that were not possible before 1991. So you could trade across international borders in ways that were just inconceivable.
And so to me, if you think about China in that context, China's really an interesting new dynamic in Central Asia because you really couldn't trade across that border before 1991. And as the Chinese economy has come on over the last 15, 20 years, you just have the sheer commercial power of the Chinese economy manifest in this part of the world. You walk into a Central Asian bazaar, there are nothing but Chinese products in the bazaar. The Chinese are dropping hundreds of millions of dollars of soft money into places like Tajikistan. And when I say soft money, I mean no-strings loans. And the loans are for good things. The loans do things like build infrastructure and highways and tunnels.
But at a time when China is a 3 or 4 percent voting shareholder in the IMF and the World Bank, and the Bank and the Fund are trying to negotiate loan conditionality by promoting reform, we need to at least step back and ask the question about not what the money goes for, but how China provides these kinds of loans, because there's a lot of Chinese money. So what's interesting to me is the Chinese have become an economic power in this part of the world, and it's manifest principally commercially, but it's produced, I think, a lot of the same debates, at least in Central Asia, probably to a lesser degree in the Caucasus, but certainly in Central Asia, that you see here in the United States and elsewhere.
There's a joke in Almaty in Kazakhstan that the Chinese are disembarking in small groups of 10,000. And it's a reference to business people. It's a reference to just the flood of Chinese traders. And you've seen this phenomenon of the Kyrgyz adopting -- the Kyrgyz basically copying bad labor law elsewhere, where they're expelling Chinese traders from bazaars in this very protectionist sentiment. I have Kazakhs asking me, you know, "What does the Occupational Safety and Health Administration do? How do we erect non-tariff barriers?" It's a very interesting debate.
So people are excited about the opportunity, because the opportunity didn't exist before. And the Chinese economy in particular represents opportunity. But it's also a huge challenge. And there's this impulse to protect these economies. And there's also a bit of xenophobia in it. And then there's an oil and gas piece, and the oil and gas piece, back to options and opportunities, I think, for both the Kazakhs and the Turkmen, it's something they're very interested in exploring. And it comes back to the way the Chinese negotiate contracts, but also to this idea of a little bit of competition, market prices for your exports, or at least to generate a little bit of price bargaining. And even in the old days in Turkmenistan, President Niyazov was unusually good at that.
BOIES: I need to respect our time constraints, and so I have one more question before we open it up to the audience, and that is to you, Steve Levine. Would you comment on what role Iran is playing in the issues we're talking about today?
LEVINE: Yeah. In Central Asia and the Caucasus, the Central Asians are terrified of the Chinese. My wife is Kazakh. They just think that the Chinese are going to overrun the whole region. And there's a similar suspicion about the Iranians, not population overrunning, but the same kind of feeling here, a suspicion about religious extremism. And the reality is this Russian-Iranian axis of convenience that you see on two major issues; one, this non-issue, I see it, this issue of the delimitation of the Caspian Sea. When everyone here is dead, that issue is still going to be there. It's not going to matter at all in terms of energy development in that region. This is a red herring that Iran and Russia raise simply to have some dialogue, some veto power over pipelines particularly.
But the nuclear issue is very important. Iran and Russia have formed an alliance of convenience on that issue. I think it's an alliance of convenience. I don't think Putin has illusions about Iran. He would like privately to settle that issue. He would love to get the international respect of having somehow resolved this thing. But meanwhile, he and Ahmadinejad are really enjoying poking their fingers in the Western eye.
BOIES: Well, we have now reached the point at which I would like to invite members to join this conversation with their questions. Please wait for the microphone and speak directly into it. Please stand and state your name and affiliation. And please limit yourself to one question and keep it concise to allow as many members as possible to speak.
QUESTIONER: Thank you. Alexander Cooley. I teach at Barnard College and at SIPA.
