Sea of opportunities
... if large and small states cooperate over the Caspian
By Hooshang Amirahmadi
August 15, 2000
From the introduction to The
Caspian Region at a Crossroad (1999, St. Martin's Press).
Notwithstanding the increasing recognition
of its significance, there is no clear definition of what constitutes the
Caspian Region. Does it comprise the newly independent states, the littoral
states, states within the catchment area of the Caspian Sea, states with
noteworthy hydrocarbon reserves, or states that contain the primary network
of hydrocarbon reserves and routes to transport oil and gas? Despite the
changing configuration of empires in the region, significant population
movement over time, and the focus of activity around the Caspian Sea, the
area is not viewed as an integrated whole, but rather as a collection of
isolated geographic fragments. A more robust methodological approach to
defining the region is of primary importance for preparing a regional vision
and for planning and policy formulation in individual countries.
The new emphasis on the Caspian Sea area results from its regional development
potentials. Few countries, perhaps with the exception of Iran, can hope
to achieve much development without regional cooperation. Most are landlocked
and depend on other countries to transport oil and gas to world markets.
Also, given their long history of exploitation, most are devoid of sufficient
infrastructure, modern technology, appropriate expertise, consumer products,
and domestic markets. Such a state of affairs does not fare well with a
world where economic forces dominate international relations.
The accumulation of capital, agglomeration of production, and expansion
of marketing opportunities is important for autonomy of the new Caspian
economies. In today's world, regions form because of the need for transnational
synergy and concomitant prospect for development. This is different from
the past when regions were defined on the basis of religion, culture, colonial
legacy, and like criteria. While economic institutions are key to regional
development, non-economic networks are also needed for managing challenges
that may threaten balance and growth.
The Caspian Region may be defined as comprising Iran, Afghanistan, Pakistan,
Turkey, Georgia, part of the Russian Federation, Armenia, Azerbaijan, Turkmenistan,
Uzbekistan, Tajikistan, Kyrgyzstan and Kazakstan. This excludes India and
the Arab world. Both political and economic factors underlie this proposed
grouping of countries. Even though the Caspian Region is predominantly
Muslim, Islam is not viewed as an important political force in the area.
Rather, the proposed constellation "constitute(s) an economically
viable assemblage of states with common developmental interests and an
awareness of their potential for development synergy. Three interrelated
bases for the development potential of the region may be identified: capital,
transportation, and economic reciprocity. Growing world demand for hydrocarbon
fuel guarantees capital, which could be distributed among all countries
to an extent because of the landlocked nature of most littoral states and
the need for pipelines that traverse several countries. Rail networks could
be expanded to link countries in the region and the network could be integrated
with other transport systems to facilitate interaction particularly via
maritime access. As most economies are in a state of sectoral imbalance,
though not in the same way, significant potential for intra-regional trade
exists. Iran, Turkey, Russia and China form a ring of outlets to the rest
of the world for the region.
The functioning of the Economic Cooperation Organization (ECO), established
to facilitate economic affiliation and cooperation in the region has been
inhibited because it has not been formed with a clear regional focus. Turkey,
for example, has tended to subordinate ECO to its ambition to join the
European Union (EU) and to its relationship with the United States, Israel
and Azerbaijan. On the other hand, the Caspian focus of the Organization
for Regional Cooperation of the Caspian States (ORCCS) may be too narrow
to represent the varied interdependencies of countries in the region.
There are also political obstacles to regional cooperation. For example,
Pakistan is not on good terms with India, while Russia has tenuous relations
with the countries in its "near abroad". Similarly, the current
policy of the United States towards the Caspian Region and its so-called
East-West directional strategy excludes Iran as a player in the region.
Instead, the United States emphasizes relations with certain so-called
pivotal states, particularly Turkey, Azerbaijan, Georgia and Armenia, which
are not economically linked or politically allied. The US view of the region
negates the important development interdependencies that exist between
Iran and its northern neighbors. It is not also conducive to regional stability,
which is a prerequisite for development in the region.
Within the larger region, there are other definitional issues. For example,
in relation to the environment, how should the region be defined? Does
it only include the Caspian Sea area and the rivers that feed it, or also
the Black Sea, which will have to carry the risk of acting as conduit for
the Caspian oil? Apart from concerns about the adequacy of present navigational
systems, the Turkish government, in particular, is concerned about the
environmental risk to Istanbul owing to increased tanker traffic through
the straits of Bosphorus and Dardanelles.
With this in mind, how should the Caspian Sea legal regime be resolved?
