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Factors that Shape US Energy Policy for Central Asia


Many factors influence the formulation of US energy policy. This chapter lays out the comprehensive description of the institutions which shape US energy policy towards Central Asia in general. Further this chapter would look into the international scenario, which has made US Congress, Federal Bureaucracy and Interest Groups in shaping ‘Energy Policy’ towards Kazakhstan. And Turkmenistan

Throughout the 1980s and before US experienced a major sorting out process, determining who would participate in energy policymaking and what the organisational arrangements for citizen involvement would be, though by 1980 the President and the Congress had been able to reach compromises on the basic issues faced by them following the onset of the energy crisis. With decisions on these basic issues the foundation for a stable national energy policy system appeared to be in place. The rudimentary energy policy system that was in place by 1980, provided the framework necessary to manage both energy supply and demand and to develop new resources (Barkenbus: 1982:413-414).

Before going into the detailed focus on the role of “iron triangle” towards Kazakhstan and Turkmenistan in particular a brief understanding of how the policy is influenced by the Congress, Interests Groups and the Bureaucracy would be appropriate.

Congress: Decision making in Congress where law is formulated, differ from decision making in the bureaucracy, where it is implemented. The institution setting greatly influences the policy outcome.[1] If not sovereign, Congress is considered to be prominent in formulating national energy policy. The president may mandate or oppose energy programs. But he is usually dictated by the Congress. It is the congress who can legislate on energy policy and raise the resources to underwrite it. The president’s freedom to act independently of congress on energy matters is limited severely by law, custom and political circumstances. Policy may be formulated by judges or administrators by interpreting or implementing a congressional enactment. But policy making by them is limited by congressional guidelines and over shift (Cowney: 1985: 82-86).

Congress is characterized as house divided and authority dispersed between its two chambers. Its members are even torn by conflicting claims of local and national interest. Although congress is fragmented, it can’t be denied that there is opportunity for policy innovation. From the apparent authority of the congress, it becomes clear that congress often reveals not power exercised but power dissipated, not policy made but policy paralysed(Victor:1984:313)

The number of committees and subcommittees with ‘energy’ as their title grew steadily from two in the 92nd Congress (1970-1972) to numerous in the110th Congress In the 96th Congress jurisdiction over some aspect of energy policy was claimed by more than 38 committees of the House of Representatives. The Senate traditionally has fewer committees than the House. Nevertheless it had at least ten major committees and several dozen subcommittees exercising some authority over energy legislation.

The committees are proposed by the legislator’s desire to exercise some authority over major public issues. There also perpetuates jealously and competition between subcommittees and their leaders in energy policy making. Vigorous conflict over energy policy produced by each chambers over squabbling committees is intensified by rivalries between House and Senate energy committees. Such competitions are due to traditional differences between the two chambers, their divergent constituencies, constitutional responsibilities, institutional histories, conflicting personalities and committees’ aspirations. Moreover, the various energy committees within and between the two chambers, often respond to different energy interest (Raycraft and Kash: 1984:239-249).

The fragmentation of power in the Congress is not only due to the formal division of authority among committees. There are other significant causes as well such as there are five hundred and thirty five geographical units – the states and the congressional districts. These numerous factors constitute a vast array of diverse parochial interests with powerful influence in the legislative process. The Senator and the Representatives ambassador to Washington are regarded by the constituents as the guardian of the local interest. The Senator and the ambassadors are supported to play the role of energy provider and protector (Chubb: 1983:30-56).

Bureaucracy: The executive branch of the federal government is a constitutional unit. Within the executive branch there are thirteen cabinet departments, fifty two independent agencies, five regulatory commissions and numerous lesser entities. More than 2.8 million employers divide their loyalties among these institutions. When closely observed, the executive branch is found to be a mosaic of disparate bureaucratic interests, each zealous to achieve its special mission.

It is very challenging for the president to bring these different interests into accord with his own administrative programs. Its success depends upon his personality to a greater extent. The designs for the administrative management by the White House are continuously impeded by the political obstacles.

In order to unite the bureaucracy, the president must constantly fight for the competing claims of agencies self interest, the political pressures upon the agencies from Congress and the pressure from an agency’s own clientele. The federal bureaucracy is a plurality of institutional interests. They are always active in shaping the policies which will be administered by them. The bureaucracy is governments’ interest lobby (Chubb: 1983:30-56).

