2001 Press Releases

Remarks by U.S. Senior Advisor for Caspian Basin Energy Diplomacy Ambassador Steven R. Mann at the Turkmenistan International Oil and Gas Exhibition

Oct. 20, 2001

It's good to be home.

It is deeply gratifying to be back in Ashgabat, seeing familiar places, enjoying the company of good friends, and not least, coming to yet another TIOGE. I've been gone from Ashgabat for five months and like any tourist, I've enjoyed spotting the new construction as I drive through the streets, including this hall. This is a special conference, coming as it does on the eve of the Tenth Anniversary of Turkmen independence. Let me offer my sincerest congratulations to the President of Turkmenistan and to the people of Turkmenistan for all that they have achieved in founding a new and independent nation. As always the United States fully supports the sovereignty and independence of Turkmenistan and wishes to press forward in finding ways to deepen our ties and contribute to that prosperity.

That's why I'm here.

Looking back at these ten years of independence, region-wide, we see that the Caspian basin holds enormous amounts of oil and gas that have been trapped - not merely by geology, but within an outmoded Soviet infrastructure. Part of this is an upstream issue. This is a region that has suffered from underinvestment for many years, and that until recently has not had the advantage of hosting the latest technology from the oil and gas industry. It is more than dollars and equipment, however. There is a long legacy of central control and economic cynicism to overcome. I have to say also that throughout the region, corruption is a serious problem. The lack of legal structures, above all, hinders development. Here, however, I single out Turkmenistan for praise in its rewriting of petroleum legislation. Beyond upstream, there are transport and marketing problems. The Caspian region has been caught in the old Soviet transport monopolies. This puts severe constraints on the options and the autonomy of the Caspian nations when it comes to energy. My government, looking at this situation, recognized the rise of the Caspian region and a need for a policy directed at the region. Our policy has been to encourage modernization of the Caspian energy sector, together with modernization of the region's economies - and to encourage multiple export routes for the Caspian's oil and gas.

This is a policy that has been endorsed by Democratic and Republican administrations alike and enjoys broad support from both political parties.

Achieving these goals, however, is anything but easy. The Caspian region has great potential but great challenges. The good news is that we have seen steady progress in these ten years. Billions of dollars of investment has flowed into the region. There is also a brilliant new generation of energy professionals arising in Eurasia, and this is further grounds for confidence. The oil and gas sector in Turkmenistan, in particular, has been home to some extraordinary professionals, and it has been my privilege to work with them.

I would like to look at certain misconceptions of Caspian energy that have developed in these ten years. A fundamental misconception is that the US is engaged in the "Great Game" and seeking to challenge Russia in the region. I must stress here that this is not an anti-Russian policy. Such a policy would be a disservice to a great nation with which the US has developed cooperative relations and with which it hopes to deepen its ties. Our policy is a policy of antimonopoly. There has been good reason for this. The energy sectors in the region, in the years after independence, remained fundamentally Soviet creations. They used their monopoly power in a nontransparent fashion, a fashion that put energy development in Caspian states at a disadvantage, and I would argue, especially as regards the Russian case, its fundamental nature of central, nontransparent control did a great disservice to the Russian economy. Given this situation in which the export routes for Caspian energy were concentrated in the hands of a small number of firms and decisionmakers, a policy of pipeline diversification was inevitable. Who knows this fact better than Turkmenistan? I would argue the change to diversification is good, for the Caspian states, and certainly for Russia. The fact of competition will compel the Russian energy industry to become more efficient and to remake itself closer to world standards. I believe, moreover, that Russian energy firms will see that it is in their financial interest to cooperate in new developments and to participate in Aktau-Baku-Tblisi-Ceyhan, and I look forward to this bringing US-Russian cooperation in the Caspian to a new and higher level.

Another point worth stressing: the United States government has long said that new pipelines must be financially sustainable. The key is working with the private sector.

I invite close analysis of the policy of the United States government on Caspian energy issues because a careful look at what we have done over the years and what we are doing now shows that this is a policy directed at economic development and at mutual benefit for all of these nations of the former Soviet Union.

The policy is succeeding. The next major Caspian pipeline coming down the road is Baku-Tbilisi-Ceyhan. This follows the success of the Caspian Pipeline Consortium project. On BTC, the consortium is in the middle of detailed engineering studies and is just about at the point of freezing project design. We can look at financial approval and the start of construction next summer, with the first oil being shipped in early 2005. Actually, it's increasingly accurate to refer to the project as ABTC - Aktau-Baku-Tbilisi-Ceyhan. This is happening. BTC itself does not need Kazak volumes to succeed; but I have no doubts that the consortium and the Kazak operating firms will find a mutually profitable way to fit Kazak oil into the pipeline.

