Bushido—The Way of Oil

America Goes Into the Energy Business With the Former Evil Empire

In this sense, Abraham's pro-Russian position is no different from that of the rest of the administration. Despite the abrogation of the ABM Treaty—a political embarrassment that Putin waved away as being "of no major concern to us"—the administration has supported Tony Blair's initiatives for the fast-track entry of Russia into both the World Trade Organization and even, despite Donald Rumsfeld's objections, NATO itself.

And why not? It's Statecraft 101: After World War II, we used defeated Nazis to help us fight our former Soviet ally. And after the Cold War, we are using the Russians in more or less the same way against our close friends the Saudis: by rebuilding their economy, starting with the oil business. As Secretary Abraham put it: "Greater energy security through a more diverse supply of oil for global markets—these are key elements of President Bush's National Energy Policy."

The quote comes from a visit Abraham paid to Moscow at the end of November. The ostensible and very p.c. purpose of the visit was "strengthening standards for the protection and accounting of nuclear materials," but the main event turned out to be the pronouncement, from all parties concerned, that the days of U.S.-Russian rivalry over Caspian Sea oil have finally ended.

illustration: Lloyd Miller

The occasion for the lovefest was provided by the Caspian Pipeline Consortium (CPC), whose members include Chevron-Texaco, Arco, Mobil, Shell, and the governments of Russia and Kazakhstan. The event they were celebrating was the inauguration of a pipeline running from Kazakhstan's Tenghiz oil field (the world's sixth largest) to the Russian Black Sea port of Novorossisk.

Dave O'Reilly, Chevron's CEO, used the moment to proclaim to "the global business community that one can confidently invest in Russia and Kazakhstan." And Secretary Abraham, with the OPEC-Russia fracas no doubt in mind, said that "Russia is emerging as a separate nucleus of the energy equation. We have great respect for the energy role that Russia is playing, and we believe it will be an expanded role in the future." The Russian press even reported that Abraham had endorsed the idea of a "third nucleus," a channel for ongoing consultations among non-OPEC nations (which in theory could include the U.S.).

The CPC represents a complete reversal of the traditional status quo on Caspian Sea oil, whose paradigm until recently was the Baku-Ceyhan pipeline, a U.S.-backed effort to transport oil (how much is uncertain, although the estimate has been diminishing) an enormous distance (1100 miles) at a cost (up to $4 billion) almost double its original projection. The Baku-Ceyhan pipeline would go from Azerbaijan (recently at war with Armenia) through Georgia (occasionally bombed by Russia) and Armenia to Turkey (across the Kurdish war zone)—all in the name of greater "security." This meant the pipeline didn't pass through Russia or Iran. And though it's been promoted for years by its main backer, British Petroleum (BP), it has never been built.

The Russians, of course, always resented the rude and exclusionary attitude to Caspian Sea oil represented by Baku-Ceyhan, and boycotted it accordingly. So imagine the pleasure felt this December in BP offices when representatives were invited to make a presentation—to the Kremlin. If, as expected, Moscow extends its blessing, then giant Russian oil companies like Lukoil and Yukos will be free to invest in the pipeline, locking it into their own extensive networks and using it to transport their own oil to the Mediterranean—a win-win situation for everybody.

More and more in recent years, those networks have extended to Iraq, which has long shipped its oil from Ceyhan. Friendly relations between the two countries go back decades, and Russia is by far Iraq's largest trading partner. It also holds $8 billion in Iraqi debt, giving it a long-term stake in Iraqi stability. Lukoil, for example, holds rights to Iraq's West Qurna oil field. One of the world's largest, West Qurna could eventually pump up to a million barrels a day. So for historical and commercial reasons, Russia has opposed the levying of further UN sanctions against Iraq, and would like to see those in place lifted.

The sanctions have, of course, been a political and humanitarian disaster (which Osama bin Laden has not hesitated to exploit). Depending on whose abacus one uses, the number of innocent children said to have died runs into the hundreds of thousands (according to the UN) or even the millions (according to the Iraqis).

The American and British response has been to lobby intensively for a change in the nature of sanctions. This past summer, they proposed to the UN Security Council the idea of "smart sanctions," which would allow the Iraqi citizenry access to a far greater range of goods, while clamping down more firmly on "dual use" items with potential military applications. France, traditionally a staunch ally of Iraq, went along with the U.S.-U.K. proposal. Russia did not, and the long shadow of a Russian veto kept the Security Council from voting smart sanctions into effect.

Iraq, which claims to have no more weapons of mass destruction, is of course opposed to any sanctions, as well as to the return of UN weapons inspectors. So in August of 2001, in clear appreciation of Russia's backing at the UN, Iraq reassigned rights to its oil fields at Nahr Umar and Majnoon, previously held by the French, to Russia. Their potential is well over double that of the West Qurna fields, which means that in a post-sanctions world, Russia has access, from these fields alone, to more than 3 million barrels a day of Iraqi oil. And there are others.

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