Interest Group: The number of interest group striving to impress their will upon government is legion. Among one hundred thousand nationally organised interest groups in the United States, high proportions are involved in politics. When the politically active state and local groups are added to the already existing numerous interest groups, it becomes obvious that the interest groups are pervasive in the United States governmental system. They represent virtually every major social group with some claims upon government (Barkenbus: 1982:413-414).

The formations of new groups are often triggered by the rise of new issues on the governmental agenda. And conversely, new issues on the agenda reflect the growing political influence of new interests. The number of interest groups in national energy policy increased significantly after 1973 oil shock.

Oil companies have been the major interest groups in terms of energy policy formulation. While analysing the role of oil companies it can be said that they are playing the role of nongovernmental bodies. They have added a degree of variety to international political relationship. Sometimes they have even made the international relationships complicated which might otherwise have been quite harmonious. But in reality oil industries are primarily economic institutions. One of the characteristics of the economic actors is that so long as they can function reasonably well, they generally accept the status quo. No industry can sacrifice its profit for the sake of political principle. None of the oil industry can turn down the chance of developing important new deposits. Of course companies have to choose between possible ventures. The political climate of the countries in which these ventures fall is the only one of the factors taken into account. The political tactics available to companies for gaining access to promising markets are limited (Scott: 2005:12-149).

The strategies adopted by the oil company are usually predictable but along with the strategies, the leadership of the company also matter to a greater extent. The underlying economics of the industry make it possible to predict the general direction in which companies will move.

The development of oil companies can be stimulated by –

  • ease of access of the various oil deposit
  • the source of existing oil production
  • the size
  • development and location of the world’s leading economies
  • some facts about the motivation of the imperial powers
  • some assumptions about the behavior of companies in an international oligopoly
  • Some information about the level of government experience in most of the potential producing countries.

The sheer size of the US market and the fact that there was a significant oil industry in existence in USA meant that American oil companies where bound to play a dominant role. As an analyst has noted that US had no history of significant engagement with the Central Asian Region before 1990s. It is the discovery of energy resources of the Caspian Sea that made the region important of the US foreign policy makers.

The Central Asia and the Caspian Region is blessed with abundant oil and gases that can enhance the lives of the region’s resident and provide energy for growth in both Europe and Asia. The impact of these resources on US commercial interests and US foreign policy is very significant. The United States first official foray into the Caucasus and Central Asia came in 1991 during the Bush administration. But it was not until major oil contracts were signed between US oil companies and the government of Kazakhstan and Azerbaijan in 1993-1994 that the region really began to register on the radar screen of the American public. The commercial interests of US oil companies in exploiting new energy reserves gave US policymakers a specific interest to protect in the Caucasus and Central Asia the US has come to see Caspian resources as one of the few prospects for diversifying world energy supply away from the Middle East.

The role of the “iron triangle” in formulating US energy policy towards Central Asia can be understood by 1998 Congressional Hearing. In this hearing the subcommittee on Asia and Pacific examined the US interest in the region. It was acknowledged by the US Congress that Kazakhstan and Turkmenistan possess large reserves of oil and natural gas. It was further observed that Uzbekistan has oil and gas reserves that may make it self sufficient in energy and gain revenue through exports (Congressional Hearings: 1998).

According to Mr. Bereuter the president of the Subcommittee on Asia and Pacific stated that US policy goals regarding energy resources in the region were based on the following factors-

  • Independence of the states and their ties to the West.
  • Breaking Russia’s monopoly over the oil and gas transport routes.
  • Promoting Western energy security through diversified suppliers encouraging the construction of East West pipeline and,
  • Isolating Iran.

In addition it was stated by the then Deputy Secretary of State Strobe Talbot, that the United States sought to discourage any one country from gaining control over the region, but rather urged all responsible States to cooperate in the exploitation of regional oil and resources. It was noted that the Central Asian Region has emerged as one of the significant opportunities for investment opportunities for a broad range of American companies. This in turn will stimulate the economic development of the region.

Debates in the Congress

According to the Department of Energy, US has following interest in the region-

  • Energy security
  • Strategic interest and
  • Commercial interest in promoting Caspian region energy development.