For example, a legal regime based on the so-called "donut" principle
of common resource use opens the opportunity for joint development while
a division of the Sea will reduce such possibility. From an environmental
perspective, the first option is certainly more desirable as it increases
the chance for a region-wide management of resource extraction and pollution
Russia's role in the region should not be underestimated. It is a littoral
state controlling a significant stretch of the Caspian shore. For example,
it is difficult to envisage how the Caspian Sea legal regime can be resolved
without Russia's cooperation, not to mention meeting its challenges of
resource management and environmental protection. Further, Russia cannot
be ignored as an outlet for some oil and gas from the region, and as a
partner in intra-regional oil and gas swaps, transport and trade. Sidelining
Russia in regional developmental programs could also unleash its considerable
"spoiling" potential, illustrated by its control of pipeline
access for Central Asian oil and gas. It will also strengthen the hand
of conservative and retrogressive elements within Russia's as yet fragile
new power structure.
The Primitive State of Caspian Studies
There is a dearth of empirical study of the Caspian Region, a factor
that underlies the significant misunderstanding of the area's resources,
problems and needs. For example, despite severe stress on the Caspian's
natural environment, relevant information in the field is scarce. As a
consequence, aspects of the environmental regime are poorly understood.
In recent years, a significant rise in sea level has caused loss of life,
damage to infrastructure, and an increase in pollution. What causes the
rise in Caspian's water level? A generally acceptable answer is yet to
More empirical studies are required for theory building and conceptualization
if a deeper, more analytical understanding of the region as a whole and
in terms of its various building blocks is to be achieved. The initiative
of Iran and Russia to establish a center for Caspian studies in Moscow
in 1992 was aimed at addressing the need for environmental data collection
and analysis. Unfortunately, inadequate resources and cooperation have
inhibited this venture. Furthermore, disagreement over the legal regime
of the Caspian Sea represents a major impediment to regional studies. For
example, current debate on the issue focuses largely on past legal arrangements
and understandings of use rights. What explicit implications the legal
regime of the Caspian Sea would have for the environment, for example,
remains copiously devoid of study because certain states do not wish to
entertain the idea.
There is no doubt that the Caspian basin contains significant hydrocarbon
resources. However, estimates of the region's oil and gas reserves vary
owing to a lack of reliable information. In particular, individual governments,
desperate to attract foreign investment and to manage their own fragility
in the face of high expectations and socio-economic hardship, tend to present
a rosy picture of the extent of resources. Analysts and consultants, hoping
to secure contracts, fuel this optimism and romantic image of the area's
riches. Western companies stand to benefit from exaggerating the extent
of the region's reserves, as they seek favorable trading conditions with
oil producers in and outside the region. The US Government has also tended
to ignore the problem because such exaggerations serve to justify its growing
involvement in the region. Yet, in order to secure the socio-economic and
political stability of the Caspian frontier, realistic rather than fictitious
estimates of its resources are required.
More significantly, we are reminded that judgement is still out as to
whether the oil and gas reserves of the region, and particularly the export
of such resources, will make a significant contribution to the welfare
of the Caucasian and Central Asian states and their inhabitants. As compared
to the Persian Gulf, the oil and gas export industry in these countries
face severe inhibiting factors. For example, gas from the Caspian Region
may not be as easy to be placed on world markets as many would like to
believe. No doubt, more thorough studies are required about how best to
utilize the Caspian's hydrocarbon resources for sustainable long-term socio-economic
At a more general level, the lack of empirical studies is also illustrated
in external actors' perceptions and views of the Caspian Region as a whole.
It is unfortunate that the Caspian Region, home to one of the world's oldest
civilizations, and an ethnically diverse community, continue to be seen
in the West in terms of certain stereotypes, namely hydrocarbon wealth,
geopolitical importance, internal conflicts and Islamic fundamentalism.
The concomitant diplomacy and policies of the Western players towards the
area are anglocentric and chauvinistic, ignoring the new reality of a world
where different world-views and cultural forces are being reasserted.
The need to change these outdated stereotypes forms the basis for future
positive engagement in the region by the outside players. For example,
it should be recognized that Islam and Islamic fundamentalism are not of
similar significance as cultural and political forces throughout the Caspian
Region. Besides, as Ali Mazrui remarks: "against Western claims that
Islamic 'fundamentalism' feeds terrorism, one powerful paradox of the twentieth
century is often overlooked. While Islam may generate more political violence
than Western culture, Western culture generates more street crime than
IslamWestern liberal democracy has enabled societies to enjoy openness,
government accountability, popular participation, and high economic productivity,
but Western pluralism has also been a breeding ground for racism, fascism,
exploitation, and genocide. If history is to end in arrival at the ultimate
political order, it will require more than the West's message on how to
maximize the best in human nature.
