Forum the us and the Caspian: Crossroads or Barricade Tuesday, October 26, 1999 Chair: Graham Allison

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The US and the Caspian: Crossroads or Barricade

Tuesday, October 26, 1999
Chair: Graham Allison, Director of Belfer Center for Science and International Affairs, Kennedy School of Government
Araz Azimov, Deputy Minister of Foreign Affairs, Azerbaijan

Ashton Carter, Ford Foundation Professor of Science and International Affairs, Kennedy School, and Co-Director, Harvard-Stanford Preventive Defense Project

Tim Cejka, Vice-President of Exploration, Exxon Ventures (CIS) Inc.

John Deutch, Institute Professor, Massachusetts Institute of Technology

Good evening. I am Graham Allison and I am very pleased to welcome you to the Forum at Harvard’s John F. Kennedy School of Government. The topic tonight is “The US and the Caspian: Crossroads or Barricade?” I am not exactly sure how we got this title, but we are very glad to have this occasion during which we are inaugurating the Caspian Studies Program at the Kennedy School as part of BCSIA and in particular, our Strengthening Democratic Institutions Project.

This panel tonight will be the first of a series of events. Some are public and some are expert conversations about the Caspian region. It is our objective to try to better understand the dynamics of this area and better understand US national interests and US strategy and policy towards this region.

To that end, tonight we have an excellent panel. Last night in Washington, thanks to the US-Azerbaijan Chamber of Commerce, this program was officially inaugurated in the Washington context. And, a generous gift from a series of companies was announced which is going to make possible this study program.

In that context, I had the occasion to make a comment or two in which I put a question which I won’t actually give as a quiz to students here tonight, but which I think nonetheless reflects some of our aspirations for having a Caspian Studies Program here at the School. I noted that Americans, even Kennedy School students I fear, are not always the best at political geography. Some of you remember that in the past month, presidential candidate George W. Bush got somewhat confused about the fact that there were two countries: one called Slovenia and another Slovakia. Unless you take that too easily aboard, just last week, John McCain, who certainly is a very internationalist oriented member of the Senate, twice congratulated the ambassador from Czechoslovakia for the success of that country. Those of you who don’t know the answer to that probably you should be embarrassed and you might ask somebody afterwards.

But my question would be, let us imagine we take the 535 members of Congress and give them a quiz. You ask them to find the Caspian, and to identify the countries or a majority of countries that are abutters to the Caspian Sea. I am not going to give that quiz even here tonight. But, if you imagine that in the Senate, what do you get, half to pass? Forget it. A quarter? 10%? We are going south. Five? One? Okay. Our aspiration is that this will not be the case forever. We are going to do better.

In fact, to make it slightly worse, let us imagine the 535 executive foreign policy makers who are most important in the Executive Branch. The president, the vice president, the secretaries of State, Defense, Treasury, CIA, and run on down those until about the deputy assistant secretary level. We give the same quiz. They need the majority of the countries that are abutters? Do they get half? No. A quarter? 10%? Peter says maybe 10%. I think we are getting closer. Over time, I believe and suspect, over the three-year life of this Caspian Studies Program, this picture will change. And, in the same way that the Persian Gulf or the North Sea are geopolitical locations in the minds and maps of the minds of the policy community, that ought to, and I believe will become the case in the instance of the Caspian. This program will be part of that effort.

Tonight, we are very pleased to have a terrific panel. Some of you who have been reading the funny papers lately will notice that there are changes going on in Baku this very day. In the last week, one of the chief foreign policy advisors to President Aliyev resigned or was fired. Two days ago, the foreign minister also no longer holds his post. Deputy Secretary of State Strobe Talbot, who was here a couple of weeks ago, is in Baku tonight. So most people suspect that something is going on in the conversations between the president of Azerbaijan and the president of Armenia that has to do with the conflict in Nagorno-Karabakh. The deputy foreign minister, who is here with us tonight, may have something to say about that.

For comments, we are going to begin with Araz Azimov, who is the Deputy Minister of Foreign Affairs for the Republic of Azerbaijan. He has been a journalist with the Azerbaijan Broadcasting Corporation. In 1989 he joined the Foreign Service and he has served as deputy foreign minister since 1994, and he has been the lead person in the security dialogs between the US and Azerbaijan.

Minister Azimov will be followed by Professor Ashton Carter. Many of you know Ash from the School. He is a Ford Foundation Professor of Science Technology and International Affairs here at Harvard. He is the co-director with Bill Perry of the Harvard-Stanford Preventative Defense Project. And, from 1993-1996 Ash served as the Assistant Secretary of Defense for International Security Policy, where, among other things, he dealt with Azerbaijan and the Caspian region.

