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Factors that Shape US Energy Policy for Central Asia

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Many factors influence the formulation of US energy policy. This chapter lays out the comprehensive description of the institutions which shape US energy policy towards Central Asia in general. Further this chapter would look into the international scenario, which has made US Congress, Federal Bureaucracy and Interest Groups in shaping 'Energy Policy' towards Kazakhstan. And Turkmenistan

Throughout the 1980s and before US experienced a major sorting out process, determining who would participate in energy policymaking and what the organisational arrangements for citizen involvement would be, though by 1980 the President and the Congress had been able to reach compromises on the basic issues faced by them following the onset of the energy crisis. With decisions on these basic issues the foundation for a stable national energy policy system appeared to be in place. The rudimentary energy policy system that was in place by 1980, provided the framework necessary to manage both energy supply and demand and to develop new resources (Barkenbus: 1982:413-414).

Before going into the detailed focus on the role of "iron triangle" towards Kazakhstan and Turkmenistan in particular a brief understanding of how the policy is influenced by the Congress, Interests Groups and the Bureaucracy would be appropriate.

Congress: Decision making in Congress where law is formulated, differ from decision making in the bureaucracy, where it is implemented. The institution setting greatly influences the policy outcome.[1] If not sovereign, Congress is considered to be prominent in formulating national energy policy. The president may mandate or oppose energy programs. But he is usually dictated by the Congress. It is the congress who can legislate on energy policy and raise the resources to underwrite it. The president's freedom to act independently of congress on energy matters is limited severely by law, custom and political circumstances. Policy may be formulated by judges or administrators by interpreting or implementing a congressional enactment. But policy making by them is limited by congressional guidelines and over shift (Cowney: 1985: 82-86).

Congress is characterized as house divided and authority dispersed between its two chambers. Its members are even torn by conflicting claims of local and national interest. Although congress is fragmented, it can't be denied that there is opportunity for policy innovation. From the apparent authority of the congress, it becomes clear that congress often reveals not power exercised but power dissipated, not policy made but policy paralysed(Victor:1984:313)

The number of committees and subcommittees with 'energy' as their title grew steadily from two in the 92nd Congress (1970-1972) to numerous in the110th Congress In the 96th Congress jurisdiction over some aspect of energy policy was claimed by more than 38 committees of the House of Representatives. The Senate traditionally has fewer committees than the House. Nevertheless it had at least ten major committees and several dozen subcommittees exercising some authority over energy legislation.

The committees are proposed by the legislator's desire to exercise some authority over major public issues. There also perpetuates jealously and competition between subcommittees and their leaders in energy policy making. Vigorous conflict over energy policy produced by each chambers over squabbling committees is intensified by rivalries between House and Senate energy committees. Such competitions are due to traditional differences between the two chambers, their divergent constituencies, constitutional responsibilities, institutional histories, conflicting personalities and committees' aspirations. Moreover, the various energy committees within and between the two chambers, often respond to different energy interest (Raycraft and Kash: 1984:239-249).

The fragmentation of power in the Congress is not only due to the formal division of authority among committees. There are other significant causes as well such as there are five hundred and thirty five geographical units - the states and the congressional districts. These numerous factors constitute a vast array of diverse parochial interests with powerful influence in the legislative process. The Senator and the Representatives ambassador to Washington are regarded by the constituents as the guardian of the local interest. The Senator and the ambassadors are supported to play the role of energy provider and protector (Chubb: 1983:30-56).

Bureaucracy: The executive branch of the federal government is a constitutional unit. Within the executive branch there are thirteen cabinet departments, fifty two independent agencies, five regulatory commissions and numerous lesser entities. More than 2.8 million employers divide their loyalties among these institutions. When closely observed, the executive branch is found to be a mosaic of disparate bureaucratic interests, each zealous to achieve its special mission.

It is very challenging for the president to bring these different interests into accord with his own administrative programs. Its success depends upon his personality to a greater extent. The designs for the administrative management by the White House are continuously impeded by the political obstacles.

In order to unite the bureaucracy, the president must constantly fight for the competing claims of agencies self interest, the political pressures upon the agencies from Congress and the pressure from an agency's own clientele. The federal bureaucracy is a plurality of institutional interests. They are always active in shaping the policies which will be administered by them. The bureaucracy is governments' interest lobby (Chubb: 1983:30-56).

Interest Group: The number of interest group striving to impress their will upon government is legion. Among one hundred thousand nationally organised interest groups in the United States, high proportions are involved in politics. When the politically active state and local groups are added to the already existing numerous interest groups, it becomes obvious that the interest groups are pervasive in the United States governmental system. They represent virtually every major social group with some claims upon government (Barkenbus: 1982:413-414).

The formations of new groups are often triggered by the rise of new issues on the governmental agenda. And conversely, new issues on the agenda reflect the growing political influence of new interests. The number of interest groups in national energy policy increased significantly after 1973 oil shock.

Oil companies have been the major interest groups in terms of energy policy formulation. While analysing the role of oil companies it can be said that they are playing the role of nongovernmental bodies. They have added a degree of variety to international political relationship. Sometimes they have even made the international relationships complicated which might otherwise have been quite harmonious. But in reality oil industries are primarily economic institutions. One of the characteristics of the economic actors is that so long as they can function reasonably well, they generally accept the status quo. No industry can sacrifice its profit for the sake of political principle. None of the oil industry can turn down the chance of developing important new deposits. Of course companies have to choose between possible ventures. The political climate of the countries in which these ventures fall is the only one of the factors taken into account. The political tactics available to companies for gaining access to promising markets are limited (Scott: 2005:12-149).

The strategies adopted by the oil company are usually predictable but along with the strategies, the leadership of the company also matter to a greater extent. The underlying economics of the industry make it possible to predict the general direction in which companies will move.

The development of oil companies can be stimulated by -

  • ease of access of the various oil deposit
  • the source of existing oil production
  • the size
  • development and location of the world's leading economies
  • some facts about the motivation of the imperial powers
  • some assumptions about the behavior of companies in an international oligopoly
  • Some information about the level of government experience in most of the potential producing countries.

The sheer size of the US market and the fact that there was a significant oil industry in existence in USA meant that American oil companies where bound to play a dominant role. As an analyst has noted that US had no history of significant engagement with the Central Asian Region before 1990s. It is the discovery of energy resources of the Caspian Sea that made the region important of the US foreign policy makers.