Yet, the formal educational system of the region and beyond remains
the monopoly of a select few in higher education, whereas students in elementary
and high schools learn very little about the geography, cultures or history
of the area. At the same time, centers of Caspian studies at US universities
largely function as isolated enclaves, divorced from the internal dynamism
and policy processes of the Caspian Region. No wonder that this educational
system should mold the current misunderstanding of the area, particularly
in the United States.
The Dominance of Fictional Prospects
The dismal state of Caspian studies has produced more fiction than fact
about the region, negatively effecting a more realistic assessment of regional
problems and prospects. For example, current and projected medium-term
production of hydrocarbon resources in the Caucasus and Central Asia is
relatively meager. Yet, governments keen on attracting foreign investment
and assisted by analysts in search of short-term opportunities, often inflate
estimates of resources. This could lead to an unrealistic estimation of
the extent to which oil exports can boost development, guarantee foreign
assistance, and improve the stability of governments for managing national
A more balanced view of resources and constraints to extraction would
facilitate a deeper understanding of the interdependence of countries,
as well as the interconnectedness of different facets of development. It
would also temper the regional hegemonic aspirations of some countries.
For example, inflation of Caspian resources and the consequent increase
in US' activities there gives an outward expression of increasingly deeper
American involvement in the region. Yet, it is not for certain that the
United States, given the real size of regional resources, the likelihood
of reaction from Moscow, and the minimal investments by the West thus far
in the area, will engage in the long-term "hegemonic management"
of the area.
Fictional notions also underlie popular geopolitical and developmental
strategies for the region, particularly those originating in the West.
The so-called New Silk Road proposal aimed at a western-oriented infrastructure
and pipeline corridor stretching from Central Asia to Turkey to markets
in West is a case in point. It fails to consider the significance of Russian
and Iranian political interests in the region, as well as their capacity
to assist in its development. Further, it is oblivious to the underdevelopment
of the Caucasus and Central Asia as a market for Western goods and to the
structural dependence of these countries on its northern and southern neighbors.
Ignored are also the serious geographic and political constraints that
could impede the viability of a Western-oriented development corridor and
the limited extent of the European market as an outlet for Caspian hydrocarbon
resources. Worse still, it probably underestimates the tenacity of Caspian
countries to resist any form of new hegemonic control and integration.
Simplistic Notions of a Complex Reality
Simplistic notions of a complex and interconnected phenomena such as
the Caspian Region abound. Views of both external and internal actors suffer
from this problem. One reason why the complexity is overlooked is that
commercial interests in the region preceded academic research. This relates
to the rapid opening up of the region, expectations of its resource riches,
and the work of consultants relating to the exploration of these resources.
Generally, the area is viewed as a good piece of real estate - up for grabs
by the toughest and highest bidder. Very little attention is focused on
the people and environment of the place, and its long-term socio-economic
and political stability. This mindset has led to the neglect by the littoral
states to properly define their national interests. Leaders have been concerned
primarily with securing the best deal in relation to the selling of hydrocarbon
As an example, there is an almost reckless inattention to the legal
regime of the Caspian Sea, while at the same time, international contract
after contract is secured for the exploration and extraction of its oil
and gas. The issue of delimitation of the Caspian Sea persists. It impedes
implementation of development projects. The debate on the Caspian Sea legal
regime is largely restricted to legal issues, instead of including important
environmental and development imperatives. Legal perspectives can serve
as a resource for determining an appropriate legal regime, but they cannot
serve as the point of departure regional development. The political and
environmental context has changed significantly since the standing legal
regime was introduced. Not only has the number of littoral states increased,
but also the extent of pressure on the Caspian Sea as a natural resource,
both as a container of pollutants and a source of development and livelihood.
Simplistic notions of inherently complex phenomena also prevail in relation
to perceptions of the internal dynamics of countries. For example, studies
of post-revolutionary Iran have focused on the Islamic government, largely
ignoring the non-state sector. As a consequence, the understanding of Iran
has been largely reduced to one of the regime in power. What is ignored
is, for example, that with the republican revolution, Iranians entered
the political scene en-masse as participants. It was they who overthrew
the Shah; it was they who fought Saddam Hussein while his war machine was
backed by the West and the wealthy Persian Gulf monarchies; and it was
they who forced the Islamic system to retreat from many restrictive cultural
and social policies. If there is anything that the Iranian clergy are concerned
with, it is not the United States or Israel, but the latent power of their
own people. Expediency vs. Historical Perspective
Policy and action in the region shows a dearth of historically-based
reflection. Life and governance in the Caspian Region has been intertwined
with the exploitation of oil and gas reserves since ancient times. A richly
textured history exists for individual places and for the region as a whole.
