http://www.nbr.org - NBR - The National Bureau of Asian Research

Treacherous Terrain: The Political and Security Dimensions of Energy Development in The Caspian Sea Zone

Rajan Menon

The Caspian Sea’s energy resources are sometimes described with breathless wonderment.

Yet the region is expected to account for only 4 to 7 percent of global oil production at its peak, and its reserves are currently estimated to be a third of Kuwait’s or Iraq’s. While this is a substantial amount, it is hardly comparable to the holdings of the Persian Gulf region, which contains two-thirds of the world’s oil reserves. Thus the energy wealth and strategic significance of the Caspian Sea should be put in perspective. Hyperbole will make for policies that are ineffective and unsustainable at a time when Americans, in the aftermath of the Cold War, seek clear and sound foreign policy priorities so that resources can be channeled to long-neglected domestic problems.

That said, the importance of the Caspian region for the United States will undoubtedly increase.

America’s multifaceted presence there is expanding just when the area is undergoing historic change that is accompanied by the possibility of instability. A fundamental shift is underway in the regional balance of economic and political power. Russia, long the uncontested hegemon, is in decline. Meanwhile the role of other states (Turkey, Iran, China, Japan, the United States, and Western European countries) as well as international organizations like the United Nations, NATO, the Organization for Security and Cooperation in Europe, and the World Bank is increasing rapidly. Multinational oil companies have also entered the region. This alone has increased the attention it receives in, and the importance it is assigned by, the major powers. America’s foreign policy is not, of course, simply a function of the interests of its corporations. Yet there is no question that the inflow of billions of dollars in American investment into the Caspian Sea zone, and the area’s growing importance for global energy supply, will increase its salience in Washington.