The Central Asia and the Caspian Region is blessed with abundant oil and gases that can enhance the lives of the region's resident and provide energy for growth in both Europe and Asia. The impact of these resources on US commercial interests and US foreign policy is very significant. The United States first official foray into the Caucasus and Central Asia came in 1991 during the Bush administration. But it was not until major oil contracts were signed between US oil companies and the government of Kazakhstan and Azerbaijan in 1993-1994 that the region really began to register on the radar screen of the American public. The commercial interests of US oil companies in exploiting new energy reserves gave US policymakers a specific interest to protect in the Caucasus and Central Asia the US has come to see Caspian resources as one of the few prospects for diversifying world energy supply away from the Middle East.

The role of the "iron triangle" in formulating US energy policy towards Central Asia can be understood by 1998 Congressional Hearing. In this hearing the subcommittee on Asia and Pacific examined the US interest in the region. It was acknowledged by the US Congress that Kazakhstan and Turkmenistan possess large reserves of oil and natural gas. It was further observed that Uzbekistan has oil and gas reserves that may make it self sufficient in energy and gain revenue through exports (Congressional Hearings: 1998).

According to Mr. Bereuter the president of the Subcommittee on Asia and Pacific stated that US policy goals regarding energy resources in the region were based on the following factors-

  • Independence of the states and their ties to the West.
  • Breaking Russia's monopoly over the oil and gas transport routes.
  • Promoting Western energy security through diversified suppliers encouraging the construction of East West pipeline and,
  • Isolating Iran.

In addition it was stated by the then Deputy Secretary of State Strobe Talbot, that the United States sought to discourage any one country from gaining control over the region, but rather urged all responsible States to cooperate in the exploitation of regional oil and resources. It was noted that the Central Asian Region has emerged as one of the significant opportunities for investment opportunities for a broad range of American companies. This in turn will stimulate the economic development of the region.

Debates in the Congress

According to the Department of Energy, US has following interest in the region-

  • Energy security
  • Strategic interest and
  • Commercial interest in promoting Caspian region energy development.

It is further observed that US has an interest in strengthening global energy security through diversification, and the development of these new sources of supply. Caspian export would diversify rather than concentrate world energy supplies. This will help in avoiding the over reliance on the Persian Gulf. It was agreed in the Congress that United States has strategic interests in supporting the independence, sovereignty, and prosperity of the Newly Independent States of the Caspian Basin. And it was desired to assist the development of these States into democratic, sovereign members of the world community of the nations, enjoying unfettered access to world markets without pressure or undue influence from the region. In other words, it can be observed that the "iron triangle i.e., Congress, Bureaucracy and the Interest Group have following four objectives with regard to Central Asia:

  • Promoting Multiple Export Route-The administration's policy is centered on rapid development of the region's resources and the transportation and sale of those resources to hard currency markets to secure the independence of these new countries. The US government has promoted the development of multiple pipelines and diversified infrastructure networks to open and integrate these countries into the global market and to foster regional cooperation. It was decided to give priority to support efforts by the regional governments and the private sector to develop and improve east-west linkage and infrastructure networks through Central Asia and the Caucasus. A Eurasian energy transport corridor incorporating a trans-Caspian segment with a route from Baku, Azerbaijan, through the Caucasus and Turkey to the Mediterranean port was included.
  • Emphasizing on Commerciality-It was realized that the massive infrastructure projects must be commercially competitive before the private sector and the international financial community can move forward. Keeping this in mind the Baku-Ceyhan pipelines was most endorsed.
  • Cooperating with Russia-It was decided to support the continued Russian participation in Caspian participation in the Eurasian corridor was also encouraged. For this purpose US companies are working in partnership with the Russian firms in the Caspian.
  • Isolating Iran- the US Government opposes pipelines through Iran because development of Iran's oil and gas industry and pipelines from the Caspian Basin through Iran will seriously undercut the development of East-west infrastructure, and give Iran improper leverage over economies of the Caucasus and Central Asian States.

Similarly, John Maresca, Vice President of International Relations, Unocal Corporation, focused on three issues with regard to Central Asia-

  • The need for multiple pipeline routes for Central Asian oil and gas resources.
  • The need for US support for international and
  • Regional efforts to achieve balanced reforms and development of appropriate investment in the region.

While emphasising these issues, argued for the repeal or removal of section 907 of the Freedom Support Act, because this section unfairly restricts US Government assistance to the government of Azerbaijan and limits US influence in the region. Unocal and other American companies are ready to develop cost-effective export routes for Central Asian resources. So, after this analysis of the "iron triangle" in terms of the Central Asian Region it can be concluded that the Cooperation of power, federalism, interest group pluralism and other checks and balances in the constitutional architecture of the United States political system created a strong bias towards bargaining, compromise and instrumentalism in energy policy making today. the electoral cycle often compels energy policy to conform to the economic and political bias of legislative constituencies charged with implementing energy policies, attempt to impose upon those policies their own bureaucratic values, their unique political perspective growing from their several missions and many other institutional concerns sub government and the public opinion also influence policy. These elements in the policy process have long been recognized. They emphasise a truth often ignored in discussions of US public policy.

The United States and the rest of the world are facing energy problem. The era of abundant, reliable, low-cost energy is in the past. Currently the condition will be that of scarcity and the continuing need to manage the complex and difficult issues associated with the use, supply, pricing and trading of energy to prevent economic, political, environmental and military crisis.

Imported oil is the heart of energy problem. As mentioned earlier the economic growth and the consequent growth in energy demand requires increased need for imported oil. To understand the full scope of Congressional perception focus on Energy Security act-S.932 of 1980 is essential.