Tim Cejka is Vice President of Exploration for Exxon Ventures (CIS) Inc. This is the Houston-based activity of Exxon in the CIS region including the Caspian. He has been at Exxon since 1975 as a geologist and geophysicist. He has been involved with work internationally and particularly in the CIS since 1993.

Tim will be followed by John Deutch, whom we are very pleased to have with us tonight. He came all the way from MIT. John is an Institute professor whom we are not able to attract over here often, but we told him we needed illumination. We are going to count on him as we get to the end of the panel to make sure that errors and confusions introduced by Harvard types like myself will be corrected. John served in earlier incarnations as Provost of MIT, as Director of CIA, Deputy Secretary of Defense where both Ash and I worked for him and, as Undersecretary of Energy in a previous administration.

We have a terrific panel. Let us welcome the minister to start.
Minister Azimov: Let me first of say that this is a great privilege and honor for me to be here at this cradle of research and political knowledge here in the United States of America and I think in the world. I think that the establishment of this research program dedicated to Caspian studies, security and other related issues in the region where Azerbaijan occupies a key position, is a natural result of a process that started some years ago.

I think that this process started with the establishment of proper bilateral relations between Azerbaijan and the United States. One of the major events in this was the signing of the so-called “Contract of the Century” in 1994: the major oil contract in the Caspian. The Caspian, by the way, has always been famous, not only for its caviar but also for its oil resources. So the establishment of this program is a clear sign of the strong involvement of not only politicians and the Administration of the United States, but also of think tanks, which you represent.

If I had to design the agenda of this program, I would have difficulties. Caspian studies would need to cover not only the region of the Caspian Sea basin, but also, unavoidably, it would include Central Asia as a related region on one side and the Caucasus as a related region on the other. So you have a nice possibility to develop this program far beyond its geographical name.

The region where I am from where Azerbaijan is located, a geographically solid one, unfortunately does not constitute the same in political terms. There are three countries in this region, but I cannot call them three united countries in political terms because two of them have different positions on security issues. I would say that there are more challenges and risks today than there are remedies and answers. I hope that this program will help US and Azerbaijani governments and think tanks to find ways out of this impasse, this deadlock.

Actually, this situation is not so bad today. So many things have happened recently, which again I would say started with the signing of the contract in 1994. Today, there is stronger involvement between the United States and Azerbaijan. Today, we have a stronger voice as an independent sovereign country. Today we have stronger positions with regard to our status in the Caspian region, by which I mean development and exploitation of oil resources. Today we have a stronger position within the transatlantic institutions with which we have established stronger links.

But, on the other hand, this first option, as I say, which on the whole Azerbaijan stands for-- a path which will open the region to the whole world, a path which will provide three countries the possibility of developing themselves as prosperous sovereign states-- is being contradicted and sometimes blocked by a second option-- which is a path of dividing lines, continuing conflicts, problems caused by separatism, problems caused by territorial claims, and so on.

By this second way, we shall not arrive at the esteemed and desired final result of the accomplishments that have been launched so courageously by President Aliyev in 1994.

If, again, I were to design the agenda of the program, I would suggest, first, a security-problems package, which would discuss wide-ranging aspects including politics, military, economics and ecology. Because security is multi-faceted, we should not actually name any priorities, but on the other hand, political military security is a fundamental aspect of security. Economics will develop smoothly when security and military terms are provided.

Today, as I said, there are many challenges in the region caused first and foremost by the foreign military presence in the region. This presence is against the will of at least two countries. We are concerned with the increased military presence in the Northern Caucasus. As you know, most recently, Russia exceeded flank limitations established by the CFE treaty. And, the amount by which they are exceeding limitations is pretty remarkable. It is not several hundred, it is more than 1,000 ACB (Armed Combat Vehicles), which are a major military power in a region such as the mountainous Caucasus.

Today we have a continuous conflict—actually, a war-- in Chechnya which is being developed with the use of the most developed weapons and weaponry. It is bringing more tragedy to the region. If we say that Azerbaijan is concerned, we would not be wrong because we are already experiencing some consequences of this war in Chechnya. We expect more. We have already faced a Russian aircraft penetration into Azerbaijani airspace. This was not only a penetration, but also a bombing of the northern part of Azerbaijan. We are concerned about the dissemination of 20,000 pieces of light arms among the peaceful population of Dagestan. That was organized by the Russian government during the most recent penetration of Chechen guerillas, or armed people into Dagestan. We are concerned about the ethnic tensions which are being nourished carefully and skillfully by the Russian government in Moscow and in other parts of Russia, where 1 million Azerbaijanis live. A million Azerbaijanis would bring at least $1 billion of investments to Azerbaijan, back to their families. And, once they are pushed out of their places of business in Russia, what will happen to them and their families and the subsequent increased social tensions? So today, there are ethnic tensions-- a kind of cold war between blondes and brunettes in Moscow. We are concerned with this.

