By Ariel Cohen

The 1990s were a boom decade for Western energy companies tapping into Caspian oil and gas. Three important oil pipelines were built — the Caspian Pipeline Consortium (CPC), Baku-Supsa to the Black Sea, and the Baku-Tbilisi-Ceyhan (BTC) to the Mediterranean — as well as the Baku-Tbilisi-Erzurum (BTE) pipeline transporting gas to Turkey.

How times have changed! A host of factors today are turning proposed Westbound gas pipelines into a Eurasian pipe dream. The United States is focused elsewhere — on Iraq, Iran, Afghanistan, Pakistan and the Arab-Israeli diplomatic quagmire — and the Obama administration is advocating a massive shift to alternative energy. European energy policy is adrift.

In addition, there are powerful economic factors that militate against the multi-billion dollar investments needed to bring the Caspian energy resources to market: oil at $50 a barrel is considerably less attractive then oil at $75; the global recession and credit crunch have sharply reduced available financing; European energy demand is in decline; and there is no strong Western private-sector champion for such projects.

In the meantime, Russia is working to corner energy exports fromAzerbaijan and Turkmenistan while China is buying up hydrocarbon companies in Kazakhstan like hot cakes and developing Turkmen gas fields.

Multiple pipelines from the Caspian region and Central Asia, such as those pumping Turkmen gas and Kazakh oil lines to China and the BTC to theMediterranean, have increased the energy exporters’ bargaining capacity.

China has turned into a hungry, 800-pound gorilla in the energy market. The planned construction of Russia-China oil and gas pipelines fromEastern Siberia may decrease the availability of resources for the West and shift the economic center of gravity in Eurasia further East.

In addition, Russia itself has become a more lucrative client for Central Asian and Caspian energy. One reason for building the BTC and the BTE to Turkey was that Russia was grossly underpaying for energy which it re-exported to Europe. Today, the Russian gas monopoly Gazprom is paying a premium and boasts of pipeline overcapacity. So less gas is left for the Western-controlled pipelines.

Despite the recession, Russia is moving with the Blue Stream and South Stream projects across the Black Sea to Turkey and Bulgaria in order to keep market share. Gazprom is enhancing its influence in Ankara at the highest levels.

Much-ignored, the role of Turkey in Eurasian energy transit is also crucial. Turkish intransigence has delayed and reduced in size the development of the Caspian off-shore Shah Deniz gas project.

Ankara has also placed daunting conditions of the construction of the proposed Nabucco gas pipeline from Turkey to Europe, which is meant to provide an alternative to Russian-controlled gas, linking the project with Turkey’s membership in the European Union, acquiring large amounts of Azeri gas for re-export and using the line for Russian and Iranian gas.

Despite all these factors, the United States and Europe should not lose sight of the strategic importance of Eurasian pipelines. At stake is access to an energy treasure-trove worth up to $4 trillion, and giant fields elsewhere are approaching exhaustion. And the pipelines are a critical source of revenue for the economic development of newly independent states in Central Asia and the Caucasus.

Ambassador Richard Morningstar, President Barack Obama’s new Eurasian energy czar, has the deck stacked against him. But he successfully promoted the Baku-Tbilisi-Ceyhan oil pipeline in the 1990s, and may be able to pull it off again.

The United States and Europe should encourage Turkey to become a gas hub for the Caspian, and eventually Iraqi gas, by facilitating Nabucco’s construction. They should encourage a private energy company to become a strong private-sector champion for Nabucco.

The West should also end its diplomatic neglect of Turkmenistan and provide a strong commitment to build a Trans-Caspian gas pipeline to link up with BTE. The Obama administration should quickly appoint an ambassador to Turkmenistan — the position is vacant for over two years — and an invitation to the White House for President Gurbanguly Berdymukhammedov may be in order.

The United States and the Europeans should not miss the opportunity to receive affordable Caspian energy and support the independence of critical post-Soviet states. Despite the economic slump, it is worth taking the chance now, before Russia and China lock the Caspian countries in the Sino-Russian “co-prosperity zone.”

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