Energy Security Act - S. 932

Representative Christopher J. Dodd on June 25, 1980 observed that with respect to the energy act it represented a long overdue commitment of federal dollars to promote energy independence for America. He acknowledged the growing dependency of United States on imported oil. The Energy Security Act provides 25 billion for exploration of a variety of energy alternatives including synthetic fuels renewable resources, conservation, and gasohol. It mandated two actions -the filling of our strategic petroleum reserves and the study of acid rain problem. Though the historical energy security act comprehensively dealt with the synthetic fuel but it was not entirely about the synthetic fuel bill. This act also provide $3.1 billion to establish conservation and solar banks that will offer federal subsidies in the form of below market loans, loan guarantees and grant to finance solar and conservation work in homes, apartments and small business. Christopher J. Dodd argued that $ 3 billion included in this bill to the energy bank was not enough to release the full potential of conservation and solar energy. But this funding was perceived to be a good beginning, and believed that the experience of the coming years will prove the worth these alternatives to continue oil imports. He further argued that the United States government must devise an effective national strategy to break the hold of OPEC and energy conservation in our homes and business should be taken as a vital part of that strategy (Congressional Hearings: 1980)

The former Clinton Administration stressed that U.S. support for free market reforms directly served U.S. national interests by opening new markets for U.S. goods and services, and sources of energy and minerals. U.S. private investment committed to Central Asia had greatly exceeded. U.S. energy companies have committed to invest billions of dollars in Kazakhstan, Turkmenistan and Uzbekistan. U.S. trade agreements have been signed and entered into force with all the Central Asian States.

By focusing on Congressional debates on Energy Policy with particular focus on Central Asia, the complexity of policy formulation can be understood. Further the various Hearings held by the Congress have also provided significant evidence that explains the changed nuances of Central Asia policy. It also helps to illustrate the argument that the Congress considered the Central Asian Region very important for US interest. In particular Congressional understanding of the "Enormous Energy Export Potential" that could ease America's energy problem went a long way in shaping US policy towards Central Asia. For instance, despite concern on 'human right' violent political movement, US government virtually supported the US government decision to promote a new pipeline from Kazakh to Azerbaijan and from Ceyhan to Turkey.

Some analysts have noted that there has been different emphasis on the level of US involvement in the CAR. According to some there have been linkages between the adequate progress in democratisation and improving the human rights. The importance of energy resources to US has been disputed in early phase of 1990. However, the Congressional interest in Central Asia was reflected in the passage of "Silk Road" in late 1999 which enhanced US policy alteration, humanitarian needs, economic development (including energy pipelines) and communications, democracy and the creation of civil societies in the South Caucasian and Central Asia.

The Bush energy policy was directed towards securing cheap oil because US oil consumption was below projected to increase by one-third over the next two decades. The white House during Bush Administration also had for greater domestic drilling and wants to open the Arctic National Wildlife Refuge to the oil industry. The Administrations National Energy Policy Development Group, led by Vice President Dick Cheney, acknowledged in a May 2001 report that US oil production will fall 12% over the next 20 years. As a result US dependence on imported oil which has risen to a great extent (CRS Report: 2005).

September 11 brought with it a dramatic reconfiguration of the entire international security environment as well as a fundamental shift in the ranking of American foreign and security priorities. Virtually every other foreign policy priority was now subordinated to the effort to create an anti-terrorist coalition (Chenoy: 2001:149-160).

It is observed that the September 11 attack on the World Trade Centre and Pentagon has underlined the connection between oil and politics. When it became confirmed that the most of the hijackers were from Saudi Arabia, it impacted on the oil market to a great extent. Since Saudi Arabia constitutes one fourth of the total petroleum reserves, United States had to look for some other alternative sources in order to fulfill its energy requirement. United States is dependent on foreign oil for its 58% of energy requirement which is likely to increase up to 65% by 2020 (Chenoy: 2001:149-160).

The counterstrike of September 11 shattered the old barriers and opened new horizons. The United States Congress acknowledged the importance of the Central Asian republic for the fulfillment of its oil requirement in the 107th Congress. It was acknowledged that the Central Asian Region is inflicted with terrorist activities and hence consequently political instability. The support from the Congress and the administration was urged. It was argued that the US assistance in developing these new economics will be crucial to business success. A strong technical assistance progress throughout the region was endorsed.

After September 11 Washington's approval of more than US$1.4 billion for the economic recovery of barren and battle scarred Afghanistan provides the Bush administration with possible insurance for deepening its petro-political sphere of influence along Russia's boarder in the form of revived Trans-Afghan pipeline. Further it was realized by the US energy analysts that the vast reservoir of oil and gas can be protected by the deployment of US special operations forces to Georgia because it will neutralize Russia's influence in the region.

It is noteworthy that the Vice president Dick Cheney, former CEO of the oil services company 'Halliburton's also a veteran of the American oil industry's presence in the Caspian Basin is sufficient to manifest the US presence in the region With almost $30 billion already invested by US oil companies in Kazakhstan, Turkmenistan, Uzbekistan and Azerbaijan, the suggested Afghan route would cost only one-half the amount of the other alternative which would run through Georgia to Turkey's Mediterranean coast ( Alam :2002:5-26).

The Caspian Sea region is widely viewed as important to world markets because of its large oil and gas reserves. Most Energy Company regards the Caspian Basin as the Persian Gulf of the 21st century. In Central Asia and elsewhere, America found new friends in hour of need. It can be said that the Sept. 11 have awakened many Americans to the interdependence to the even -smaller world, to their vulnerability especially in energy. The growing American stake in Central Asia is one response to that. It can be said that the American "war against terrorism" has also become a battle to control the energy resources of the Central Asian Region. Since Central Asian region can offer the United States a rare opportunity to diversify world oil supply, it could be one of the most important areas of US foreign policy. However, in Washington D.C., and especially in the US congress, foreign policy tends to be an elitist sport. Few members of the Congress focus on foreign policy and accepted by the most of the Americans. As a result, few members of the congress view foreign policy and the Caspian region in strategic terms. The Central Asian Region is viewed by the most members of the congress through one or more of the following perspectives-

  • The Azerbaijan- Armenia issue
  • US policy towards Iran
  • US policy towards Russia
  • Partition and domestic politics.

Among the four factors mentioned above, the fourth one i.e. that is partition and domestic politics is perhaps the most important. Members of the Congress tend to be overly responsive to their domestic constituents and some even support certain ethnic groups as a way to raise campaign contribution. This leads to a phenomenon termed "ethnic politics". Critics argued that ethnic politics have driven US policy towards both Azerbaijan and Iran (Congressional Hearing: 2001).

In order to understand the attitude of Congress towards the Central Asian Region in the aftermath of Sept. 11 attack on World Trade Centre (WTC) and Pentagon, the congress role towards Azerbaijan-America issue, Iran, and Russia requires a brief consideration.

The Azerbaijan-Armenia issue

On the Azerbaijan - Armenia issue, congress tends to favour Armenia and uses foreign aid legislation as a means of exerting pressure on Armenia's neighbors particularly Azerbaijan and Turkey. The most obvious example of this is the section 907 at the Freedom Support Act which prohibits US government aid to the government of Azerbaijan.