I have a question for Evan, and maybe Steve wants to jump in, on managing the promotion of values, democratic values in Central Asia, versus promoting a strategic interest. I was just wondering if you could comment on how that's evolved in your thinking and in the State Department's thinking over the last few years.
I'm thinking about what happened in Uzbekistan regarding the eviction from the K-2 base. The Germans are going through this with their bases now. The EU as a community is going through it. This is a new strategy paper, sort of trading off how much energy security they want versus human rights.
And I think, to the State Department's credit, you know, you kept the pressure on the Uzbeks. You haven't backed the Kazakhs for the OSCE chairmanship. Did you make a concerted effort to put in some of the values back into the policy over the last few years?
FEIGENBAUM: You know, what I always say about Central Asia -- and I say this to Central Asians, too -- is we don't have a one- or two-dimensional approach to this part of the world. And so we don't want one- or two-dimensional relationships either. And that doesn't mean in a place like Uzbekistan that I necessarily expect that every basket is going to move at the same speed simultaneously. They won't. I don't think cooperation on democracy is going to move as fast as on security, for instance, or on trade, although we're not doing so well on trade with Uzbekistan, actually. But we don't have the luxury of opting out of baskets entirely. And I think that's true of every one of these countries.
So you're right; it's a question of balance. And it's hard to get the balance right. But we try. And part of the way we try is by trying to pursue a policy that's broadly similar, Mary, to the way I answered your question at the outset, which is we really do have a multidimensional approach in this part of the world. Look at our assistance money. Look at how we spend it. It's divided across multiple baskets. Look at our programs. Look at our rhetoric. Look what's happened in our relationships around the world. In fact, we don't have the luxury of a value-free foreign policy. If we did, it would be a lot easier, because a lot of these governments don't like, frankly, that part of our agenda.
So what I say is, you know, we don't have an oil and gas policy. Likewise we don't have a democracy policy. We have a foreign policy. And each of these is an important component, but we need to try to find a way to get the balance right. And it's art. It's not science. And it varies from country to country. But I think that's part of the challenge that we have with them.
You know, the irony is -- and this is the last thing I'll say -- you know, Uzbekistan, as your question implies, is probably the toughest nut to crack on this in the region. But we signed a strategic framework agreement with Uzbekistan in 2002, and it actually provides a pretty good vision for the relationship. If you look at it, it's a genuinely multidimensional vision. It's got security cooperation. It's got economic and trade cooperation. It's got legal cooperation. And it's got political cooperation.
And so the tragedy is that we don't have to look very far to find the vision. The vision is there. The challenge is, how do we pursue these relationships, not in a one- or two-dimensional way, but how do we do it in a multidimensional way? But the work of change in these countries is hard, and it requires things -- it's going to be a long process. And it's something ultimately these countries have to do for themselves.
BOIES: But Evan, are we trying to do too much? And by necessarily spreading ourselves rather thin by having such a long list of objectives, are we making it more likely that we don't achieve even a short list?
FEIGENBAUM: I don't think we have a long list of objectives. I think we have four or five discrete baskets. And as I said, they're security, economics, political, energy, and transnational issues.
Now, what we do within the baskets -- you're right; you know, we do a lot of stuff. A lot of this stuff is things that the countries themselves want. I'll just give an example -- narcotics; you know, a big challenge in this region. The United States, working with Kyrgyzstan and Tajikistan, literally built the national drug control agencies of those countries by running training programs, equipment programs, and with money. And it's begun to stem the problem. So these are things that the countries themselves want to do.
But this is not generic to Central Asia. Frankly, I think this is a challenge we have everywhere in American foreign policy. We do. Look at our China policy. Look at our Korea policy. Look at our Japan policy. We have to find a way to do more than one thing. But as I said, if we expect that every basket moves at the same speed, it's very unrealistic. And you have to calibrate it to the peculiarities of the region, and we try. And you also have to take the long view. And I think we're playing long ball in this part of the world. We're not playing hurry-up offense. I don't expect, you know, everything that the United States is promoting, particularly in the baskets you were talking about, to happen by next Tuesday. I think this is the work of years and decades.
