Forget Mideast, Here's New Source of Oil Wealth

How does an obscure, minor-league dictator make the leap to major player in the world of politics and business? One word: Oil.

This week, Saparmurat Niyazov, the president-for-life of Turkmenistan, a California-sized former Soviet republic just northwest of Afghanistan, met with officials from Russia, Iran, Azerbaijan and Kazakhstan in an attempt to divide one of the world's richest oil and gas regions — at the bottom of the Caspian Sea.

While talks between the leaders of the five nations in Ashgabat, Turkmenistan, ended today with no agreement, for Niyazov and his colleagues, the stakes remain high.

Estimates for the oil reserves beneath this landlocked sea range from 35 billion barrels up to an optimistic 300 billion barrels. At the high end, that's more oil than even Saudi Arabia's 260 billion barrel reserve, and half as much as the entire Middle East. And while few analysts expect the Caspian to truly challenge the Middle East, its crude is already seen as shifting the global oil dynamics.

By 2020, the Caspian could be pumping out 6 million barrels of oil a day, or about 6 percent of the world's forecasted daily demand, according to the U.S. Energy Department. That, in turn, would generate about $150 million every 24 hours for the Caspian states and the Western oil companies that have partnered with them.

Clickable Map: Guide to Caspian's Oil Riches

Six percent may seem like a drop in an ocean of oil. Yet at a time when major energy consumers like the United States, Japan and Europe want to cut their dependence on the politically unstable Middle East — and when Western oil companies are desperately seeking new oil assets to put on their books — the Caspian has emerged as the petroleum equivalent of El Dorado.

"Caspian oil may eventually be as important to the industrialized world as Middle Eastern oil is today," declared former U.S. Secretary of State James Baker several years ago.

Just last December, Colin Powell, the current secretary of state, described the oil reserves in Kazakhstan as being of "critical importance" to Western energy consumers in the near future.

Yet as this week's contentious talks in Turkmenistan have already made clear, unlocking the Caspian's energy riches has been exceedingly difficult. Before Caspian oil can flow to Western markets, producers, consumers and oil companies must address three major issues: boundaries, pipelines and investment.

Whose Oil Is It?

Since the collapse of the Soviet Union in 1991, the five nations bordering the Caspian — Russia to the north, Iran to the south, Azerbaijan to the west and Kazakhstan and Turkmenistan to the east — have been arguing over how to apportion the oil-rich sea floor.

Previous settlement talks have stalled. Meanwhile, as more gas and oil discoveries are announced, and as billion-dollar production contracts are signed, tensions among the five nations have risen dramatically.

Last July, for example, when an exploration ship operated by British Petroleum and Azerbaijan entered waters claimed by Iran, Iranian gunboats arrived and forced the vessel to leave. And in February, according to one published report, Iran announced it was moving ahead with oil and gas projects even without a settlement of the boundary issue, saying it would "prevent others from exploiting what it considers its share of the sea."

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