Concern over the plight of Azeri refugee and the increasing importance of United States investment in the Azeri oil sectors; have led Congress to adjust section 907 incrementally each year since it took effect in January 1993. Nevertheless, Congressional attitude towards the region began to change significantly in 1997. The changes occurred for several reasons:

  • The presidential elections in Armenia appeared to be less than free and fare this damaged Armenia's image on Capitol Hill and embarrassed lawmaker who had clouted Armenia as the democratic ideal for the region.
  • Some members of the congress thought the Armenia lobby had gone too far and was out of step with the realities on ground. The Armenian lobby was pushing for what some members of Congress thought was excessive legislation.
  • As the deadline for a decision on the main export pipeline route approaches Congressional interest has continued to rise. There was the increased number of Congressional delegation traveling in the region. At least five delegations visited the region in 1997 including one led by senator McConnell. However, since his trip he has taken a more balanced approach to the region. This is noteworthy because McConnell is the chairman of the Senate appropriations subcommittee on foreign operations, the subcommittee which has jurisdiction over section 907. The House of Representatives, however, continued to reject attempt to weaken section 907. Congress tends to be an incremental body and the facts demonstrate that there is momentum towards making further revisions in section 907. As a result of this increasing momentum it is believed that the US Senate is now positioned to make substantial changes in 907. Senate headway will be critical because progress will have to be made in a House-Senate conference committee and the House of Representatives continues to be solidly on the side of Armenia and is likely to support a significant softening or repeal of S.907. A major problem especially in the House is that section 907 is not on the radar screen for most Representatives since 907 is usually inserted into the foreign operations appropriations legislation at the subcommittee level, only 13 House member-less than 3% have an opportunity to vote up or down on 907 each year (Congressional Hearing:1997).

Congressional attitude towards Iran:

Iran is the most stable country politically and economically bordering the Caspian, and offers the most attractive pipeline routes: it is important to understand congressional attitude towards that country. Congress is opposed to Iran and has limited the Clinton's administration's flexibility in dealing with it. In this respect, Congress has played a significant role. In the opinion of Congress no country undermines American interest more than Iran. Since the Iranian revolution the United States has sought to isolate Iran diplomatically and politically and more recently economically. Congress has passed the Iran-Libya Sanction Act (ILSA). This act was passed without a single member of congress voting against the sanctions. Congress has rarely adopted any controversial piece of legislation unanimously which have a wide range of implications. This law is causing problem for the companies trying to move Caspian oil to market. US companies are prohibited from partnering with Iranian firms in the Caspian (CRS Report: 2003).

US Policy towards Russia

Another regional issue clouding Congress view of the region is US policy towards Russia. Congress is skeptical of Russia, and its relations with Iran. For many members of Congress opposing the Soviet Union was a major pillar in their political philosophy during 1980s. Today there are still resident effects of this cold war attitude especially Republican party. In 1997 dozens of bills were introduced seeking to impose sanctions on Russia. Congress has consistently opposed Russian efforts of nuclear cooperation with Iran.

Congress views the possible pipeline alternative through Russia, southern route through Iran, eastern route through Afghanistan and western rout through Georgia and Today Congressional view of the pipeline can be summed up in three ways: congress is opposed to pipelines routes through Iran, Congress is skeptical of routes through Russia, and is dubious of routes through Afghanistan. Turkey and Georgia are the only options in view of the Congress.

Therefore, it is obvious why Congress has expressed support for pipeline along an east-west axis. This also helps to explain why the US government (Congress and the administration) are increasingly calling the Baku - Ceyhan route "the preferred route" because it belongs NATO, ally, and avoid Iran and Russia.

During 1998, Congress continued to advocate isolation of Iran and continue the incremental progress in US relations with Azerbaijan. While formulating energy policy for the United States, Congress is the preeminent force. But congress is a house divided. Its authority is dispersed between the two chambers. It is due to the fact that its members are usually torn by the conflicting claims of local and national interest. In spite of having fragmented opportunity it can be expected for policy innovation. On the brighter side, the United States has important energy interests in Central Asia. With its recent energy resources, Kazakhstan could become one of the largest oil exporters in the world. The United States has a strong interest in this oil getting to the world market at reasonable prices via multiple pipelines (Congressional Hearings: 1998).

The 107th Congress supported government's efforts to promote a new pipeline from Kazakhstan to Azerbaijan, Georgia, and Turkey, the gateway to the entire Western oil market. It was also acknowledged that in addition to energy interests, the United States also has a strong interest in working with the existing Central Asia governments on combating drugs and on divesting themselves of their weapons of mass destruction materials ( Congressional Hearings:2001).

Finally, domestic security concerns for the Central Asian region particularly about violent political movements also got due consideration.

The world gets nearly half of its energy from oil and this fuel accounts for over 40 percent of US energy use. Thus it is understandable that oil is the most important component in the world's energy outlook. But the recent visit of the Secretary of Defense Rumsfeld in Central Asia focuses on the increased concern of us policy makers on security concern in Central Asia. The former U.S. Defense Secretary Donald Rumsfeld visited Kyrgyzstan, Kazakhstan and Turkmenistan to review U.S. cooperation with each of them in the framework of antiterrorism operations.

In sum, US policy towards Central Asia can be understood by analyzing the statement of the Assistant Secretary of European and Eurasian Affairs, A. Elizabeth John. According to him The United States has three sets of strategic interests in Central Asia.

Security, including our fights against terrorism, proliferation, and narcotics trafficking;

Energy, involving ___ and economically sound transit of Caspian oil and gas to global markets, and the use of energy revenues to foster sustained and balanced economic growth; and

Internal reform, which encompasses democratic and market economic transformations can support human rights, and expand freedom, tolerance, and prosperity in these countries.

Before going into the dynamics of US energy policy making towards Kazakhstan a brief introduction about the geographical and natural resources of this newly independent country seems to be inevitable. Kazakhstan borders both Russia and China and is a close neighbor of both Iran and Afghanistan. In the words of Senator Sam Brownback Kazakhstan is "caught in a tough neighborhood."

Proven oil reserves in Azerbaijan and Kazakhstan are about 20 billion barrels, almost equivalent to those of the United States. These figures could increase significantly as exploration continues. For example, initial results of exploration in Kazakhstan's Kashagan field indicate the potential oil reserves as comparable to those of Prudhoe Bay in Alaska.

