Afghan Pipe Dreams

By Pratap Chatterjee, CorpWatch. Posted July 25, 2002.

A proposed natural gas pipeline through Afghanistan has governments jockeying for political control as well as a share in the billions of dollars that would come with it.

So far, however, international oil and gas corporations are sniffing around the region and the World Bank has hinted it might give it's blessing to the plan, but none has committed to a pipeline project.

Many political observers and critics of the US war in Afghanistan have voiced suspicions that the true aim of the fossil fuel friendly Bush administration's "war on terrorism" is to clear the way for such a pipeline. Others, like John Pike, Director of GlobalSecurity.org, say that while oil and gas are never far off U.S. policy makers' radar screen, they also have other objectives.

"The people who peddle fossil fuels are the most interested and most active in seeking to influence the United States government," notes Pike. "But right now I think the US policy is to keep a new pipeline out of Iran at any costs," adds the former military analyst for the Federation of American Scientists.

Meanwhile, human rights and environmental activists are keeping an eye on a potential pipeline in the volatile region.

Central Asia Jockeys for Position

On May 30th President Hamid Karzai, then chairman of Afghanistan's interim administration, Pakistan's president General Pervez Musharraf, and Saparmurat Niyazov, the president of Turkmenistan, signed a memorandum of understanding, laying out plans to build a 900 mile pipeline that would snake across southern Afghanistan, from Turkmenistan's Daulatabad gas fields to the Pakistani port city of Gwadar.

Two weeks earlier, World Bank president James Wolfensohn told reporters in Kabul that the international lending institution might be interested in such a project.

"We are not taking the entrepreneurial role, but were it to come up we would certainly take a look at it. There are a number of entrepreneurs already in the exercise so we will wait and see," he said.

Western governments are also taking a keen interest. "The pipeline is one of those things out there in the future," a United States State Department official told the Far Eastern Economic Review estimating that Afghanistan could earn $100 million-$150 million a year in transit fees.

Current estimates of natural gas reserves in four former Soviet republics: Azerbaijan, Uzbekistan, Turkmenistan and Kazakhstan equaled more than 236 trillion cubic feet while total oil reserves might reach more than 60 billion barrels of oil.

At current consumption levels, the region holds enough fossil fuels to service Europe's oil needs for 11 years: a prize that has many oil companies salivating, especially because labor costs in the region are low and environmental standards practically non-existent.

The high stakes have generated strong interest in tapping these reserves and piping them south through Afghanistan over the last decade or so, especially from Unocal, a California-based oil corporation. Among the other companies sniffing around for partners is Gazprom, a Russian oil behemoth.

Power Politics

Despite the institutional backing from financiers and local governments, analysts say that pipeline is still years from being built and the current discussions are really just an attempt to consolidate power in the region.

Julia Nanay, director of Caspian Services for the Petroleum Finance Corporation, an energy consulting group in Washington DC, told CorpWatch: "The United States is supporting this talk of a pipeline in an effort to isolate Iran and aggravate the situation. And the Russians want to make sure that oil and gas flows north not south."

Indeed, the two former superpower rivals are more interested in making sure that they have a place at the table, says Nanay, than in actual funding for such a pipeline. "What we are talking about is an effort to control any future venture. But right now it would be pretty foolish to build a pipeline while the various warlords are still feuding with each other in Afghanistan."

Alastair McKechnie, the Afghanistan country director for the World Bank, says that the Bank is also simply keeping tabs on the situation. "Any revenue whatsoever from apples to oil would be welcome in Afghanistan today. But I would not advise support for a pipeline right now because there are far more pressing needs. Even if someone were to approach us, we would look very hard at such a proposal," he told CorpWatch.

The Entrepreneurs Arrive

However, entrepreneurs are already setting up shop. Earlier this year Robert Mojave and Fariborz Shafei, two Iranian born businessmen, traveled to Kabul and Mazar-i-Sharif, to look into the possibility of setting up a Afghan branch office for Los Angeles-based Dynatek Corporation, a small supplier of industrial pumps. Their potential customers are the oil multinationals looking to build a pipeline from Central Asia through Afghanistan to the Indian Ocean.