LEVINE: Just one item. The U.S. has had a really strong human rights policy and civil rights policy in Central Asia, Caucasus, through the whole Clinton era and now. The U.S, a lot of times, was the only voice, and not the Europeans, particularly in Uzbekistan. But over time, the behavior has slipped. It's gotten worse and worse in all of the -- really all the republics across the region. And the U.S. doesn't really have the levers to change this. The states understand that they can get away with worse and worse behavior there. It's not a price to pay. And they see that their neighbor, China, gets away with a lot.
You know, they're not blind to what's going on around the world. They're not blind to our own foibles in recent years. And so really our levers have -- I wouldn't say vanished, but they've weakened a lot. But I will say that the U.S. in Uzbekistan, flying out those refugees, the survivors of Andijan, knowing that Karimov would shut down the base because of that, was a very courageous move. And I think it was a big thing to do.
BOIES: Richard Haass has promised to pay me a princely sum if I can keep the discussion focused on pipeline politics.
So might there be another question? Yes, sir.
QUESTIONER: Roswell Perkins, Debevoise & Plimpton.
I just would like to be brought up to date on exactly how the Caspian oil is flowing now. The pipeline -- is it bypassing Russia at the moment? And how much oil is flowing? Maybe Steve can help us.
LEVINE: Yeah. I'll talk and then, I think, Carter. Yeah.
QUESTIONER: If you could point to the map, too, it would help.
LEVINE: Okay, yeah. So a million barrels a day --- wait, wait, wait! I'm hooked up! Okay. (Laughter.) I'm not going anywhere.
The Baku-Ceyhan pipeline runs like this down. A million barrels a day is flowing that way. Then there's a --- and then there's a pipeline that goes --- (off mike).
Okay. And then there's a ---
BOIES: Could you begin again because I think this is being recorded.
LEVINE: Okay. Yeah. The Baku-Ceyhan pipeline running like this and down, a million barrels a day. That's the pipeline that the U.S. promoted. The napkin pipeline. And then the Tengiz Oil Field is right here. That's Chevron and Exxon and they're shipping 300,000 barrels a day this direction through --- well, I shouldn't say --- through Russia and then out. And it's 300,000 --- it's shipping 650,000, but around 300,000 is from Kazakhstan.
BOIES: So is the entire production of the Tengiz location going through the Russian pipeline system?
LEVINE: They have started --- Russia --- Chevron and Exxon have expanded their production at Tengiz, but Russia has blocked an expansion of that pipeline. So they've resumed a channel that they started up during the '90s. And it's crazy thing of loading up oil on barges and shipping all the way down the Caspian Sea to Baku and loading it into a pipeline and into railroad cars over here to Batumi and then on onto the West from there.
And then there are also --- there are smaller pipelines and routes that go north in Russia and out. There's a railroad car route. And all in all, I think it's probably --- it's probably maybe 1.6 or 2 million barrels a day. Something like that all in all.
BOIES: Yes, sir?
QUESTIONER: Michael Rifkin, National Committee on American Foreign Policy.
Two small points: One is we've got the comparison of reserves and productions let's say between Kazakhstan, Russia, et cetera. But I think it's worth mentioning the consumption. That for those in Central Asia --- they consume relatively a very small portion of what they produce. It means they have much more for export. And in the case of Russia, it's much more substantial where they have to consume and increasingly.
And the second question, let's say where the stability or the character of the region, I think one should mention that this is a very moderate Islam. A kind, I would say, practically ideal Islam. And they always underline this fact dealing with foreigners, that this is a moderate Islam, tolerant Islam. And that makes it much easier from that point of view, to deal with them --- whatever field.
LEVINE: Was there a question?
BOIES: Does any of you wish to comment on the statement made? Is there a question?