If I said that the Caspian and the Caucasus create a buffer zone and the states which are located there are deeply vulnerable because of this factor, I would not be incorrect. On the south we have NATO and Turkey, which is one of the core members of NATO. We have Azerbaijan, which willingly cooperates with NATO and the development of bilateral relations of a distinguished character and level. We have Georgia, which also willingly cooperates with NATO. And then we have the third country, Armenia, which hosts Russian bases and which continually stresses the fact of whatever risks and threats threaten the security of Armenia from the Turkish side. The one way out of this deadlock would be the exclusion on any foreign military presence in the area. Azerbaijan and Georgia will not strive to bring NATO to the region as long as there is no threat from Russia.

I think that this is a type of task and challenge that this program should examine. How can we provide a pact for security in the South Caucasus? A pact which will exclude any foreign military presence, which will be brought about by Iran, the US, Russia, the European Union, France, Germany, the UK, Turkey, and which will engage Azerbaijan, Armenia and Georgia in a set of agreements and guarantees for security and peace in the region?

Finalizing my remarks, referring to a remark by Mr. Chairman Graham Allison about events that are happening today in the coup. Nothing dramatic is happening there. It is of course enormous work that is being done by President Aliyev now, and by President Kocharian of Armenia who is also engaged, and by US Deputy Secretary Strobe Talbot. So, let us cross fingers. I wish them well. I hope they can agree on something, which will give us a possibility to look to the Istanbul Summit, which actually is a major political event in the end of this year. We should not miss this opportunity and we should do something about bringing a solution to the Nagorno-Karabakh conflict closer.

Thank you.

Graham: Thank you very much. Professor Carter.
Professor Carter: Thanks Graham. I would like to take up your challenge, which was to try to explain why this place matters from the point of view of American security. The standard answer to that begins with Caspian oil. That is not where I would begin. I would like to suggest to you instead a very simple logic that goes like this. Caspian oil-- however much of it there turns out to be, and however economical it turns out to be to get that oil from what is an inland sea out to where it can be used-- according to most of the assessments that I am familiar with, its effect on the world supply of oil as a commodity will be significant but marginal. This is not another Saudi Arabia. It is not in the large an alternative as was frequently said when Americans first became associated with the Caspian region, an alternative to the Middle East as a source of oil for the rest of the world. Caspian oil will be significant but not determinative of the global energy picture.

But, and this is the second item in the syllogism, Caspian oil is crucial for the development and the security of that region. And third, that region is of crucial security importance to the United States. That is the logic I want to follow. It is not so much the amount of oil there that matters to the US, here in the other hemisphere. It is that the management of the exploitation of Caspian oil will determine the future of the Caspian region. And, for a whole host of reasons, security and stability in the Caspian region is a vital American interest.

Let me try to unpack each of these points. I won’t go into the calculus that underlies the estimates of the oil reserves proven and unproven in the Caspian. I will simply suggest that in ten years, fifteen years, twenty years or so, if all goes well, and the Caspian is reasonably exploited in a reasonably economical way and there are no other great shocks of any kind, then Caspian oil will make up several percent of the world supply of oil.

Really what I am suggesting is that even if there were no oil in the Caspian, the Caspian would be important to us. Think of all the attention that the Balkans have received since the Cold War ended. The Caspian region and Central Asia and the Caucasus in general have had a level of instability and violence that make the Balkans look peaceful. Start over there with Tajikistan and walk westward to the Fergana Valley to Nagorno-Karabakh, to Georgia and now to Chechnya. You see right along the whole region one terrible conflict after another. And if you add up the lives lost and the people displaced in that conflict it easily, easily rivals the Balkans, which have stolen the headlines in the West for the last decade. Into the instability and the poverty of the region, and the relatively low level of development overall, comes this thing called oil. Everyone is scrambling for it.

So the question about Caspian oil is whether in the region itself it will become a shared resource that makes everybody better off, in which case the region will be secure, and our interests, which I will get to in a moment, will be secure. Or, the oil will be yet another thing to fight about, in which case it will fuel instability that already exists in abundance and our interests will suffer.

What are those interests? Why should we care apart from the human tragedy represented by all of these problems? Well, look around at the points of the compass up there. Start with Russia in the north. This is their old empire that was snatched away from them when the Soviet Union broke up. It is terribly important that the sovereignty and independence of these states, in my judgement, be sustained because it takes away the imperial idea from Russia, once and for all. I think that is crucial for Russia. But it is also true that that cannot be done in a humiliating way because Russia is already suffering from a Weimar syndrome and feels that it is a defeated, dismembered and “dissed,” to use the American word, former power. And the manner in which it is treated will determine whether it concludes that it can join the international mainstream or whether it has to be a thing apart. That in turn will determine a whole heck of a lot for our security ranging all the way from Russia’s role in NATO to their custody and control of nuclear weapons, of which they still have 25,000. That is the northern point of the compass.