"We want to be the first American company to set up an office in Kabul and we want to get the exclusive right to supply industrial pumps to whoever wants to build a pipeline," Mojave says.

Over the course of last few months, the two men have traveled to Dubai in the United Arab Emirates, Baku in Azerbaijan and Teheran in Iran, to seek out potential partners. In April Mojave was back in Kabul setting up his office.

"We are not betting on a company, we are betting on a strategy. Remember all that American aid money has to be spent on American companies and there aren't any other American companies there. We are the first," he told Corpwatch just before returning to Afghanistan.

Unocal

But US interest in a pipeline is not new. In 1997 a consortium led by Unocal drew up plans to build a four foot wide pipeline that would snake 875 miles from the Dauletabad Field in southeastern Turkmenistan, passing near the cities of Herat and Kandahar in Afghanistan, crossing into Pakistan near Quetta and linking with existing pipelines at Multan. An additional $600 million extension to India was also under consideration.

But in August 1998 Unocal halted development of the project after U.S. forces fired missiles at guerrilla camps in Afghanistan in the wake of bomb attacks on two U.S. embassies in Africa.

One of their consultants in the company's 1997 conversations with the Taliban was Afghan-born Zalmay Khalilzad, who was appointed special envoy from President George Bush to Afghanistan on December 31, 2001. As an adviser for Unocal, Khalilzad drew up a risk analysis of a proposed gas pipeline from Turkmenistan across Afghanistan and Pakistan to the Indian Ocean.

Today Unocal says it has no more interest in a Central Asian pipeline through Afghanistan and has closed its offices in Kazakhstan, Pakistan, Turkmenistan and Uzbekistan retaining operations only in Azerbaijan. "We have exited the region because we have long term commitments on other places and our plate is full," says Teresa Covington, a spokeswoman for the company.

Covington noted that other members of the original consortium such as Crescent of Pakistan and Delta of Saudia Arabia were still pondering their role in future joint ventures.

The biggest player still in the game is Gazprom, the world's largest natural gas company, which is 38% owned by the Russian government.

Dictators and Dollars

A few years ago the yellow bumper sticker on the car of Elizabeth Jones, then United States ambassador to Kazakhstan, read, "Happiness is Multiple Pipelines."

In reality the billion dollar pipeline investments have brought great wealth to the Central Asian political bosses, all former senior Communist party leaders from Soviet days, but not to their citizenry whose average monthly wage is around $20.

Recently Kazakhstan's foreign minister Kasymzhomart Tokayev acknowledged that in 1996 President Nursultan Nazarbayev moved $1 billion of oil funds into a secret Swiss bank account without telling his parliament.

And although substantial oil money has yet to flow into Turkmenistan's coffers, President Niyazov has spent millions building marble hotels to attract the multinationals to the region in addition to a gold statue of himself in the center of town that rotates to reflect the sun.

Others say that the venture will not help the common people. Keith Griffin, an economics professor at the University of California, expressed skepticism that the money will ever flow to the local people. "We cannot expect to re-float society on a pool of oil," he told a conference in Kazakhstan's financial center.

Environmental and human rights activists say that the oil pipelines have often brought more poverty and environmental destruction than wealth.

"Look at Nigeria and Colombia. Pipelines have only brought misery to local people in those countries such as massive pollution of rivers and farmland from spills and gas flaring and major human rights abuses by the military that guards these operations" explains Gopal Dayaneni, oil campaigner for Project Underground, a California-based activist group.

Indeed if Gazprom, the current front-runner for building the pipeline succeeds, the Afghan population does not have much of a track record to draw comfort from -- every month the company is reported to spill one million gallons of oil, 25 times the amount of oil that Exxon spilled in Valdez, Alaska. Activists like Dayaneni say they will keep a watchful eye on developments in the region.

Pratap Chatterjee is a freelance journalist based in Berkeley, California. Earlier this year he was on assignment in Afghanistan, Turkmenistan and Uzbekistan.

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