July 1998

The oil and gas resources of the Caspian region are of very great economic importance to the United States. U.S. companies plan to invest billions of dollars in the region, which of course could bring great benefit to all Americans through reliable energy access at reasonable prices. As a result, a major component of my work as NIS Ombudsman is to promote our commercial as well as our broader interests in the Caspian Basin.

Goals
American goals in the Caspian Basin are to: 1) support the independence and prosperity of all the states in the region, 2) promote regional cooperation and conflict resolution, 3) ensure that Caspian export routes serve to diversify, not concentrate, world energy supplies, and 4) maximize commercial opportunities for American companies. The United States has pursued several strategies to achieve these goals. We promote the building of multiple pipelines on commercial terms particularly east-west pipelines to transport Caspian oil and gas to world markets. We help to resolve disputes concerning Caspian demarcation, which would expedite the building of an east-west transportation corridor through the region. We promote cooperation among the companies and the countries of the Caspian region, and encourage the most efficient system of exporting petroleum--the aggregation of volumes from several countries to increase economies of scale. We also encourage the countries in the region to create an attractive business climate for foreign investment.

It should be noted that the U.S. Government welcomes signs of positive change in Iran. Nevertheless, we oppose the construction of pipelines from the region to or through Iran. Iran is a competitor, not a partner, for the Caspian states when it comes to oil and gas exports. It is against our energy security interest for more oil and gas to go through the Straight of Hormuz. Furthermore, according to some recent cost estimates, building an oil pipeline across the Caspian to the Mediterranean is more cost effective than a pipeline running south from Kazakhstan to the Persian Gulf.

Recent Activities
In recent months, my work as Ombudsman has included two trips to the Caspian region, during which I pressed for a quick resolution of Caspian delimitation issues, emphasized the need to aggregate oil and gas volumes from the eastern Caspian states, and encouraged regional leaders to avoid dependence upon Iran as an oil and gas transportation route. These trips also involved continued advocacy for U.S. petroleum and nonpetroleum companies in the Caspian region. In the United States, several meetings were held with Turkmenistani officials during President Saparmurat Niyazov's visit to Washington in April, and I spoke at the annual meetings of the U.S.-Azerbaijan and U.S.-Uzbekistan chambers of commerce. In Istanbul last May, I conducted a series of bilateral meetings with NIS representatives during the U.S. Trade and Development Agency (TDA) "Crossroads of the World" Conference and addressed the "Tale of Two Seas" Conference sponsored by Cambridge Energy Research Associates.

In April, Assistant Secretary of Energy Robert Gee and I co-led an interagency delegation to Azerbaijan, Kazakhstan, and Uzbekistan. In Azerbaijan, we urged the leadership to work with Turkmenistan to solve the Caspian delimitation issue, emphasized the need for the aggregation of oil volumes from the eastern Caspian states to increase the cost-effectiveness of the Main Export Pipeline, and provided specific suggestions for improvements in the Kazakhstani investment climate. We also expressed strong U.S. opposition to energy development in and transportation to and through Iran. In Uzbekistan, I emphasized the need for improvements in the commercial environment, specifically the need to move towards a freely convertible currency, and provided advocacy for several U.S. companies.

During a meeting with Turkmenistani President Niyazov in April, Deputy Secretary of Commerce David Mallet and I pushed strongly for bilateral talks with Azerbaijan on the Caspian delimitation issue and for regional cooperation on a trans-Caspian pipeline. During our meeting, we also discussed two recent and two upcoming signings of commercial agreements between the Government of Turkmenistan and U.S. oil companies. To encourage more such transactions in the future, we emphasized to President Niyazov the need for Turkmenistan to adopt transparent legislation and regulations to improve the commercial environment and attract foreign investment.

Following on earlier contacts, I also visited the Caspian region in late May and early June, meeting with the presidents and other leaders in Azerbaijan and Georgia. During these meetings, we reiterated U.S. opposition to construction of a pipeline to or through Iran, strongly encouraged the development of trans-Caspian and Baku-Ceyhan transportation routes, and discussed ways to strengthen the environment for future trade and investment.

Jan Kalicki
Counselor to the U.S. Department of Commerce and
U.S. Ombudsman for Energy and Commercial Cooperation
with the New Independent States

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)