November 25, 1997

West's unholy scramble for oil

By James Meek and Tom Whitehouse

THE European spy hit his stride halfway into the Baku-Tbilisi flight, as the passenger jet left the Caspian Sea behind, cruising west between Nagorno-Karabakh and the Caucasus mountains. His cover was as an 'export promoter'. By his own admission,he belonged to a world where state and personal interest, commerce and espionage, sexual desire and financial greed merge.

'The business languages here are English and Russian,' he whispered. 'There are not many interpreters in Baku and they all work for the same competing foreign firms. I pay them a hell of a lot of money not just to interpret, but to tell me what my competitors are up to. It's very cost-effective'.

He and his ilk have done their work well. After years of anticipation, the first oil is flowing from Western energy companies' multi-billion dollar investments in the Caspian nations of Azerbaijan and Kazakhstan. Western geostrategists hope the Caspian will be a Middle East without tears - secure energy supplies for the United States, Europe and East Asia in the twenty-first century, without cartels, wars or tyrants. The notion always seemed naive. Now it looks downright disingenuous.

As the Caspian oil rush gathers pace, a baroque cast of spies, assassins, carpetbaggers, warlords, military advisers, ethnic demagogues and religious fanatics is in ferment in a region where the notions of revenge and betrayal are as old as recorded time. Azerbaijan and Kazakhstan have a comfortably remote sound to them on the filling station forecourts of London or New York - as Kuwait and Iraq once did.

Western leaders are already fawning to authoritarian patriarchs in Azerbaijan and Turkmenistan as their antecedents fawned to shahs and sheikhs before them. How long before a new Western dependence on Caspian oil provokes a new cycle of military involvement in local conflicts? 'There's no question that the Caspian basin is of strategic importance to the US, the West in general and to Japan in terms of energy,' said a Western diplomat in the Kazakh capital, Alma Ata. 'There's no question that it's a clear alternative to the Middle East.'

Today Baku is pervaded by a a heady stench of black gold. The rusting, sighing forest of clapped-out derricks stretches to the horizon on the outskirts. In the hubbub of the Black Jack cafe, the self-styled Rick's Place of the Caspian, sleek executives from British Petroleum and Amoco and the Azerbaijani mafia breathe the same fug. According to US government estimates, Azerbaijan's oil reserves could rival those of Kuwait. Joint exploration and extraction deals worth $30 billion have been signed. Kazakhstan could become the world's fourth-largest oil producer: one oil and gas deal signed last week by consortiums including British Gas, Texaco and Russia's Lukoil is projected to generate $600bn over the next four decades.

The moral, commercial and political risks of this Caspian stampede are immense. Business in Baku means dealing with the extended family of Azerbaijan's President, Heidar Aliyev, Leonid Brezhnev's former politburo sidekick who, like most leaders in the region, has resurrected himself as a nationalist. Aliyev's son, Natiq, runs the Azerbaijan state oil company. Friends and allies occupy the key positions of power.

Azerbaijan's Communist and Islamic parties are harassed and their leaders locked up because of fears they are Trojan horses for the country's northern and southern neighbours, Russia and Iran. Iranian television signals are jammed. The Azerbaijani Democratic Party is baired from fielding election candidates and several of Aliyev's former and potential political opponents have been imprisoned, without clear evidence, for alleged participation in attempted coups against him.

While other, oil-less authoritarian post-Soviet leaders - such as Alexander Lukashenko of Belarus - are denounced from the retractable pulpits of the West, Aliyev is feted. He was the guest of Bill Clinton. He will shortly be the guest of Tony Blair. One of the few Western officials to have sounded a note of warning about Azerbaijani drift towards corruption and repression is Britain's ambassador to Baku, Richard Thomas, who, in an extraordinarily open attack on the Aliyev regime, said recently: 'What is hard to accept is the hijacking of assets and wealth by a few people while a large part of the country goes empty-handed.'

Few Western oilmen share the ambassador's scruples. 'As former head of the KGB in Azerbaijan, the President knows a thing or two about internal security and, thanks to him, the country is at least stable,' said one. Yet Middle East experience shows how terribly the oilmen and Western intelhgence agencies can get it wrong, and how drastic the repercussions can be. On New Year's Eve, 1977, President Jimmy Carter toasted the Shah of Iran at a Tehran banquet, calling his country an 'island of stability'. A week later the riots began which brought down the Shah, sent Western oilmen fleeing the country, trashed Carter's place in history and ushered in the era of Ronald Reagan.Aliyev is no Shah yet, but at 74, with no clear successor, he could become a liabihty as his country's oil becomes more important to the global economy. Azerbaijan is in a suspended state of war with Armenia over the predominantly ethnic Armenian territory of Nagorno-Karabakh. In a Caucasian version of the Arab-Israeli conflict, Washington is trying to mediate between allies with oil (the Azeris) and alhes with votes (the Armenians, through the powerful US Armenian lobby).

Kazakhstan is more stable, but remains lumbered with the ethnic inheritance of the Soviet years. Most Russians consider that the north of the country, which is mainly populated by their ethnic kin, belongs to them. The Azeris and the Kazakhs are in dispute with Moscow and Tehran over whether they have the right unilaterally to section off parts of the Caspian Sea as territorial waters.

US State Department officials insist there is no prospect of a Caspian version of the Carter Doctrine of 1980, which committed the US to defend the Persian Gulf as firmly as western Europe. The US Navy has not yet worked out a way to slip an aircraft carrier into the landlocked Caspian. But a battalion of US paratroops recently made their longest continuous flight to practise a drop in the Kazakh desert. Kazakh President Nursultan Nazarbayev signed a defence agreement with US Defence Secretary William Cohen last week.

And what exactly did Nato's rapid reaction force have in mind a few days ago when it began an exercise defending an imaginary, UN-backed country against another which claimed ownership of the first country's offshore oil deposits? The first casualty of the low-level military intelligence war in the region may have been as long ago as 1993, with the mysterious shooting of a US embassy official, Fred Woodruff, in Georgia - now the scene of frantic activity as a pipeline to the Black Sea is rebuilt, breaking Russia's monopoly on Caspian oil export routes.

The US called the killing 'a random act of violence' and denied any link between Woodruffs fate and a reported visit to Georgia the month before the shooting by CIA operative Aldrich Arnes, later exposed as a Russian agent. Back in 1993 the strategic agenda for the Caspian region was relatively straightforward: Moscow struggling by fair means and foul to maintain a primitive notion of 'control' over the former Soviet states without the only weapon that counted - money.

Now the playing field of the new 'Great Game' is more complex, and Russia a chastened, smaller and more sophisticated player alongside Western countries and the powers of Asia - Turkey, Iran and China. The image of the Russian bogy is fading, just as the Ottoman Empire did from the Middle East, leaving enormous risks and temptations.

'Economically, Russia becomes less influential here every day. Politically, it's weaker and weaker,' said one senior aid worker, a veteran of Caucasus intrigues. 'It still is the powerbroker, probably because it's got the main military force in the region, and at the moment no Western power would challenge Russia's might. But as foreign investment increases and important issues such as pipelines emerge, that could change. '-Dawn/Oobserver Service

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