We have a great and immediate success to celebrate in the signing of the Shah Deniz gas pipeline agreement. The United States warmly welcomes and fully supports this agreement. This is a good deal for Georgia and a good deal for the producers. It will, moreover, go a long way toward securing Georgia's energy independence in the years ahead. This 2.6 billion dollar project may eventually carry as much as 24 BCM into Turkey, and I hope, onward into Europe.

A Caspian retrospective would not be complete without words on Caspian delimitation, and I would like to spotlight the praiseworthy efforts of Russian Deputy Foreign Minister Kaluzhniy, as he works to develop a delimitation scheme for the Caspian Sea. I'm very sorry that I just missed Viktor Ivanovich this week in Ashgabat. The United States wishes godspeed to his efforts. If there is any way in which we can lend a helping hand, we will. We encourage a peaceful process that will result in delimitation. I must note, though, that we do not consider delimitation to be a prerequisite for cross-Caspian energy transport. The agreement of the countries involved in any pipeline or transport agreement is sufficient to enable the successful, financeable transport of Caspian oil and gas. But it is incontrovertible that the resources of the region will be extracted with greater confidence when a delimitation regime is achieved.

Let me caution that for the region, new pipelines are not a cure-all. They will not automatically make an exporting country or a transporting country prosperous. Pipelines must be part of a well-considered plan for national development. The degree to which a country will prosper will be determined by the degree to which that country invests its revenues productively - most of all in education and health care - and by the degree to which the governments establish rule of law in a nation. Without this, no nation, no matter the degree of gas or oil reserves it commands, cannot prosper. That is, strictly speaking, not the subject of our conference today, but this increasingly should be on the Caspian agenda, broadly viewed. Ten years from now, twenty years from now, we all want to see a stable and efficient investment climate, so let us encourage the governments of the Caspian region to make those hard changes now, in governance, to make this happen.

Another point to consider: the Caspian region itself is in competition for investment dollars. It is not a given that dollars will flow into Caspian energy. Azerbaijan, Russia, Turkmenistan, Kazakhstan are not merely competing among their own investment blocks for foreign investment: they are competing with West Africa, South America, China. This is a point that is too simple to stress for an oil and gas audience; but it is not a point that is yet generally realized in the region. When I travel through the region and advocate slashing the bureaucracy, eliminating so many license requirements, creating transparent procedures, renouncing corruption, putting in place a fair and predictable legal environment, I am not merely doing this because I want to smooth the path for US companies. I am doing this because my time in the region has given me a deep appreciation of the Caspian region and I am saying these things as an advocate of the region.

Let me talk briefly about something that must be on all of our minds, the War on Terrorism. I thank the many countries represented here for their enormous sympathy in the face of the tragedies that have befallen us - and by us I mean not merely the United States but the entire community of civilized nations. It is with pride that I say that the United States will not be deterred from its business - from its diplomatic business, from the business of governance, or in this case, from its policy of seeking to develop Caspian energy. The message I bring you after September 11 is one of determination and continuity. We will move as strongly as we can to help the nations of the Caspian region develop their resources and transport them to world markets. What all of us are doing on Caspian energy fits in the spirit of these times: the pipelines we are building, the consortia we are establishing, represent the finest kind of international cooperation, organized according to international norms.

In retrospect, I think of TIOGEs past. The 1999 TIOGE is vivid in my memory, since we had the excitement of the Trans-Caspian Gas Pipeline in those days. TCP has dropped from the scope, and I regret that fact. It would have been a great and profitable project. Since that time, the United States has, frankly, had little on the table with Turkmenistan in terms of energy projects. I would like to see, in my visit here, what would be possible. It's time for the United States to revive its energy dialogue with Turkmenistan.

I come here with no plans, programs, or projects in my pocket. Life is not that simple, and Caspian energy by no means is that simple. I come, though, with an open mind and with the willingness of my government to work together with Turkmenistan and see how we might start some more productive cooperation. We have a new ambassador here, Mrs. Kennedy, who enjoys the full confidence of President Bush and Secretary Powell. She is guaranteed to do a better job than her predecessor. And I know that the President and Secretary have directed her to look for ways in which we can bring the US-Turkmen relationship to a more productive level. I want to be part of that, and I look forward to good and productive dialogue with the President and his officials this week.

Caspian energy is an endeavor from which we can all emerge better, closer, and more prosperous, and I'm delighted to be back in Ashgabat to be a part of this effort. I thank you and wish you well as we count down the days to the tenth anniversary.