- The Washington Times - Friday, July 20, 2001

Debates over drilling at home have dominated the headlines, but the Bush administration’s energy plan also calls for some aggressive prospecting in overseas markets as well.

Kazakhstan, Russia, India and even Venezuela stand to be big winners under key sections of the energy program, released by a task force headed by Vice President Richard B. Cheney on May 18.

Energy needs would assume a much greater role in considering whether to apply economic or other sanctions against unfriendly governments.

“There’s a lot going on on the international side in that report, and it’s going to matter a lot to the entire global energy market,” said Robert E. Ebel, director of the energy and national security program at the Washington-based Center for Strategic and International Studies (CSIS).

“The path the U.S. chooses on production and consumption will have a huge impact on the rest of the world,” Mr. Ebel said.

The Bush plan calls for a major diversification of oil suppliers, away from the long-standing reliance on unstable or unfriendly Middle Eastern producers.

“Concentration of world oil production in any one region of the world is a potential contributor to market instability, benefiting neither oil producers nor consumers,” the report said.

A survey released by the American Petroleum Institute (API) on Wednesday could boost the Bush plan, which faces a tough time in Congress.

The oil industry trade group found that U.S. crude oil imports for the first half of 2001 hit a record average of 60 percent of total demand, or 9.2 million barrels per day. Oil imports in April accounted for 62.8 percent of total demand, “the largest (monthly) share in history,” API said.

Officials in the Central Asian country of Kazakhstan have expressed satisfaction with the Bush administration’s focus on their market, where recent oil field discoveries have attracted intense industry interest.

Kazakhstan’s Kashagan oil field is rated as perhaps the biggest new find in more than a generation, rivaling the oil produced by Alaska’s Prudhoe Bay.

“The new administration has showed a very complete and mutual understanding of the cooperation we hope to have in the future,” Vladimir Shkolnik, Kazakhstan’s vice minister for energy and natural resources, said in an interview during a Washington trip this spring.

“I get the feeling they understand very well our potential,” Mr. Shkolnik said.

While saying private investors must lead the way, the Cheney report devotes considerable time to the Kazakh market, urging U.S. government agencies to “deepen their commercial dialogue” with Kazakhstan.

The report also endorses the proposed pipeline from Baku, Azerbaijan, through Georgia to the Turkish port of Ceyhan. Enthusiastically backed by the Clinton administration, the Baku-Ceyhan pipeline has been resisted by Moscow, which sees the project as an effort to bypass Russia.

“The big question has always been how to get the oil and gas to market. With private companies like (British Petroleum) really pushing the pipeline, it’s hard to see how the Bush administration could do a 180-degree turn from what the Clinton people were recommending,” Mr. Ebel said.

To complete the bypass of both Russia and Iran, the Cheney report’s authors called for the State Department to push for Greece and Turkey to link their gas pipeline systems, allowing even easier access to European markets for Caspian gas.

But Russia is also one of several other international producers that the Cheney task force recommends should be encouraged. Russia has about 5 percent of the world’s proven oil reserves and a third of the world’s natural gas, but needs major Western investment and significant legal and commercial reforms to exploit its potential.

While urging continued pressure on Middle East suppliers like Saudi Arabia and Kuwait to open their markets to foreign investors, the Bush administration blueprint seeks suppliers much farther afield.

Despite a series of sharp political and diplomatic exchanges with Venezuelan President Hugo Chavez, the United States should push to conclude a bilateral investment treaty with Caracas, said the administration proposal, and begin talks with Brazil to boost “energy investment flows” with both of the South American powers.

The report also directs U.S. agencies to help India “maximize its domestic oil and gas production,” as well. One foreign policy recommendation that has taken some hits is the Bush proposal to include “energy security” as a factor when considering the usefulness of economic sanctions.

The administration was forced to retreat in the first congressional fight over such sanctions, in the face of strong bipartisan support for maintaining current restrictions on trade and investment with Iran and Libya.

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