Eestimates show Kazakhstan's oil exports could be 84 million tons by 2010 and 150 million tons by 2015.Current exports from the region are about 800,000 barrels of oil per day, in part due to limited export route options. Department of Energy (DOE) estimates that exports could increase by 1.8 million barrels of oil per day by 2005, as export routes, such as the Baku-Tbilisi-Ceyhan (BTC) and Caspian Pipeline Consortium over the past decade. Kazakhstan has made some progress in transforming its economy to create a more transparent, less regulated and more market-driven business environment (Janes Information Group: 2009).

It is important here to bring to the notice that Kazakhstan's strategic aspiration is to become a modern, diversified economy with a high value-added and high-tech component, well integrated in to the global economy, and they are cognizant of the need for foreign expertise to accomplish this. Though like other former Soviet republics, Kazakhstan's infrastructure is underdeveloped, especially roads, transportation, and telecommunications. Likewise, areas such as health and environment need an infusion of investment to reach European standards. There is no question that the global economic crisis will impact Kazakhstan's goal of attracting FDI outside the oil and gas sector (Abazov: 2004).

So far as the consistently intensifying relationship between US and Kazakhstan is considered it can be observed that natural resources, particularly oil and gas, currently provide the greatest opportunities for strengthening ties between the United States and Central Asia in general and Kazakhstan in particular. Vice President Dick Cheney has been the most senior US official to speak at length about Kazakhstan. Commenting administration's comprehensive national energy plan, he has stressed the importance of Kazakhstan in the context of diversifying foreign oil supplies. He further stated that "We need to develop projects to get pipelines built so that we can get access to the oil, get it into the international market that will help stabilize prices and diversify supply."(US Department of State: 2009).

Since the foreign policy of any country is shaped by the external circumstances and its national interest, the international scenario which can be perceived as the catalytic factor in shaping US foreign or rather energy policy towards Kazakhstan can be analysed as-

  • Issue of non Proliferation: The United States and Kazakhstan recently made significant progress on what the Department of Energy has called "one of the world's largest and most successful nonproliferation projects" - securing a stockpile of weapons-grade plutonium large enough to make roughly 400 nuclear bombs. That project builds on a record of security cooperation between the two countries that began when Kazakhstan agreed to denuclearize after the collapse of the Soviet Union ten years ago, and continued through Operation Sapphire, during which Kazakhstan shipped 600kg of weapon-grade uranium to the United States to remove an urgent proliferation threat. (Carol Dahl and Karlygash Kuralbayeva: 2001:429-440).
  • RUSSIA: In the past decade, Russia occasionally has attempted to exert influence on Kazakhstan and other former Soviet states, particularly with regard to energy matters. In this regard the former Secretary of State Colin Powell has noted that, "we have to make it clear to the Russians that even though they may have concerns in the periphery of the old Soviet Union and now the periphery of Russia, they cannot act in a heavy-handed way, and they cannot intimidate these countries, and they cannot threaten these countries, and they should not think about trying to re-create the old Soviet Union in some smaller way. This will not further their interests in the West." Though, the US has shown some kind of cooperation with Russia for example the United States and Russia seek to build upon the commercial aspects of their relationship, the energy resources of the former Soviet Union could in fact serve as basis for international cooperation. This is evident in the message of Secretary of Commerce Donald Evans t regarding the Caspian Pipeline Consortium, a $2.6 billion project that built a 935-mile crude oil pipeline running from the Tengiz oil field in Kazakhstan to the Russian Black Sea port of Novorossiysk Referring to the project, Secretary Evans declared that "it tells the world that the United States, Russia, and Central Asian states are cooperating to build prosperity and stability in this part of the world."( Cutler:2008)
  • Iran: The growing cooperation between Iran and Kazakhstan is evident from the fact that KazMunaiGaz, Kazakhstan's state-owned oil and gas Company, is charting a new course under the leadership of its new president, Kayrgeldy Kabyldin, He is guiding the company toward closer cooperation with Iran, and he has made it clear that international sanctions against the Islamic Republic will not stand in his way (Elina: 2009).

Kabyldin the third chief of KMG addressed the Kazakhstan International Oil and Gas Exhibition (KIOGE) in Almaty, where he said that "there are proposals from Iran regarding the shelf of the Persian Gulf." That suggestion of potential cooperation may have been a surprise for some, but it manifests the fact that the Kazakhstan and Iran are increasing their oil industry ties.

In the words of Kabyldin "the Iranian route is a potential direction for transporting oil to the south" that "would allow us to reach the Persian Gulf and get access to the Asian market." In this it should also be noted that even the Iranian side is enthusiastic about this growing cooperation in energy sector as evident by the Iranian Interior Ministry official Morteza Safari Natanzi's statement that talks between the two countries were already being held to construct an oil pipeline from Kazakhstan to Iran via Turkmenistan. Natanzi reportedly said the oil could be pumped into existing Iranian pipelines to Iran's Kharg Island for export to Asian markets.[2] According to Bolat Auelbekov, an expert with Kazakhstan's presidential Economic Research Institute (ERI), a similar plan is already under negotiation on Kazakh side.

Though KMG officials have not confirmed any plans for building an oil pipeline south to Iran. But Kazakh Deputy Energy and Mineral Resources Minister Lyazzat Kiinov, speaking at the KIOGE conference, said there is an Iranian proposal for exchanging "oil and gas assets." Kazakhstan and Iran already have been exchanging oil assets for a decade in a deal that even the U.S. government approves of, because it mostly benefits Kazakhstan. Kazakhstan ships oil via tanker across the Caspian Sea to the northern Iranian port city of Neka. In exchange, Iran delivers Kazakhstan's foreign customers crude oil of comparable quality, sending it to those clients from a Persian Gulf oil terminal.

In this regard it should be noted that KMG chief Kabyldin has acknowledged that current international sanctions complicate deals with Tehran. But he was quoted as saying "there are a number of Kazakh companies, not bound by these obligations that are shipping their oil through Iran."(Inogate Energy Review: 2008).

Joint construction of a new refinery in northern Iran seems almost certain. It is also being reported by the Iranian Interior Ministry that Kazakhstan and Iran were discussing building a new refinery.

