PIPELINE POLITICS

(Excerpt from "RUSSIAN-IRANIAN RELATIONS IN THE 1990s" )

http://www.radiobergen.org/links.html

By Robert O. Freedman*

(professor of political science)

While Russia continued its nuclear cooperation with Iran, despite its assertions otherwise, it also stepped up cooperation on Caspian Sea energy projects. Iran, whose own Caspian coastal shelf has little oil, had opposed the Russian-Kazakh agreement of July 1998 partly dividing the Caspian Sea. (22) U.S. efforts to promote the Baku-Ceyhan oil pipeline and the Trans-Caspian gas pipeline, however, brought Iran and Russia closer together as both became increasingly concerned about Azerbaijan's and Georgia's willingness to cooperate closely with NATO, (23) a development that was reinforced by the decision at the meeting of the Organization for Security and Cooperation (OSCE) in Europe in Istanbul on November 18, 1999 to move forward with the construction of the Baku-Ceyhan pipeline.

Perhaps even more disconcerting to both Russia and Iran was a second action at the OSCE meeting, an "intergovernmental declaration of intent" to construct a Trans-Caspian gas pipeline from Turkmenistan to Baku to transport gas to Turkey. (24) Moscow had hoped to become Turkey's main natural gas supplier through the "Blue Stream" gas pipeline, while Iran had hoped to supply Turkey with Turkmen gas through its own pipelines. Iran not only wanted Caspian oil and natural gas to pass through its territory to foreign markets--rather than through Azerbaijan, Georgia, and Turkey--but it also feared that the two projects would strengthen Azerbaijan.

Consequently, soon after the OSCE agreements were signed, Russia and Iran sought to undermine the economic rationale for the projects. The Russian gas company, Gasprom, suddenly-perhaps at the urging of the Russian government-reached an agreement with Turkmenistan in December 1999, after two years of haggling, to buy Turkmen natural gas at $36 per 1,000 cubic meters, and to purchase a large share of Turkmenistan's gas in the year 2000. The aim was to deter Turkmenistan from moving ahead rapidly with the Trans-Caspian gas pipeline. (25) In an effort to persuade major oil companies not to proceed with Baku-Ceyhan, Iran cut the cost of its oil swaps with Turkmenistan, Kazakhstan, and Azerbaijan by 30 percent, beginning in the year 2000. As Iran's deputy oil minister for international affairs, Mehdi Hosseini, frankly stated, "The reduction would give Iran the upper hand in competing with 'political alternatives' for the export of Caspian crude." (26)

Yet, while Iran and Russia were acting in concert to stop both the Baku-Ceyhan and Trans-Caspian pipelines, their long-run interests in Caspian energy resources differed. Moscow wanted transport routes to pass through Russia to help it control the states of Transcaucasia and Central Asia. Iran, on the other hand, continued to profess-with support from a number of foreign oil and gas companies-that it could provide the cheapest and safest route for the shipment of Caspian oil and natural gas. As Iranian Foreign Minister Kamal Kharrazi stated: "We believe in diversity of routes for the transfer of energy, but consider Iran as the best route to the south, east and west." (27) Still, in the short run at least, Moscow and Tehran cooperated on the Caspian issue and both benefited from the sharp rise in oil prices that took place in 1999 that was made possible by increased cooperation among Iran, Saudi Arabia, and Venezuela.

LACK OF ORDER IN POLITICS

In commenting rather caustically on the lack of order in Russian foreign policymaking, the Russian periodical Kommersant noted: "It is impossible to pursue an integrated foreign and foreign economic policy today [in part] because Russia's political and economic elite, including its ruling elite, not only is not consolidated, but has split into competing, hostile factions, groups and groupings that are openly battling each other. It would be simply foolish for our foreign partners not to take advantage of this circumstance at any talks with Moscow." (3)

Perhaps Lukoil is the leading example of independent foreign policymaking in Russia.  Owned in part (8 percent) by the American oil company ARCO, Lukoil came into direct conflict with the Russian Foreign Ministry in 1994, when the latter claimed that none of the five Caspian Sea littoral states (Russia, Azerbaijan, Iran, Kazakhstan, and Turkmenistan) could act independently in developing Caspian oil. When Lukoil signed an agreement with the Azerbaijan International Operating Company to develop oil resources in the Caspian, it explicitly recognized Azerbaijan's right to extract oil in its sector of the sea. Problems arose again in March 1996 when Lukoil joined Chevron and Mobil in a consortium to build an oil pipeline from the Tenghis oilfield in Kazakhstan to the Russian port of Novorossisk. Kazakhstan, like Azerbaijan, claims the right to independently extract oil from its sector of the Caspian, and its previous efforts to market its oil had been stymied by Russia's control of transport pipelines.

Another example of independent foreign policymaking is the Russian Defense Ministry, which during both Chechen wars and also in Tajikistan, formulated its own policy, often at cross purposes with that of the Foreign Ministry and the president.