Col. Stanislav Lunev
Friday, July 12, 2002

We are once again shocked by our dependence on oil from the Middle East when, in the wake of a new wave of violence there, Iraq announced a ban on its oil exports and some other countries promised to follow its example.

Recent events in the Middle East once more underscore our heavy reliance on Persian Gulf oil, which is subject to political influence and disruption and is a special weapon in the hands of our foes and our alleged "friends."

The Gulf has an output capacity of 22.7 billion barrels per day, 27 percent of the world's oil supply, and contains about 679 billion barrels of proven oil reserves, about 66 percent of world oil reserves. The region also holds 91 percent of the world's excess oil capacity and can compensate for oil unavailable during disruptions of trade.

If there were any long-term disruption in oil deliveries from the Persian Gulf, it would cause serious energy shortages, rising prices and general economic panic for the world's economy. As a result of this, many states dependent on Gulf oil are hoping to find new sources of energy in the Caspian Sea region, a source believed to be more reliable and less subject to political disruption.

The Caspian Sea is believed to hold the world's third-largest reserves of oil and natural gas, after the Persian Gulf and Siberia. Because of their heavy reliance on Middle Eastern oil, Western nations, including the U.S., have been particularly interested in tapping Caspian Sea oil.

According to experts, Caspian oil will help lower the cost of any disruption of oil supplies from the Gulf, will be useful for price leverage when the price of oil reaches a certain level, and is sufficient to be a crucial barrier for any oil price increase.

Increasing the amount of Caspian oil on the world market is difficult, however, because the sea is landlocked and is therefore, for all intents and purposes, a lake.

As a result of geographic limitations, the only cost-effective means of conveying Caspian oil is through pipelines to Georgia and Turkey, countries with port access in the region. With no alternatives, oil-extracting nations of the Caspian region have built and continue to build pipelines to ports in both nations.

Georgia's involvement as a transit point came with the establishment of the Baku-Supsa pipeline, which carries so-called "early oil" from Azerbaijan to the Supsa terminal on the Black Sea. The Baku-Supsa line, which has been operational since 1999, moves about 100,000 barrels per day.

Another oil pipeline, the Baku-Tbilisi-Ceyhan, is planned to be operational by 2004. This line begins in Baku, Azerbaijan, and stretches northwest to Tbilisi, Georgia, where it turns sharply southwest to end at the Mediterranean port of Ceyhan, Turkey. The 1,095-mile-long pipeline will cost an estimated $2.7 billion and be able to move 50 million tons of oil per year, boosting the Georgian economy by $130 million.

However, constructing oil and gas pipelines is a challenge to Russia and Iran and other countries that have been the region's dominant energy producers and suppliers since the Cold War. These nations consider energy supplies from the Caspian Sea to be their exclusive monopoly and are trying to undermine international efforts to bring the region's oil and gas to the Western market.

We need to keep in mind that, aside from promoting Caspian oil development, the U.S. must continue to diversify its oil supplies in other regions and increase its strategic oil reserve. Despite new pipelines and plans for increases in oil output, it is unlikely that the Caspian Sea will replace the Persian Gulf in the near future as the major source of oil in world trade.

The development of Caspian Sea resources as an alternative source for oil and gas supplies, however, could dramatically reduce Western dependence on the Persian Gulf and would make it more difficult for the Middle Eastern nations to raise oil and gas prices and to influence political processes in the U.S. and other Western countries.

Col. Stanislav Lunev is the highest-ranking Soviet military intelligence officer ever to defect from Russia. Read his gripping story, Through the Eyes of the Enemy.

Read more on this subject in related Hot Topics:
Middle East
Russia

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