Then look west at the Middle East. Turkey, already been mentioned. The peoples of this region are Turkic, many of them. They speak Turkic languages and what happens there is something of great importance and great emotional importance to Turkey, which is still the southern anchor of NATO and plays a very important role in our policy toward the Middle East.

Now look south. There is Iran. The country we cannot quite seem to get along with. They took our hostages, they play with weapons of mass destruction, they support terrorism and they have a government internally, which is not satisfactory to us. But they are there. One way or another, at some point, they are going to be an important part of our future.

Now go east, all the way to China, which has a Muslim insurgency in its western region. Go south, where India and Pakistan have just made overt the fact that they have nuclear weapons. Look next to Pakistan, there is Afghanistan where a whole army of Mujahadin has been liberated. They are not on active duty anymore. They are milling around this whole region trying to find something else to do. And imagine an example that might complicate things: the specter of the “Talibanization” of Pakistan. A Pakistan that possesses nuclear weapons.

So you don’t have to look too hard around this compass, if you think of this as a place you haven’t heard of and as countries that are difficult to understand and difficult to pronounce. Just look at their neighbors and you will find countries that you do know how to pronounce and that are obviously important to US security.

What can we do then, if it is true, as I have said, that oil is key to the region? And the region is key to the world, even if oil is not key to the world. What can the US do? Well, three things. First of all, give strong support to the sovereignty and independence of the states in this region. In particular, in the Caucasus region: Azerbaijan, Georgia and Armenia. But, also to all of the “stans” further east.

That, secondly, should include a strong security relationship of the kind we tried to establish when we were serving in the Department of Defense. That is both a bilateral security relationship and as the minister said, a relationship, yes, between these states and NATO’s Partnership for Peace. This gives them an alternative in security terms to their historic reliance upon their immediate neighbors. An alternative that is both psychologically and in security terms is terribly important.

Finally, on this point I will close, with respect to Caspian oil, what should American policy be? If the idea is to make the exploitation of this resource work for everyone, it is crucial that no one be left out. And that means that the core of American policy from my point of view has to be a policy of no losers. Everybody gets a cut. Because, if everybody doesn’t get a cut, whoever doesn’t get a cut will cause trouble. And, whether that is the Russians destabilizing Georgia, in part to demonstrate that a pipeline through Georgia will not work, or any one of the many other examples you can give of the ability of one of these countries, if aggrieved, to become a spoiler. The only way to make this work is for everybody to get a slice.

Finally, at some point down the road, and I don’t know when this will happen, it must include Iran as well. That is something our government is not prepared to contemplate and indeed the Tehran government is not prepared to contemplate either. But, if you accept the principle I have stated, they have to be part of the solution eventually. It must be a win, not a total win, but a partial win for everyone or it will be a lose for everyone.

Thank you.
Graham: Thank you Ash. Tim, what about your perspective?
Tim: Well first I would like to thank you for being invited and to have this opportunity. I came to Harvard a year and a half ago when we sort of gave birth to this idea of creating this studies group. So I am glad to be back to see it kicked off.

I want to talk a bit about Azerbaijan and a bit about oil. I will quote the numbers. As a geologist and an explorer, I was really pretty excited when they assigned me to the Caspian because of the potential. For a geologist, this was a brand new world. I do have to admit though that I did check my National Geographic when I was first transferred to the area to find out where it was. But since then, I have been travelling back and forth for six years. In that time, maybe Ambassador Courtney can confirm this, I have actually become a diplomat, a negotiator, an educator, a refugee worker and a friend to Azerbaijan. But enough of my introduction.

I will just take a moment to talk about why Exxon and the other oil companies are there. I will agree with Ash on one point. It is not as big as Saudi Arabia and I believe nobody in the oil industry ever actually said that. Only those in government said that. We in the oil industry see it as very attractive, but attractive on the scale of a North Sea. Just for numbers sake, the North Sea is in the range of 100-200 billion barrels of oil equivalent. To give you perspective, the largest field in the US, Prudhoe Bay, is about 13 billion. So we are talking about another 10-15 Prudhoe Bays being found. In the oil business, this is a very exciting deal.

To date in the Caspian, about 60 billion barrels have been discovered. But because of the lack of money and technology, that 60 billion has barely been developed. Most people are familiar with fields in Azerbaijan, the megastructure in Kazakhstan--Tengiz-- both of these fields produce just approximately 10-15% of their potential. But with additional investment, production facilities, and pipelines to take the oil out, those fields are capable of themselves producing up to 1 million barrels a day each. So we see in the 10-20 year range that the Caspian would supply 3-6 million barrels of oil a day, which would fall in line with a couple percent of the world production.

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