QUESTIONER: Thank you. Malcolm Weiner.
If I'm not mistaken, there's an auction coming up perhaps this week in Tajikistan and I'm just wondering who's going to be bidding and which direction that oil is going.
One of the "Stans" in today's Financial Times described a major auction coming up there week somewhere for oil rights.
MR. : Turkmenistan.
FEIGENBAUM: Well, there's an oil and gas show in Turkmenistan. It's called TIOGE. It's their major international oil and gas show. So that's this weekend and our secretary of Energy, Sam Bodman, is going to that. But it's a big international event that I think, Steve, if I'm not mistaken, lapsed for a long time. I don't think the Turkmen have done this in a long time. So it's a sign of interest.
LEVINE: It's a sign that the president is dead.
BOIES: Can you explain that a little more?
LEVINE: For a long time the development of the oil industry and its pipeline were dead because of this bizarre president Niyazov. And he died and his successor has revived the contest for the reserves.
BOIES: And this death was last December.
LEVINE: Yeah, yeah. And I mean, I don't want to stand up and hoot, but it was good news. (Laughter.)
PAGE: There was also, you know, as Steve is alluding to, there is a significant step forward in terms of reaching out to foreign investors and foreign experts, which had not been the case previously. So yes, it was a positive change in a lot of lights. But there's also, you know, the new president has been making some good headway in terms of putting things in the right direction.
BOIES: Is foreign investment discouraged because of the lack of a legal agreement over ownership and development rights? Or is the area so rich in resources that private investors are just willing to take the risk?
PAGE: No. I think pretty clearly there's significant concern and it's definitely a major consideration which is brought into play whenever people are assessing opportunities and measuring the risk.
BOIES: You say it's a consideration. Is it fair to say that you mean it's an impediment?
PAGE: It's --- yes, an impediment.
BOIES: Okay. Sir --- on the aisle.
QUESTIONER: Stephen Blank, North American Transportation Research Council --- not the Steven Blank who does Caspian. The other one.
We talked a lot about, earlier, a movement of hydrocarbons east towards China and a Chinese pipeline. That wasn't mentioned anywhere. Is there still talk about movement of gas and oil eastward to China from the area?
FEIGENBAUM: The answer's yes. The Chinese have been talking to Turkmenistan about gas and the Chinese have been talking to Kazakhstan --- not just talking, actually doing, with Kazakhstan about oil.
You know, and it's interesting. It's the sign, on the one hand, of growing Chinese demand. It's also a sign of the strategy that China has to increasingly try to get involved in producing countries. What's interesting about Kazakhstan, at least, is it's contiguous with China. They share a border. Turkmenistan is going to be an interesting story on that gas pipeline because they'll have to negotiate transit rights through other countries to reach the Chinese border. And the Turkmen like to sell gas at the border, and so the Chinese will have to find a way to negotiate the transit rights.
QUESTIONER: (Off mike.)
FEIGENBAUM: Well ---
PAGE: On the Turkmenistan pipeline, it's already in discussions with especially --- you mentioned the transit countries and Uzbekistan is obviously the key party there. So these discussions are already under way.
BOIES: And discussions are relating to the oil or to the gas pipeline or both?
PAGE: Both are under consideration at diplomatic level.
BOIES: Under consideration, but no firm agreement as of this time?
BOIES: Do you want to comment on this?
LEVINE: Well, just to say that ---
BOIES: Or just on the role of China generally?
LEVINE: Yeah, just to say that --- just a question, really. And Evan, maybe. China has taken 10 years to build this pipeline --- oil pipeline from Kazakhstan. A small pipeline --- 200,000 barrels a day. Now they're proposing a $26 billion gas pipeline from Turkmenistan. Is that credible?
FEIGENBAUM: I don't know. We'll see. We'll see. I mean, one issue is whether the Turkmen regard it as credible and then we'll see how the negotiations go. But this isn't new. I mean, before he died, President Niyazov, of course, I think his last foreign trip was to Beijing to talk about gas negotiations. So it's not something that's new. But all of these projects take a long time so we'll have to see what's possible.