Turkmenistan: It is an interesting fact that Kazakhstan is not broadening its horizon towards its neighbouring countries rather the option is open for the countries within the Central Asian Region. Kazakhstan is "already in talks with Turkmenistan about the North-South project," Auelbekov said. "Turkmenistan itself proposed the initiative that includes Iran, Kazakhstan, and Russia to join in a transportation route. But so far this plan centers primarily on railways." (Overland Indra, Heidi Kjaernet, Andrea Kendall: 2008).

Growing US- Kazakh Relations: It can be argued that in view of the growing cooperation of Kazakhstan with the neigbouring country disturbed the sleep in the White House and consequently an enhanced participation by the US Congress towards this 'potential country' can be observed. Kazakhstan's Prime Minister met US Congress delegation headed by Nick Rahall, House Committee on Natural Resources in Astana. The US Congress delegation comprises representatives of West Virginia, California, Illinois, Louisiana and Georgia.

The two sides dwelt on issues of bilateral political and economic cooperation. In the words of N. Rahall "Kazakhstan and the USA have established strong ties" It's of great importance to us that Kazakhstan has been a partner of the USA in terms of security within the region in this volatile period". On the other hand, K. Massimov noted that Kazakhstan as a major trade and investments partner of the USA in Central Asia would further adhere to the principles of comprehensive open and positive partnership relations.

The Congressmen lauded Kazakhstan's economic development level, pointing to the progress in Oil & Gas and energy sectors. Kazakhstan's PM reciprocated by highlighting the openness of the national O&G sector to US companies' investments, noting that the Kazakh Government guarantees stability of contracts in effect. In the course of the meeting the sides exchanged pinions on a range of issues in the realms of mutual investments, agriculture, and some others. The sides expressed confidence in further expansion of bilateral ties between Kazakhstan and the USA (Government of the Republic of Kazakhstan website).

It is important to mention here that US focused towards Kazakhstan even much before September 11. The reason for this can be attributed to its significant petroleum and other mineral resources. Though since September 11, that interest has intensified, mainly because of security concerns highlighted by the military campaign in Afghanistan and the overall war against terrorism. From both perspectives, the United States has important national interests relating to Kazakhstan specifically and Caspian Basin region more generally. These interests have been extensively articulated by the Bush Administration and members of Congress (Isabel: 2003:13-18).

During his visit to Kazakhstan in 2001 the former Secretary of State Colin Powell acknowledged the country's political and diplomatic support for the war on terrorism, and its military support in the form of over flight clearances. While it has not been necessary to take up Kazakhstan's offer to use its military bases, the country's transportation infrastructure and other facilities could play a significant role in humanitarian relief and the reconstruction of Afghanistan. Kazakhstan's energy potential argues for strengthened cooperation and commercial dialogue between senior officials of both the U.S. and Kazakhstan. In this regard, an energy working group that can help clear obstacles to implementing commercial projects was required (US Department of State: 2001).

US Energy Policy Making Towards Turkmenistan:

Similarly before going into the discussion regarding the dynamics of US energy policy making towards Turkmenistan a brief introduction of the country is required.

Turkmenistan is a landlocked, desert country beneath whose surface lie substantial deposits of oil and the fifth largest reserves of natural gas in the world. Turkmenistan, the Caspian's fourth post-Soviet state, is less endowed with oil but richly endowed with natural gas. Turkmenistan's natural gas reserves are ranging from 10 trillion to 14 trillion cubic meters. While as per their estimates about its natural reserves place them even at higher levels of up to 24 tcm. In order to settle the matter of estimation Berdimuhamedov commissioned an independent audit by respected British firm Gaffney, Cline & Associates of Turkmenistan's newly discovered South Iolotan-Osman gas field. Foreign investors, attracted by the republic's calm and receptive atmosphere, have sidestepped human rights issues on their way to establishing joint exploitation of Turkmenistan's rich energy resources. Apart from this the country remains quite isolated on the eastern shore of the Caspian Sea, largely occupied by the Qizilqum (Kyzyl Kum)( Orazgylyjow:2009).

Turkmenistan played a vital role in the Soviet system as a natural gas supplier. In the post-Soviet period, Russia remained the republic's top trade partner, with Turkey moving into second place in the mid-1990s. A crucial rail link with Iran also was an important commercial improvement.

Throughout the1990s, Turkmenistan's economic policy continued to rely heavily on the West's demand for natural gas. But, for a nation isolated along the east coast of the Caspian Sea, gas sales depend strictly on pipeline movement. Existing lines, built to serve the Turkmenistan-Russia north-south axis, cannot fill this need. New lines moving from east to west have been planned, but all plans encounter strong geopolitical opposition from a regional power or from the United States. Until the pipeline problem is solved, Turkmenistan can sell gas only to the same customers it served in the Soviet era. Turkmenistan made a long-term agreement to sell as much as 15 billion cubic meters of gas per year to Turkey between 1998 and 2020. Turkey also received development rights for a field in Turkmenistan believed to contain 20 million tons of oil (Ochs: 1995:1-15).

Foreign investment has been small, and experts predict no short-term improvement, partly because of the republic's insufficient legal and bureaucratic infrastructure, and partly because the very small and impoverished population provides little market opportunity. (The official average monthly wage was US$7 in early 1996.) The European Bank for Reconstruction and Development (EBRD) and other international banks are funding a textile complex, and Ashgabat Airport will be modernized with a loan of US$31 million from the British Export Credit Agency. However, for 1996 total direct investment was only US$32 million, with another US$61 million in joint ventures and US$161 million in foreign loans (U.S. Department of State:2007).

Besides this, Turkmenistan has pursued the most independent and pragmatic foreign policy of the five Central Asian republics. Turkmenistan passed legislation declaring permanent neutrality and prohibiting membership in any military or political-military alliance entailing responsibilities for collective action by its members.

President Niyazov had run the country's foreign policy personally; he faced little pressure at home to orient policy in a particular direction. Thus, he had been able to form ties with diverse foreign nations, maintaining economic advancement as the primary goal. Through the mid-1990s, Iran has been the top regional partner, although national security relations with Russia also have been a high priority during that period. In 1995 Turkmenistan signed a series of bilateral agreements with Russia, expanding economic and political cooperation and proclaiming the two nations "strategic partners" through 2000 (Institute for war and Peace Reporting: 2006).