This represents an important source of experience and knowledge, often
forgotten in the rapidly changing development context of today, where decisions
have to be made fast, and time spent on reflection is not viewed as an
asset. For newly independent states, history is often associated with times
best forgotten, as opposed to being viewed as a source of guidance and
insight for the future. There is an ill-informed belief that the events
of the past will not be repeated.
Perhaps now more than ever, there is a need for reflection, and a view
of history as a means to make sense of today's increasingly complex world.
The scale and nature of the Caspian problematic is vastly different to
what it once was. There are many more actors involved, more people with
pressing needs to be met, and governments with less power to act unilaterally
and no longer able to rely on force to achieve their aims. They are also
more dependent on external sources of finance. Although the present situation
is substantially more complex than before, we have the benefit of history
to teach us precedent, to serve as both a guiding light and a warning.
That history shows that the Caspian Region experienced a crossroads before,
and was subject to watershed decisions that subsequently affected all aspects
of life in the region, many of them unforeseen. Most significantly, the
interconnectedness of circumstances and the decisions that affect them
must be taken into account. Attitudes affect policies which could have
unintended consequences later.
Despite the curtailment of state powers today, many facets of the role
played by the state in earlier times are important. First, the state's
view of a valuable resource as a means to increase government revenue rather
than one that formed the basis for more sustainable development warrants
careful consideration. Second, the state's intense internal delays in decision-making
impeded the potential constructive development of the oil industry. Recent
developments to consolidate the various ministries engaged in energy matters
in the newly independent states should be welcomed in this regard. Also
important is the kind of support the state provides in resources over which
it has substantial control, from infrastructure to education, to allow
for a more beneficial exploitation of the resource.
Finally, the state has a role to play in protecting the interests of
smaller industries so that opportunities associated with hydrocarbon resources
can be spread more widely. The state should not favor foreign capital to
the detriment of local development. Instead, it has a responsibility to
establish rules or conditions for foreign investment, which further support
rather than inhibit local opportunities. Less dependence on foreign capital
and a few multinationals would reduce dependency on the whims and woes
of the international market. We are reminded of the harmful consequences
of over-dependence by the incidents of the Baku oil crisis in the early
twentieth century, and the control of transportation routes by first the
Noble and later the Rothschild companies.
History offers important lessons for foreign companies. Even today,
the tides can turn unexpectedly. Companies should not contribute to the
vulnerability of governments through exploitative practices. When the tide
turns, as it did in the Baku crisis, they cannot necessarily rely on the
support of the state, and may lose everything. The institutional impasse,
which was previously a result of a lack of co-ordination among government
departments, could now conceivably occur between nation-states. The impasse
leads to problems that currently relate to fundamental developmental and
History also suggests the wisdom of stronger states bearing responsibility,
when possible, to secure against the perils faced by weaker states in the
region. States could gain from respecting and assisting each other in developing
their comparative advantages. In a region where the advantages of interdependence
are prominent, focusing primarily on competitive advantage is inappropriate.
The approach should be to gauge the competitive advantage of the region
as a whole, and within that, to address the comparative advantage of its
parts. The interdependent destinies of the Caspian Region and the oil industry
means that both will suffer if problems are addressed unilaterally. Regional
co-operation is necessary not only for environmental management, but also
for the installation of pipelines, among other development projects.
There are, however, contradictions in the extent to which history determines
present-day action. The past may be forgotten in adherence to an export-driven
development view, but it has been revived in shaping the foreign policy
and the worldviews of key actors in the region. US sanctions against Iran
is a case in point, based on historic events and premises which may no
longer be relevant. Current pipeline preferences have tended to take current
US-Iran relations as a given, not recognizing that much can change within
the period of construction of these pipelines. Perhaps more time should
be spent defining the pre-conditions for viable pipeline routes rather
than speculating about routes within an uncertain context. The future development
of the Caspian Region is too grand a topic to be viewed through the lens
of the current US Administration, the leaders of the Islamic Republic,
or of present US-Iran relations. Long after the current political players
have left the scene, there still will be two great regions who must one
day mend their fences and make the world a better place for posterity.
Hooshang Amirahmadi, a Rutgers Universtiy professor, is the president
of the American Iranian Council.