It is further observed that US has an interest in strengthening global energy security through diversification, and the development of these new sources of supply. Caspian export would diversify rather than concentrate world energy supplies. This will help in avoiding the over reliance on the Persian Gulf. It was agreed in the Congress that United States has strategic interests in supporting the independence, sovereignty, and prosperity of the Newly Independent States of the Caspian Basin. And it was desired to assist the development of these States into democratic, sovereign members of the world community of the nations, enjoying unfettered access to world markets without pressure or undue influence from the region. In other words, it can be observed that the “iron triangle i.e., Congress, Bureaucracy and the Interest Group have following four objectives with regard to Central Asia:

  • Promoting Multiple Export Route-The administration’s policy is centered on rapid development of the region’s resources and the transportation and sale of those resources to hard currency markets to secure the independence of these new countries. The US government has promoted the development of multiple pipelines and diversified infrastructure networks to open and integrate these countries into the global market and to foster regional cooperation. It was decided to give priority to support efforts by the regional governments and the private sector to develop and improve east-west linkage and infrastructure networks through Central Asia and the Caucasus. A Eurasian energy transport corridor incorporating a trans-Caspian segment with a route from Baku, Azerbaijan, through the Caucasus and Turkey to the Mediterranean port was included.
  • Emphasizing on Commerciality-It was realized that the massive infrastructure projects must be commercially competitive before the private sector and the international financial community can move forward. Keeping this in mind the Baku-Ceyhan pipelines was most endorsed.
  • Cooperating with Russia-It was decided to support the continued Russian participation in Caspian participation in the Eurasian corridor was also encouraged. For this purpose US companies are working in partnership with the Russian firms in the Caspian.
  • Isolating Iran- the US Government opposes pipelines through Iran because development of Iran’s oil and gas industry and pipelines from the Caspian Basin through Iran will seriously undercut the development of East-west infrastructure, and give Iran improper leverage over economies of the Caucasus and Central Asian States.

Similarly, John Maresca, Vice President of International Relations, Unocal Corporation, focused on three issues with regard to Central Asia-

  • The need for multiple pipeline routes for Central Asian oil and gas resources.
  • The need for US support for international and
  • Regional efforts to achieve balanced reforms and development of appropriate investment in the region.

While emphasising these issues, argued for the repeal or removal of section 907 of the Freedom Support Act, because this section unfairly restricts US Government assistance to the government of Azerbaijan and limits US influence in the region. Unocal and other American companies are ready to develop cost-effective export routes for Central Asian resources. So, after this analysis of the “iron triangle” in terms of the Central Asian Region it can be concluded that the Cooperation of power, federalism, interest group pluralism and other checks and balances in the constitutional architecture of the United States political system created a strong bias towards bargaining, compromise and instrumentalism in energy policy making today. the electoral cycle often compels energy policy to conform to the economic and political bias of legislative constituencies charged with implementing energy policies, attempt to impose upon those policies their own bureaucratic values, their unique political perspective growing from their several missions and many other institutional concerns sub government and the public opinion also influence policy. These elements in the policy process have long been recognized. They emphasise a truth often ignored in discussions of US public policy.

The United States and the rest of the world are facing energy problem. The era of abundant, reliable, low-cost energy is in the past. Currently the condition will be that of scarcity and the continuing need to manage the complex and difficult issues associated with the use, supply, pricing and trading of energy to prevent economic, political, environmental and military crisis.

Imported oil is the heart of energy problem. As mentioned earlier the economic growth and the consequent growth in energy demand requires increased need for imported oil. To understand the full scope of Congressional perception focus on Energy Security act-S.932 of 1980 is essential.

Energy Security Act – S. 932

Representative Christopher J. Dodd on June 25, 1980 observed that with respect to the energy act it represented a long overdue commitment of federal dollars to promote energy independence for America. He acknowledged the growing dependency of United States on imported oil. The Energy Security Act provides 25 billion for exploration of a variety of energy alternatives including synthetic fuels renewable resources, conservation, and gasohol. It mandated two actions -the filling of our strategic petroleum reserves and the study of acid rain problem. Though the historical energy security act comprehensively dealt with the synthetic fuel but it was not entirely about the synthetic fuel bill. This act also provide $3.1 billion to establish conservation and solar banks that will offer federal subsidies in the form of below market loans, loan guarantees and grant to finance solar and conservation work in homes, apartments and small business. Christopher J. Dodd argued that $ 3 billion included in this bill to the energy bank was not enough to release the full potential of conservation and solar energy. But this funding was perceived to be a good beginning, and believed that the experience of the coming years will prove the worth these alternatives to continue oil imports. He further argued that the United States government must devise an effective national strategy to break the hold of OPEC and energy conservation in our homes and business should be taken as a vital part of that strategy (Congressional Hearings: 1980)

The former Clinton Administration stressed that U.S. support for free market reforms directly served U.S. national interests by opening new markets for U.S. goods and services, and sources of energy and minerals. U.S. private investment committed to Central Asia had greatly exceeded. U.S. energy companies have committed to invest billions of dollars in Kazakhstan, Turkmenistan and Uzbekistan. U.S. trade agreements have been signed and entered into force with all the Central Asian States.