Until now, Turkmenistan has exported its gas exclusively through Russian-controlled energy pipelines. While reaffirming a commitment to uphold long-term contractual obligations, which require Turkmenistan to continue shipping more than 50 billion cubic meters annually to Russia, the Berdimuhammedov administration has been exploring additional export routes, including eastward into China and southward toward Pakistan. Although much uncertainty persists regarding the extent of Turkmenistan's gas reserves, which industry experts estimate at almost 3 trillion cubic meters (tcm) and Turkmen government representatives claim as high as 20 tcm, representatives of foreign governments and energy companies have flocked to the country since the beginning of the year. The legacy of the USSR's integrated pipeline system has compelled Turkmenistan to rely on Soviet-era energy pipelines to reach world markets. Turkmenistan dependence on transit routes through Russia has allowed Gazprom to buy Turkmen gas for lower than market prices$ 65 per 1,000 cubic meters before August 2006; $100 per 1,000 cubic meters since then and then resell it at much higher prices (over $250 per 1,000 cubic meters) to European customers(Eurasianet:2009).

International scenario: Before going into the subject of US Congress, Bureaucracy and Interest Groups stepping in Turkmenistan It is inevitable to look around the international scenario which played the role of catalyst in enhancing the role of this "iron triangle" to look towards this once ignored country with more pragmatic approach.

China: Chinese government officials have started lobbying Ashgabat to expand bilateral energy cooperation. During Berdimuhammedov visit to China in July 2007, the Chinese National Petroleum Company signed an agreement with Turkmengaz, Turkmenistan's national gas company, to purchase 30 billion cubic meters of Turkmen gas for export to China starting in 2009. The 4,300-mile Turkmenistan-China pipeline under construction will be one of the longest and most expensive in the world (Goldstein: 2005:13-34).

European Union: The European Union also considers Turkmenistan an important player in its future energy strategy, including as a major supply source for the envisaged Nabucco gas pipeline. British Energy Minister Malcolm Wicks traveled to Turkmenistan. Wicks stressed Europeans willingness to pay higher prices than Russia for the country's natural gas and underscored the contributions that British Petroleum and other EU-based firms Congressional Attitudes Toward Iran (Eurasianet:2009).

IRAN: As has been already discussed above that the US Congress has always been opposed to Iran. In the opinion of Congress no country undermines American interests more than Iran. This underscores the fact that America has some very real disagreements with Iran and that U.S. policy is not simply driven by domestic lobbies (CRS Report: 2007).

Since the Iranian revolution, the US has sought to isolate Iran diplomatically and politically, and more recently economically. Last year, Congress passed the Iran-Libya Sanctions Act (ILSA). This Act sanctions foreign companies that invest in the petroleum sector of Iran.

Congress passed ILSA without a single Member of Congress voting against the sanctions. Rarely has Congress unanimously adopted such a controversial piece of legislation with such wide ranging implications. However, this lawis causing problems for the companies trying to move Caspian oil to market. For example:

  • US companies are prohibited from partnering with Iranian firms in the Caspian.
  • If the center of the Caspian Sea is ultimately considered to be an area of shared resources, American companies may face difficulties in moving oil across the Caspian because Iran might be part owner of that territory.
  • ILSA is also limiting the pipeline routes for Caspian oil. Although Iran may be the most stable country politically that borders the Caspian Sea, Congress has labeled it off limits to U.S. and foreign companies.

One illustration of the problems ILSA has caused is the flap over the proposed Turkey - Iran (now Turkmenistan) gas deal. On July 23, a State Department official announced before the House International Relations Committee that the U.S. had found the deal, as structured, was not sanction able. The reason the Administration gave for the non-sanction able designation was that Turkey had agreed to buy gas from Turkmenistan, supersedingthe agreement with Iran, and that Iran would earn only transit fees (Katzman).

Members of Congress interpreted the Administration announcement as a gesture of conciliation toward Iran as Khatemi was coming to power. Since the July announcement, Congress has sent strong signals to the Administration that it is premature to alter US policy toward Iran significantly. The Congressional reaction to this announcement demonstrates that from the point of view of Congress, the Iran option is not viable as a pipeline route and is not likely to become viable in the near term.

RUSSIA: A 25-year agreement between Russia and Turkmenistan, signed in April 2003, forms the basis of Russian-Turkmen cooperation in the gas sector. In announcing the reconstruction of the Central Asia-Center gas pipeline, scheduled for completion by 2011, Gazprom Deputy Chief Executive Officer Valery Golubev said, "The main aspects of our work are the purchase and export of gas to Europe. Turkmenistan provides 63.7 percent of (Gazprom's) gas bought in Central Asia," with 2007 purchases totaling about 67 billion cu m of gas. U.S. Policy Toward Russia (Blagov: 2006).

Hence another regional issue clouding Congress' view of the region is U.S. policy toward Russia. Congress is skeptical of Russia, and its relations with Iran. Many Members of Congress came of age politically during the 1980's and opposing the Soviet Union was a major pillar in their political philosophy. Today, there are still residual effects of this cold war attitude, especially in the Republican party. In 1997 dozens of bills were introduced seeking to impose sanctions on Russia. Congress has consistently opposed Russian efforts of nuclear cooperation with Iran.

While Russia monopolizes the bulk of Turkmen gas imports, in December 1997 Turkmenistan inaugurated the $190 million, 124-mile Korpezhe-Kurt Kui pipeline to Iran, the first natural gas export pipeline in Central Asia to bypass Russia. While the pipeline has a potential carrying capacity of 8.4 billion cu m, in 2006 the pipeline carried 4.5 billion cu m.

A further factor joint declaration on the development of the gas pipeline network in Central Asia, signed by the Russian, Kazakh, Uzbek and Turkmen presidents, which includes a pipeline skirting the Caspian shoreline currently pumping more than 5 million cu m of gas daily.

US Engagement with Turkmenistan: Since 2001, a sustained effort has been launched by the Bush administration to turn the page and explore opportunities to elevate the Turkmenistan-American relationship to a higher plane. U.S. executive branch agencies have sent more than a dozen delegations to Turkmenistan following Niyazov death to sustain a broad dialogue in many important areas economics and agriculture; democracy and human rights; education; public health; and cooperation regarding Afghanistan and other regional security issues.

Further in the opinion of Evan A. Feigenbaum, Deputy Assistant Secretary of State for South and Central Asian Affairs, Washington attributes considerable importance to developments in Turkmenistan because they could affect nine issues of critical concern for American foreign policy:

  • Russia resurgence in the other former Soviet republics,
  • China's expanding global footprint;
  • Iran's influence in Eurasia;
  • energy security;
  • democracy promotion;
  • the fate of Afghanistan;
  • the evolution of Islam;
  • transnational terrorism;
  • And global economic development (Press Release US Embassy: 2007).

