- The Washington Times - Monday, October 14, 2002

The Bush administration is accelerating efforts to diversify America's sources of oil imports and reduce its dependence on the Middle East. The bid to strengthen ties with major producers like Russia and the Caspian Sea region has gained momentum as the United States prepares for war against Iraq.
While prospects dim for passage of President Bush's energy goals in Congress, including oil drilling in the Arctic National Wildlife Refuge, U.S. officials are aggressively promoting more oil exploration and imports from around the world.
"What you're seeing now is all of the work we did last year come to fruition," said Robert Card, undersecretary of energy. "It took some time for us to get the momentum where we were involved in on-the-ground activities."
The effort gained a sense of urgency after the September 11 terrorist attacks, which for many showed that some of the world's major energy producers might not have America's best interests at heart.
The United States receives about 58 percent of the oil it consumes from imports. With domestic production waning, imports are expected to increase in the coming years.
Administration officials say the Bush energy policy also emphasizes conservation. Still, it is pursuing new oil partners, dispatching top officials across the globe to encourage more development.
"Every million barrels of oil counts," Mr. Card said. "We think it is vitally important, and there is a lot of oil production that hasn't been fully realized yet."
Some recent developments:
Mr. Bush has reached out to Russian President Vladimir Putin to encourage the third-largest oil producer to boost development with the help of Western investment.
The administration has promoted construction of a pipeline from the oil-rich Caspian Sea to the Black Sea that is expected to deliver up to 1 million barrels per day by 2005. After years of delays, the project began in September.
Several administration officials, including Mr. Card and Secretary of State Colin L. Powell, have visited Africa in the past year to demonstrate U.S. interests in developing petroleum there.
The results of these efforts won't be apparent for a few years, but non-Middle East production, particularly in Russia and the Caspian Sea region, shows signs of increasing.
In the meantime, the United States and other nations are boosting their own reserves of petroleum to offset any price surges from a war with Iraq. The price of a barrel of oil has risen about $2 since July to around $28.50. Analysts warn that a war with Iraq could push oil costs over $30, perhaps higher, which would raise prices at gasoline pumps.
Saudi Arabia has vowed to release more of its oil into the world market to keep prices in check if a war chokes off Iraqi exports. Saudi Arabia evidently has increased production gradually.
The most hopeful signs for more production have come from the budding relationship between Mr. Bush and Mr. Putin. Building on cooperation from Mr. Putin in the war on terrorism, the two leaders in May signed a "joint communique" to encourage investment and development of Russia's vast oil fields.
The administration says increased Russian oil production could offset price quotas established by the Organization of the Petroleum Exporting Countries (OPEC).
Russiaproduces about 7 billion barrels of oil per day. Russia's oil industry has struggled under corruption and a lack of capital since the fall of the Soviet Union. It is eager to burnish its image and lure much-needed Western investment and technology.
"I think that the central focus should be Russia, and the way to get more oil on line from Russia is to get them to privatize their pipelines and to get Western investment involved," said James Woolsey, a former director of the Central Intelligence Agency who now works for Booz Allen Hamilton, a Washington management consulting firm.
Skeptics counter that Russia never will produce enough petroleum to overtake Saudi Arabia at the top.
"There has been a lot of cheerleading by lawmakers, but right now Russia and the Caspian region are not providing much oil to the United States," said Fiona Hill, a fellow in the foreign policy studies program at the Brookings Institution.
Miss Hill and others in the petroleum industry say it will take several years and dramatic investment before Russian oil can be shipped directly to the United States in a cost-efficient manner.
Despite the challenges, both nations appear committed to forging a mutually beneficial relationship on energy matters.
Government officials and oil industry chiefs from Russia and the United States met last week in Houston to discuss the new relationship. At the meeting, the U.S. Export-Import Bank said it would underwrite $100 million in sales of U.S. equipment and services to Russian oil companies. Also, Russia announced that it would make its first contribution to the U.S. Strategic Petroleum Reserve.
The Bush administration also is looking to the Caspian Sea region as a source for non-Middle East, non-OPEC oil. The sea contains 10 billion barrels of proven oil reserves, potentially more than 230 billion barrels, according to the Energy Department.
The region's potential has prompted a rush of investment and fierce dispute over exploration and development rights. The United States hopes to get American companies involved.
Caspian oil exports, currently limited by geography, could increase by 1 million barrels by 2005 with the new Baku-Ceyhan pipeline, the Energy Department says.
"We have been pursuing an East-West energy corridor for many years now, and the fact that Baku-Ceyhan is now going to happen is a big win for U.S. policy," said Steven Mann, senior adviser for Caspian Basin energy diplomacy for the State Department.


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