By focusing on Congressional debates on Energy Policy with particular focus on Central Asia, the complexity of policy formulation can be understood. Further the various Hearings held by the Congress have also provided significant evidence that explains the changed nuances of Central Asia policy. It also helps to illustrate the argument that the Congress considered the Central Asian Region very important for US interest. In particular Congressional understanding of the “Enormous Energy Export Potential” that could ease America’s energy problem went a long way in shaping US policy towards Central Asia. For instance, despite concern on ‘human right’ violent political movement, US government virtually supported the US government decision to promote a new pipeline from Kazakh to Azerbaijan and from Ceyhan to Turkey.

Some analysts have noted that there has been different emphasis on the level of US involvement in the CAR. According to some there have been linkages between the adequate progress in democratisation and improving the human rights. The importance of energy resources to US has been disputed in early phase of 1990. However, the Congressional interest in Central Asia was reflected in the passage of “Silk Road” in late 1999 which enhanced US policy alteration, humanitarian needs, economic development (including energy pipelines) and communications, democracy and the creation of civil societies in the South Caucasian and Central Asia.

The Bush energy policy was directed towards securing cheap oil because US oil consumption was below projected to increase by one-third over the next two decades. The white House during Bush Administration also had for greater domestic drilling and wants to open the Arctic National Wildlife Refuge to the oil industry. The Administrations National Energy Policy Development Group, led by Vice President Dick Cheney, acknowledged in a May 2001 report that US oil production will fall 12% over the next 20 years. As a result US dependence on imported oil which has risen to a great extent (CRS Report: 2005).

September 11 brought with it a dramatic reconfiguration of the entire international security environment as well as a fundamental shift in the ranking of American foreign and security priorities. Virtually every other foreign policy priority was now subordinated to the effort to create an anti-terrorist coalition (Chenoy: 2001:149-160).

It is observed that the September 11 attack on the World Trade Centre and Pentagon has underlined the connection between oil and politics. When it became confirmed that the most of the hijackers were from Saudi Arabia, it impacted on the oil market to a great extent. Since Saudi Arabia constitutes one fourth of the total petroleum reserves, United States had to look for some other alternative sources in order to fulfill its energy requirement. United States is dependent on foreign oil for its 58% of energy requirement which is likely to increase up to 65% by 2020 (Chenoy: 2001:149-160).

The counterstrike of September 11 shattered the old barriers and opened new horizons. The United States Congress acknowledged the importance of the Central Asian republic for the fulfillment of its oil requirement in the 107th Congress. It was acknowledged that the Central Asian Region is inflicted with terrorist activities and hence consequently political instability. The support from the Congress and the administration was urged. It was argued that the US assistance in developing these new economics will be crucial to business success. A strong technical assistance progress throughout the region was endorsed.

After September 11 Washington’s approval of more than US$1.4 billion for the economic recovery of barren and battle scarred Afghanistan provides the Bush administration with possible insurance for deepening its petro-political sphere of influence along Russia’s boarder in the form of revived Trans-Afghan pipeline. Further it was realized by the US energy analysts that the vast reservoir of oil and gas can be protected by the deployment of US special operations forces to Georgia because it will neutralize Russia’s influence in the region.

It is noteworthy that the Vice president Dick Cheney, former CEO of the oil services company ‘Halliburton’s also a veteran of the American oil industry’s presence in the Caspian Basin is sufficient to manifest the US presence in the region With almost $30 billion already invested by US oil companies in Kazakhstan, Turkmenistan, Uzbekistan and Azerbaijan, the suggested Afghan route would cost only one-half the amount of the other alternative which would run through Georgia to Turkey’s Mediterranean coast ( Alam :2002:5-26).

