Step up on the gas

It was Lord Curzon, Viceroy of India, who wrote in 1898, “Turkestan, Afghanistan, Transcaspia, Persia – to many these names breathe only a sense of utter remoteness or a memory of strange vicissitudes and of moribund romance. To me, I confess, they are pieces on a chessboard upon which is played out a game for the dominion of the world.”

Exactly a hundred years later, in 1998, the CEO of Halliburton, later to be Vice President of the United States, Dick Cheney told his audience of industrialists, “I cannot think of a time when we had a region emerge as suddenly to become strategically more significant as the Caspian Sea.”

And about a year later George Bush, himself a Texan oil tycoon, said in his autobiography, “I am fascinated with the oil industry. All my friends have in one way or the other been involved in the oil industry.” President George Bush’s more prominent friends are Dick Cheney and Condoleezza Rice, at one time associated with Chevron, who had also named a tanker after her. The present US Government is oil- driven, it understands the Game the best, where as the Americans say, they play hard ball, and their rule book says “winner takes all.”

A lack of steady and assured access to energy resources was the difference between winning and losing a war; it will be the difference between development and survival, between prosperity and poverty. US concern with energy supplies goes a long way. It was the present Bush Administration that has considered energy needs as a matter of national importance and evolved a National Security Policy in 2001 to ensure energy supplies for the next 25 years.

In many ways the Cold War era was far less complicated. Today, the New Great Game of Ahmed Rashid has become far more complicated than the Great Game of Rudyard Kipling. The USA, is the master player with other smaller but important players. China and India as the main new consumers and Iran and Russia still the important suppliers. The other new actors to this Game have been the gigantic MNCs whose budgets are larger than those of some of the countries around the Caspian. Chevron or ExxonMobil could hold some of them to ransom. The theatre remains more or less the same from Kazhakhstan to Algeria from Azerbaijan to Balochistan.

Oil and gas in the vast Eurasian region are mostly to be found in areas inhabited by Muslims and ruled either by monarchical or dictatorial regimes, sometimes obscurantist as well. In addition, they are politically unstable and even violent, which could easily mean interrupted and uncertain supplies. In most of these countries, including the new countries after the break up of the Soviet Union, there is American troop presence, in varying degrees. In addition US forces are in Afghanistan and Pakistan, especially in areas facing Iran. The only hold out so far is Iran but the noose is tightening and the campaign is bound to get more vociferous.

Political interests apart from economic interests are an important factor for the USA. Supplies from the Caspian region must not go through either Russia to Europe or through Iran to the Persian Gulf, which is the cheapest and the fastest route. The Americans want the oil to flow from Kazakhstan and Azerbaijan through the turbulent Caucasus and end up at Ceyhan on the Mediterranean coast of Turkey, both expensive and long. The gas from Turkmenistan should flow through Afghanistan to Pakistan, similarly expensive and long and charted through politically volatile territories of Afghanistan and Balochistan.

Finally, and the most important facet is that supplies are running out. No serious alternative to oil and gas has been found for transportation nor any serious global attempt made to curb consumption. Probably none will be found till we actually all come to a grinding halt. Major oil companies like Exxon Mobil and Chevron Texaco, two of the largest US companies and Royal Dutch/Shell in Europe disclosed last year that there was a significant imbalance between their oil production and replacement.

Russia may no longer be the Super Power, militarily or economically, that it was a few years ago. But it is still the world’s second largest oil exporter and the largest outside OPEC. Gazprom sits in control of one-third of the globe’s gas reserves and the Russian government controls Yukos the oil giant of Russia. It remains a major player in the energy market outside the total control of the USA and its decision to go ahead with supplying heavy water to Iran’s Bushehr plant is an indication of its continued interest in the Gulf.

If all future needs have to be met, the total output would have to increase from the present 80 million barrels a day to 120 million barrels a day by 2025, the year they say India will be major power. The increase is equivalent to the total global consumption in 1969. Of course, then China and India were not in the market. New discoveries are few and have to be dug deeper. Unless some new sizeable discoveries are made, there will be a massive energy crunch soon.

Some estimates place China as the world’s second largest consumer of petroleum products accounting for 40% of the increased demand. But even though demand for energy in India and China is rising, this is still about one-sixth or even less of what is consumed per head in the rich nations. There is scope for Indian and Chinese consumption to continue to grow while there has to be scope for consumption by the rich to reduce. Ironically, if either the Chinese or American economies were to slow down for want of energy resources or for any other reason, the result on the global economy would be disastrous.

While the war on terror continues unabated in one form or another, it is also quite apparent that this has been an opportunity for the rich and powerful to put an iron ring around the areas of production of these precious energy resources, and control on areas of transit to ensure uninterrupted supply. Thus one power can conceivably hope to control both the production and supply of virtually all oil and gas in the Eurasian region. It would then be in a position to help some friends/allies to become major powers, though not competitors, while the rest would have to wait. Such supplies would doubtless depend on good behaviour to be defined periodically by the controller of these resources from time to time. The game remains what it was -“a game for the dominion of the world.”

This has to be accomplished quickly. The almighty dollar has to be saved from depredations by other currencies. For this, the sagging economy must be revived. And for this, there must be an uninterrupted supply of energy.

Civilisation as we know it today will die away, if we have no water and no oil. In India, we are short of both, so before we get carried away by delusions of grandeur 20 years from now, let us sort these out. We have to find ways to ensure water for ourselves, and for the second, oil and gas, we have to get involved in the New Great Game being played out there. Mani Shankar Aiyer’s valiant efforts are well taken. But the choice of a pipeline through turbulent Afghanistan or Balochistan remains an uncertain prospect, unless the nationalist aspirations in these regions are satisfied or subdued either by the Americans or the Pakistanis.

Source : Hindustan Times 4th April 2005