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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Afghan War a Subset of U.S. Efforts to Secure Central Asian Energy Riches

Operation Enduring Freedom, on Oct. 7 will begin its ninth year. At $4 billion per month, a National Priorities Project has determined that the total cost of military operations in Afghanistan by the end of the year will be almost $200 billion. Thoughtful American taxpayers may ask why the Obama administration has not only embraced the Central Asian ground war that it inherited from Bush, but is seeking to expand not only the U.S. military footprint, but subject its NATO allies to contribute more troops and funding as well.

Shorn of post 9/11 patriotic and fervor against the perpetrators of that terrorist deed, the answer is simple – access to the rising volumes of Central Asian energy, particularly natural gas, long locked up and exploited by the USSR and its successor state, the Russian Federation.

Central Asian energy has four possible directions for export. The USSR spun a network of export pipelines, the Truboprovodnaiia sistema Sredniaia Aziia-Tsentr (the Central Asia-Center, or SATS) network, which ran northwards to bring Turkmen gas via Uzbekistan and Kazakhstan to the Russian SSR. The SATS eastern branch consists of SATS-1, 2, 4 and 5 pipelines, which were built between 1960 and 1988. Construction began after the discovery of Turkmenistan's Dzharkak field, with the first SATS section coming online in 1960, while SATS-4 was commissioned in 1973.

The collapse of the USSR changed everything. Suddenly independent and buffeted by rampant inflation and economic dislocation caused by the implosion of the Soviet Union, the newly independent states of Kazakhstan, Uzbekistan and Turkmenistan looked westwards for desperately needed foreign investment to unlock their hydrocarbon potential and provide the wealth for restructuring their societies in the post-Soviet era.

While Western energy companies scored successes first with Azerbaijan and Kazakhstan, Turkmenistan’s energy reserves remained largely off-limits to foreign investment largely due to the quixotic policies of its xenophobic ruler, Saparmurat “Turkmenbashi” (“father of the Turkmen”) Niyazov. Farther to the east, Uzbekistan devolved into an authoritarian government dominated by President Islom Karimov.

Accordingly, in the short term, the initial viable export options for Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan remained the Soviet-era export pipeline network were directed towards Russia, but all the aforementioned new nations chafed under Moscow’s “buy cheap and sell dear” policies towards their hydrocarbons.

The Kremlin's isolationist policy along with Russia's tightfisted low prices led Niyazov in March 1997 to halt gas exports and to remind the Kremlin of Ashgabat's other options. Later that year he opened the $195 million, 124-mile, 8.4 billion cubic meters (bcm) Korpezhe-Kurt Kui pipeline to Iran, Central Asia's first gas export pipeline to bypass Russia, creating the region’s first southern export pipeline.

On the Caspian’s western shore, Azerbaijan, which had been forced to use the Baku-Novorossiisk pipeline terminating at a Russian port on the Sea of Azov, in 1999 opened the 550-mile, 140,000-bpd Baku-Supsa line. Terminating at a Georgian port on the Black Sea, the Baku-Supsa pipeline provided Azerbaijan with its first export pipeline not under Russian control.

Western energy interests' trump card for exporting Azeri crude and wresting new Caspian production from Russian control opened in May 2006. The $3.6 billion, 1,092-mile, 1 million-barrel-per-day BTC pipeline moves high-quality Azeri crude from its offshore Azeri-Chirag-Guneshli fields to Turkey's deepwater Mediterranean terminus at Ceyhan. BTC, which opened in May 2006, took a year to fill before beginning operations.

Kazakhstan was not so fortunate. While the relatively liberal foreign investment policies of President Nursultan Nazarbayev’s government brought more than $40 billion into the country’s energy sector, geographical reality forced Astana to rely on 938-mile Caspian Pipeline Corportation (CPC) oil pipeline from its massive Tengiz oil field again to Novorossiisk. Farther east, Uzbekistan’s geographical isolation and Karimov’s conservative attitude towards foreign investment and ownership forced Tashkent to continue using the SATS network.

