Central Asia: One Side of Modern Lifeline - the Pipelines

Posted in Asia | 16-Nov-05 | Author: Dieter Farwick

70 per cent of the world's oil and gas reserves mark the geopolitical significance.

The “strategic ellipse,” stretching from the Persian Gulf to the Caucasus and the Caspian region, hosts about seventy percent of the world’s reserves of crude oil and gas.

The ever-growing demand for these natural resources in Asia, Europe and America gives these reserves decisive importance for the economic survival of old and newly emerging industrial countries.

In the foreseeable future, renewable energy will no longer be able to fill the gap between production and consumption. The curves of declining production and climbing consumption will cross each other. Experts discuss when this crossing will happen. It does not really matter whether there are 30 or 50 years left - it will happen. Beyond this crossing, crises and conflicts will intensify. The competition for crude oil and gas – as well as for fresh water and other strategic raw materials – might even lead to wars.

The problems start with the location of the reserves. Most of the oil and gas producing countries belong to the “arc of instability” – often as politically fragile entities.

Hurricane “Katrina” has shown us the vulnerability of some production sites as well as the transportation aspect. A regionally and timely limited interruption of production, transport and refining created a crisis with worldwide repercussions. It is impossible to protect all important production sites around the clock. Terrorist attacks can do more harm than “Katrina.”

Even worse, production sites in the hands of enemies of industrial countries over a longer period of time would allow political, economic and financial blackmail. The philosophy of “just in time” with fewer reserves in the industrial countries increases the dependence on a timely and affordable energy supply.

On the other hand: most of the consuming countries are far away from the source of the natural resources. Many thousands of miles have to be bridged through means of transport. In the past, the transport was done by ships; today and in the future, it will increasingly be done through pipelines. The decision as to where to build the pipelines is highly political and should be based on strategic thinking.

The transit is attractive for the transit countries. They receive their share of the revenues through fees they get for the transit. Therefore, Poland and the Baltic states were embarrassed when Germany and Russia announced their plan to bypass these countries with a pipeline through the Baltic Sea.

Even more important, the countries through which the pipelines should pass must to a certain degree offer security and stability. In some cases, it is actually more economic to choose a detour of hundreds of miles.

But, the pipelines remain vulnerable – as we have recognized in the past. Even the end points of the pipelines – harbors and refineries - are vulnerable.

Imran Khan, member of our International Advisory Board, has carefully examined the issue of the pipelines as a lifeline of the modern world, focusing on Central Asia. A similar analysis could be done of the African continent or in South America. In his conclusion, Imran Khan strongly advocates a “grand strategy” in order to avoid crises and conflicts. National interests and the different interests of producers and consumers turn this into a very difficult task.