BOIES: Yes, sir.
QUESTIONER: Harold Tanner.
You talk ---
BOIES: Your affiliation, please?
QUESTIONER: Tanner and Company. It's a catchy name.
You talk about the Baku pipeline. Two questions: Can the Baku pipeline be expanded from the million barrels a day, because it seems to be the only pipeline that doesn't go through either China or Russia? And the second question, since you want to talk about the Caspian pipeline or the pipeline --- what pipeline construction, besides the Baku construction, can help the United States?
BOIES: Carter or Steve, do you want to take an initial stab at that?
LEVINE: Well, I'll just say one --- just one fact. BP is currently negotiating to expand that pipeline to 1.6. This is currently.
PAGE: I agree. And in terms of other potential initiatives, I think one point which could be perhaps looked at in a bit more detail is the possibility of pursuing additional projects with Russia. I think, obviously, there are certain considerations which need to be brought into play in terms of, you know, are they a competitor? Are they a potential partner? I think to the extent we structure the relationship in much more of a partnership type of an arrangement, I think potentially that could make a very positive effect over time. Not an easy goal, but it's definitely worth keeping that on the agenda.
BOIES: And the second part of the question was whether those pipelines --- those that originate in Baku and then go through Georgia --- and then in the case of the oil pipeline, on through Turkey --- are those the only pipelines in which Russia has not been connected? And I think we're excluding any that run to the east or south to Iran or Pakistan or that neighborhood. Are there others?
FEIGENBAUM: Well, there are a lot of ideas.
BOIES: Certainly the trans-Caspian was proposed.
FEIGENBAUM: There are a lot of ideas for all sorts of pipelines: inter-connector pipelines, trans-European pipelines, Caspian pipelines. And I think Steve's book recounts some of this very well. There are a lot of these ideas. But right now the only thing going westward that's real is the Baku-Tbilisi-Ceyhan oil pipeline.
BOIES: Evan, you said earlier that it was the people of Turkmenistan who want the pipeline, the coastal pipeline, that would go through Russia. When I asked you a question about the trans-Caspian pipeline and the alternative of a coastal pipeline going through Russia, I believe you responded by referring to what the people want in the region as opposed to what we might think is better for them. Can you explain what it is about a coastal pipeline that makes it more attractive for them, than a trans-Caspian pipeline that would connect through Baku and not hook into the Russian network?
FEIGENBAUM: Well, this is an analytical question, so this is really more of a question for Steve or Carter. But from a policy standpoint, the way I tried to answer was to say, you know, we believe in markets. And we think that producer countries in this part of the world should be able to get market prices for their exports. And so you take a country like Turkmenistan. This is a country that has powerful economic opportunities available to it should it choose to explore them. And Turkmenistan may choose not to explore them. And indeed, there's a long tradition that Turkmenistan has of exporting its gas through an existing pipeline network.
But you know, what's interesting is that the government of Turkmenistan has spent the last 10 months talking about a whole variety of things. And I think the idea of a Turkmen government that's exploring its options in a way that's independent is, as I said, consistent with the basic framework of American policy in this part of the world. For a long time --- you know, the Turkmen are ultimately going to have to make the choice. They're going to have to make the choice.
BOIES: And Steve, in your view, did the Turkmen make that choice freely and independently?
LEVINE: Well, with Russia? Well, it's a vacuum. You know, the --- Russia moved in and signed those deals in a vacuum. In my view, the U.S., until recently, is not as assertive as it should have been in that relationship and allowed Putin to steal a march in that --- not just there --- all over Central Asia. But there is a qualitative difference in the style of leadership in Central Asia and the Caucasus. Why did Baku-Ceyhan work? It goes back to what Evan just said. Evan just said Turkmenistan needs to decide. That is the key fact.