Since the death of Turkmenistan's Saparmurat "Turkmenbashi" (President for Life) Niyazov in December 2006, the struggle for the Caspian's last significant post-Soviet natural gas reserves has intensified, reviving hopes in Washington and Houston that Turkmenistan’s gas can be exploitable by western investors.

The hopes in turn have revived one of the Western energy community’s most cherished and longstanding projects, the proposed Trans-Afghanistan Pipeline (initially "TAP," now "TAPI" with the inclusion of Pakistan and India) pipeline to bring Turkmenistan’s gas to the burgeoning southern Asian markets of Pakistan and India.

TAPI was under development even before the Taliban captured Kabul, as in 1995 Turkmenistan and Pakistan initialed a memorandum of understanding. TAPI, with a carrying capacity of 33 bcm of Turkmen natural gas a year, was projected to run from Turkmenistan's Dauletabad gas field across Afghanistan and Pakistan and terminate at the northwestern Indian town of Fazilka.

As TAPI would require the assent of the Taliban, in 1997 TAPI’s initiators, the Central Asia Gas Pipeline Ltd. consortium, led by U.S. company Unocal, flew a Taliban delegation to Unocal headquarters in Houston, where the Taliban signed off on the project. It is a minor point of history but a telling one that Afghanistan’s President Hamid Karzai at the time worked for Unocal. But then the Taliban made the fatal mistake of offering sanctuary to Osama bin Laden and two months after 9-11 were driven from power for their misguided hospitality.

Despite Karzai’s fervent support for the project, security of TAPI’s route through Afghanistan remains an “impediment” to the project’s realization, though in 2008 the Afghan government made several pledges to relieve those concerns. Given the Bush administration policy, inherited by the Obama regime, of dual containment and isolation of both Russia and Iran, TAPI remains the sole significant undeveloped southern output for Central Asian natural gas and oil.

Afghanistan remains one of the world's poorest and least developed countries, where two-thirds of the population lives on less than $2 a day, producing unrest that the insurgency feeds upon. Nevertheless, in the wake of Karzai’s recent resounding electoral victory TAPI has received a new lease on life as visions of transit fee riches from his former employers becloud Karzai’s eyes, which in turn requires defeat of the Taliban, which in turn requires more troops, according to General Stanley A. McChrystal, current Commander, International Security Assistance Force (ISAF) and Commander, U.S. Forces Afghanistan (USFOR-A).

The bankruptcy of the Bush administration’s policies in occupying countries to corral their energy resources and pacify transit corridors is now evident. Invading Iraq in 2003 because of the threat of non-existent weapons of mass destruction, administration hawks predicted that rising Iraqi oil output would soon cover the cost of military operations, but six years later Baghdad is struggling to reach pre-war levels of output. In Afghanistan, 2009 is proving to be the deadliest year since Operation Enduring Freedom began in 2001.

Two weeks ago Niyazov’s successor, President Gurbanguly Berdymukhammedov announced that the 4,350 mile natural gas pipeline from Turkmenistan to China will start operations in December, allowing Beijing to purchase 40 billion cubic meters of Turkmen gas annually. Diversifying its export options, will also open a 19-mile pipeline to Iran to compliment Korpezhe-Kurt Kui pipeline, providing Tehran with an additional 12.5 bcm of gas per year.

Peering across his border at the rising chaos in Afghanistan, who can blame him? Chinese and Iranian investors came to Ashgabat armed with ready cash, equitable contracts and a lack of hectoring human rights lectures. Little wonder then that Berdymukhammedov chose to sign with them rather than wait for Operation Enduring Freedom to succeed. Not a single Chinese or Iranian soldier has died to secure their inside track, while success in Afghanistan remains as elusive as ever for the Pentagon. And if and when ISAF does pacify Afghanistan, all of Turkmenistan’s available exports are spoken for far into the future.

By. John C.K. Daly of OilPrice.com




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