Despite this comprehensive list of American interests in Turkmenistan, the main objective of U.S. policies has been to direct some of Turkmenistan gas exports through a pipeline under the Caspian Sea to Azerbaijan and then to Europe. The route of this 1,000-mile Trans-Caspian Gas Pipeline (TCGP), under active discussion for approximately a decade, would relieve the need to use the existing network of Russian-controlled pipelines.

However it is to be noted here that Washington officials deny that they see themselves engaged in a great-game style competition with Moscow and Beijing for influence in Turkmenistan. Nevertheless, a number of senior U.S. officials Feigenbaum, USCENTCOM Commander Admiral William Fallon, as well as high-level State Department officials Steven Mann, Matt Bryza, and Daniel Sullivan have visited Ashgabat since Russia, Kazakhstan, and Turkmenistan agreed in May 2007 to construct their own Caspian Shore Gas Pipeline. Berdimuhammedov signing of this preliminary memorandum of understanding aroused concern that he was losing interest in the U.S.-backed TCGP.

Sullivan, Assistant Secretary of State for Economic, Energy, and Business Affairs stressed that increased diversification of energy routes, buyers; suppliers are in Turkmenistan long term energy security interest. Nations should never be left with only one option one market, one trading partner, and one vital infrastructure link( Gurt:2007:1-10).

Washington policy makers furthered their dialogue with Turkmenistan leaders during Berdimuhamedov presence at the annual opening session of the UN General Assembly in New York. The occasion, Berdimuhamedov first visit to a Western country since becoming president, also provided an opportunity for his first meeting with U.S. Secretary of State Condoleezza Rice. In addition, some members of the Turkmenistan delegation including Baymurat Myradov, the executive director of the new national hydrocarbon agency subsequently traveled to Washington and Houston for detailed discussions on energy policies and other issues.

The discussions between U.S. and Turkmenistan officials apparently went well. Berdimuhammedov reaffirmed interest in developing multiple pipelines for his country's energy exports. He even confirmed stories in the Russian media that differences over pricing Ashgabat reportedly wants Moscow to begin paying $150 per 1,000 cubic meters for Turkmenistan's natural gas starting next year have prevented implementation of the May 2007 agreement. It was realised by the Bush administration that it would be wise to accelerate its efforts by appointing a new ambassador to Turkmenistan.

All the goodwill so carefully built up, however, may now be at risk by Washington's insistence on linking its interest in Turkmen energy exports to its policy of containing Iran. As it is evident by the view expressed by former U.S. Energy Secretary Samuel Bodman at the 12th annual Turkmenistan International Oil and Gas Exhibition, "The U.S.A. is confident that Iran is trying to develop its own nuclear weapons. We are trying to do our utmost to make Tehran stop developing nuclear weapons." Bodman further clarifies US's reservation against Iran by saying, "We will not be happy if this (Trans-Iranian gas pipeline) project is implemented."(Department of Energy: 2008).

Though more than 150 companies from 21 countries, including 62 companies from Russia, participated in the three-day exhibition. US were represented by its six Companies, Chevron and Shell being the heavyweight.

In contrast, the Bush administration has been promoting an undersea east-west subsea Caspian pipeline, which would link up in Baku to Western-directed pipeline facilities, avoiding both Russian and Iranian territory.

It can be observed that Bodman's rhetoric is in stark contrast to Moscow's and Iran's dealings with Turkmenistan, which are devoid of ideological content rather they are focused on economic issues. Under Niyazov's leadership, Turkmenistan pursued avowedly neutralist foreign policy; however it seemed unlikely that less than 12 months after his death Berdymukhamedov administration will risk alienating its two best-paying customers to placate Washington conservatives, especially as any future American financial payoff for the country's energy reserves would be years away.

During his visit to Astana on May 5, 2006, the then US Vice President Dick Cheney proposed construction of oil and gas pipelines under the Caspian to link Central Asian reserves to Europe via Azerbaijan and Turkey, thus bypassing both Russia and Iran. But both Moscow and Tehran strongly opposed to such projects, arguing that the seabed is too unstable for pipelines and the environmental dangers to the Caspian region is too high.

Russian Industry and Energy Minister Viktor Khristenko on Feb. 22, 2006, warned that the undetermined borders of the Caspian Sea would be a stumbling block for the proposed pipeline projects, adding: "Resolving the issue of a trans-Caspian system, including the construction of a pipeline system, will be possible only after agreeing to a clear understanding of the status of the Caspian".

The proposed pipelines would link the oil and gas reserves of Turkmenistan and Kazakhstan to the recently completed pipeline which now connects Azerbaijan's own crude oil to Europe through Georgia and Turkey. There is a parallel line under construction which will pump Azeri gas to Georgia, Turkey and Europe and which is to be on stream before end-2006.

Top US officials dealing with the region have taken a different view of the "corridor" projects. According to the US Deputy Assistant Secretary of State for European and Eurasian affairs, Matt Bryza, it was up to the countries involved to decide whether the pipelines should go ahead, noting: "Several feasibility studies have demonstrated the technical, environmental and economic feasibility of a trans-Caspian pipeline [system] and it is up to the countries through which the pipelines would travel and the investors concerned to decide whether to proceed". Bryza said Turkmen President Saparmurat Niyazov "showed interest in exploring the possibilities of the trans-Caspian pipeline, as well as other options", during a meeting the two had in Ashgabat January 2006.

The Caspian region is important to the United States because it is perhaps the last great untapped oil reserve in the world and it offers the U.S. a rare opportunity to diversify world oil supply. Therefore, the Caspian Sea region could be one of the mostimportant areas of U.S. foreign policy. However, In Washington DC, and especially in the U.S. Congress, foreign policy tends to be an elitist sport. Few Members of Congress focus on foreign policy and most Americans do not either — except in rare cases.

Congressional View Impacts Attitudes Toward Pipeline Routes :

It has been argued that the U.S. should allow Caspian oil to travel through Iran. This may ultimately be possible. However, in the short term it is difficult to predict that the U.S. willsuddenly change its position. In fact, Congress, which has maintained the U.S. embargo against Cuba despite the opposition of American allies, might actively work to prevent Caspian oil from moving out

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