American Geological Institute

Government Affairs Program


Caspian Sea Oil and Gas Exploration Hearing Summary (9-8-98)

As global energy consumption continues to rise, oil and gas from the Caspian Sea is being touted as the last frontier of exploration. Proven reserves in this area are estimated to be 15-29 billion barrels of oil, and an additional 100 billion barrels may exist. The Caspian Sea borders Russia, Iran, Azerbaijan, Kazakhstan, and Turkmenistan. Political instability in the region, however, may prevent a pipeline needed to carry the material out of the region from being built. Proposed pipeline routes include lines from the Caspian Sea through Turkey to the Mediterranean Sea, Georgia or Russia to the Black Sea, and Iran to the Persian Gulf. The Administration opposes any route through Iran. The next main decision on a pipeline route must be made by October.

Most Recent Action
The House International Relations Committee held a hearing on the US Role in the Caucasus and Central Asia on April 30, 1998. The Senate International Economic Policy, Export, and Trade Promotion Subcommittee held a hearing on July 8, during which most members voiced support for the Administration's Caspian Sea policies.

House International Relations Committee Hearing
April 30, 1998

The full list of witnesses with links to written testimony is available on the committee website. This summary focuses on the testimony of Secretary of Energy Pena, who spoke about the Administration's Caspian Sea position and actions. Pena provided background information on the region and summarized the goals of the Administration's Comprehensive National Strategy, which include:

He said that energy policy in the Caspian region address the last two goals and articulated the US view that "the development of diverse, stable, and reliable sources of energy is important to our national security and to the global economy." He outlined five broad objectives in the Caspian region: 1) to ensure global energy security in a way that adequately addresses the strategic and economic interests of the United States as well as those of our regional partners; 2) to promote the economic development, political independence and democratization of the countries in the region; 3) to support U.S. companies in their efforts to speed development of the region's energy resources; 4) to foster viable and reliable alternatives for export of the region's resources, particularly avoiding transit routes through Iran, and 5) to ensure that energy development occurs in an environmentally sensitive manner.

Pena voiced his support for an "east-west energy corridor" that would run under the Caspian Sea and link Kazakhstan and Turkmenistan with countries on the west, starting with Azerbaijan in the coastal city of Baku. The oil line would continue to the Mediterranean port of Ceyhan and the gas line would serve Turkey. He voiced the Administration's support for other routes, including the Caspian Pipeline Consortium proposal to create a route form Kazakhstan to the Russian Black Sea port of Novorossiysk. The Administration opposes any route through Iran.

Secretary Pena pressed for the repeal of Section 907 of the Freedom Support Act of 1992, which restricts the type of aid the US may provide to Azerbaijan. He said the rule -- in place because of Azerbaijan's human rights record --- "limits our ability to advance U.S. interests in Azerbaijan and prohibits us from offering the many kinds of technical assistance and exchange programs now available to other governments throughout the region."

Senate International Economic Policy, Export and Trade Promotion
July 8, 1998

The following summary is taken form the July 13, 1998 edition of Environment and Energy Weekly:

Senate International Economic Policy, Export and Trade Promotion Subcommittee Chairman Chuck Hagel (R-Neb.) extended his full support to the administration's policy on Caspian Sea oil exports but had some doubts about its successful implementation.

At a hearing on July 8, Hagel said he supported the U.S. policy in the region, including construction of a main oil export pipeline through Azerbaijan, Georgia and Turkey to the Mediterranean. "But a policy is not enough without a clear, forceful plan for carrying it out," he said.

He said a recent trip to the region had made him hopeful but concerned. The nations in the region need to work cooperatively to make the pipeline project a reality and the United States could help bring these nations together, according to Hagel.

The Caspian Sea basin contains extensive reserves of oil and gas but remains vastly untapped and inaccessible to the sea and therefore to the world market. The United States backs a multiple-pipeline strategy in the region. Three pipelines are currently in development and the next big decision on the main oil export pipeline route has to be made by October. The United States is backing the circuitous east-west corridor, or the trans-Caspian oil and gas pipelines, rather than the less-expensive southern route through Iran. Hagel is concerned that there is lack of coordination in the implementation of the plan. The concept is good "but who is driving the train?" he asked. Political stability was another issue that bothered Hagel. He pointed out the conflicts among nations in the region, and said, "I met with oil companies and I got an uncertain tone." The stability issue was picked up by ranking member Paul Sarbanes (D-Md.) who said he has some concerns on oil and gas being the driving force of U.S. policy in the region. Unless a situation of stability is developed in the region any oil pipeline effort would be a vain move, he said. Sarbanes said he has considerable concerns that pipeline politics should overshadow other issues, such as human rights and rule of law.

State Department officials attempted to lay bare before the panel the administration's policy and plan for promoting U.S. interests in the region. Marc Grossman, assistant secretary of State for European and Canadian Affairs, explained that bringing Caspian energy to world markets could simultaneously contribute to diversifying energy markets, provide major commercial opportunities for American companies and help develop the emerging market economies of the supplying and transit states. He said the United States would work with Turkey and the countries of the Caucasus and Central Asia to pursue east-west energy transport routes, to reform internal economic and energy policies and to shake off unnecessary regulatory and bureaucratic burdens. He said the United States would continue to take active efforts to dissuade other countries from considering Iran as an acceptable route for transporting their energy reserves.

Grossman also said establishing the right dialogue with Congress is vital to developing a successful policy, and called for passage of the Silk Road Strategy Act and the repeal of the Freedom Support Act. State Department officials had made similar appeals at a House panel hearing on the issue earlier this year. The Silk Road Strategy Act of 1997, introduced in the Senate and House (S. 1344 and H.R. 2867), amends the Foreign Assistance Act of 1961 to provide assistance to support the economic and political independence of the countries of the South Caucasus and Central Asia. Section 907 of the Freedom Support Act bans any kind of assistance from the United States to Azerbaijan because of its border dispute with Armenia. The United States considers it essential to provide economic assistance for the growth and development of the region that would ultimately enhance the nation's energy interests. But Sarbanes was skeptical of repealing Sec. 907 of the Freedom Support Act. Azerbaijan's human rights record remains dismal, he said. Stephen Sestanovich, special adviser to the secretary of State for the New Independent States, detailed the efforts the United States plans to foster regional energy cooperation, including encouraging Russian companies to work cooperatively with other investors in the Caspian Pipeline Consortium project.

Sources: EESI, Washington Post, Parade Magazine, New York Times


Please send any comments or requests for information to the AGI Government Affairs Program.

Contributed by Kasey Shewey, AGI Government Affairs
Posted September 8, 1998


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