So on the other side, Azerbaijan --- Heydar Aliyev, then the president; and Eduard Shevardnadze, then the president of Georgia --- decided themselves: We're going to take the risk and stand up to Russia and build this pipeline, which allowed then the United States to get behind them and then --- and so forth the history that we know. Nazarbayev, the president of Kazakhstan and Niyazov and then Berdymukhamedov in Turkmenistan have never stood up. And in fact, I mean, they've been extremely cautious on this issue. They have --- whoever is sitting in front of them they say, yes, yes, of course we support your pipeline. And then go home and don't do anything. And so to this day, Nazarbayev, the president of Kazakhstan, has not --- he has not committed to this --- to a line that would provide the independence for his country from Russian influence. And Berdymukhamedov has been there a very short time, but he's not either. Just to close that out, that agreement that was signed in May with Russia --- these agreements are signed all of the time and they really --- they don't mean anything. You've got to wait until steel is ordered and it arrives there on the ground and they're actually welding it together. That means there's a real contract.
BOIES: We're at the --- one last question.
Thank you, ma'am.
QUESTIONER: Caroline --- (off mike.)
BOIES: Could you repeat?
QUESTIONER: Sure. Caroline Kasan (sp), NYU.
I have a quick question: If you look at sort of Kazakhstan in the mid-1990's --- the early to mid-1990's --- basically, the government put out a welcome mat to the international oil companies. And most recently they just signed a new sub-surface law, which is making the investment environment for the international oil companies much more difficult.
How do you, in terms of thinking about sort of changes in the investment climate, or from the U.S. foreign policy perspective --- you know, talking to potential investors from the United States who want to go to Kazakhstan where the government has basically sort of said that they have the option to change the laws and to change the contracts? They have much greater power now over these production sharing agreements. So I was just wondered if you could comment on that.
FEIGENBAUM: This is a more interesting question for Carter, because you represent the companies.
PAGE: Well, I think it's a very interesting question. And until --- it's very early to say at this stage definitively what's going to be the implications of that. I think, obviously, people are evaluating it and thinking about the implications. However, at this stage, the jury is still out and the people we've spoken with --- there's definitely, you know, some level of concern. However, you know, actually what it means in terms of practice is still a bit of a moving target.
BOIES: We are almost at 7:00 o'clock straight up. So if any panelist would like to make a very brief closing statement, he has 30 seconds to do that. Otherwise, we are concluded.
FEIGENBAUM: I'll just say one --- I'll just say one thing, because --- and I don't mean to do that, but we've talked a lot, in talking about this region, about outside powers. And so I just want to return to something that I said earlier. I do think it's important in talking about Central Asia or the Caucasus --- to put Central Asians and the Caucasus countries themselves back into the equation.
You know, you cannot pick up a newspaper or a magazine in the United States and read about this part of the world and not read about the great game or the big game or these 19th century metaphors. And I hate that metaphor. And part of why I hate it is I think it's insulting to --- it's insulting to Central Asians, because it reduces them to being the passive receptacles of the wily strategies of the outside powers when, in fact, we know that very often the reverse is true. Why does Kazakhstan talk about a multi-vector foreign policy? In fact, Central Asians themselves have interests and goals and policies that they themselves pursue, and I think the same thing is true on the other side of the Caspian. So these countries, we find, are quite clear eyed about their interests and they pursue them in a very clear-eyed way.
So I guess just one plea, because we've talked a lot about Russia and China and Iran. It is important, I think, to put the countries themselves back at the center. And from a policy standpoint, we certainly do.
BOIES: Carter has indicated that he has a very brief statement.
PAGE: Just a brief statement that I agree completely with what Evan said; however, by the same token, it's very important to keep in mind the Russian considerations and balance that out accordingly.
BOIES: Thank you very much for attending. (Applause.)
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THIS IS A RUSH TRANSCRIPT.
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