The Caspian Sea region is widely viewed as important to world markets because of its large oil and gas reserves. Most Energy Company regards the Caspian Basin as the Persian Gulf of the 21st century. In Central Asia and elsewhere, America found new friends in hour of need. It can be said that the Sept. 11 have awakened many Americans to the interdependence to the even -smaller world, to their vulnerability especially in energy. The growing American stake in Central Asia is one response to that. It can be said that the American “war against terrorism” has also become a battle to control the energy resources of the Central Asian Region. Since Central Asian region can offer the United States a rare opportunity to diversify world oil supply, it could be one of the most important areas of US foreign policy. However, in Washington D.C., and especially in the US congress, foreign policy tends to be an elitist sport. Few members of the Congress focus on foreign policy and accepted by the most of the Americans. As a result, few members of the congress view foreign policy and the Caspian region in strategic terms. The Central Asian Region is viewed by the most members of the congress through one or more of the following perspectives-

  • The Azerbaijan- Armenia issue
  • US policy towards Iran
  • US policy towards Russia
  • Partition and domestic politics.

Among the four factors mentioned above, the fourth one i.e. that is partition and domestic politics is perhaps the most important. Members of the Congress tend to be overly responsive to their domestic constituents and some even support certain ethnic groups as a way to raise campaign contribution. This leads to a phenomenon termed “ethnic politics”. Critics argued that ethnic politics have driven US policy towards both Azerbaijan and Iran (Congressional Hearing: 2001).

In order to understand the attitude of Congress towards the Central Asian Region in the aftermath of Sept. 11 attack on World Trade Centre (WTC) and Pentagon, the congress role towards Azerbaijan-America issue, Iran, and Russia requires a brief consideration.

The Azerbaijan-Armenia issue

On the Azerbaijan – Armenia issue, congress tends to favour Armenia and uses foreign aid legislation as a means of exerting pressure on Armenia’s neighbors particularly Azerbaijan and Turkey. The most obvious example of this is the section 907 at the Freedom Support Act which prohibits US government aid to the government of Azerbaijan.

Concern over the plight of Azeri refugee and the increasing importance of United States investment in the Azeri oil sectors; have led Congress to adjust section 907 incrementally each year since it took effect in January 1993. Nevertheless, Congressional attitude towards the region began to change significantly in 1997. The changes occurred for several reasons:

  • The presidential elections in Armenia appeared to be less than free and fare this damaged Armenia’s image on Capitol Hill and embarrassed lawmaker who had clouted Armenia as the democratic ideal for the region.
  • Some members of the congress thought the Armenia lobby had gone too far and was out of step with the realities on ground. The Armenian lobby was pushing for what some members of Congress thought was excessive legislation.
  • As the deadline for a decision on the main export pipeline route approaches Congressional interest has continued to rise. There was the increased number of Congressional delegation traveling in the region. At least five delegations visited the region in 1997 including one led by senator McConnell. However, since his trip he has taken a more balanced approach to the region. This is noteworthy because McConnell is the chairman of the Senate appropriations subcommittee on foreign operations, the subcommittee which has jurisdiction over section 907. The House of Representatives, however, continued to reject attempt to weaken section 907. Congress tends to be an incremental body and the facts demonstrate that there is momentum towards making further revisions in section 907. As a result of this increasing momentum it is believed that the US Senate is now positioned to make substantial changes in 907. Senate headway will be critical because progress will have to be made in a House-Senate conference committee and the House of Representatives continues to be solidly on the side of Armenia and is likely to support a significant softening or repeal of S.907. A major problem especially in the House is that section 907 is not on the radar screen for most Representatives since 907 is usually inserted into the foreign operations appropriations legislation at the subcommittee level, only 13 House member-less than 3% have an opportunity to vote up or down on 907 each year (Congressional Hearing:1997).

Congressional attitude towards Iran:

Iran is the most stable country politically and economically bordering the Caspian, and offers the most attractive pipeline routes: it is important to understand congressional attitude towards that country. Congress is opposed to Iran and has limited the Clinton’s administration’s flexibility in dealing with it. In this respect, Congress has played a significant role. In the opinion of Congress no country undermines American interest more than Iran. Since the Iranian revolution the United States has sought to isolate Iran diplomatically and politically and more recently economically. Congress has passed the Iran-Libya Sanction Act (ILSA). This act was passed without a single member of congress voting against the sanctions. Congress has rarely adopted any controversial piece of legislation unanimously which have a wide range of implications. This law is causing problem for the companies trying to move Caspian oil to market. US companies are prohibited from partnering with Iranian firms in the Caspian (CRS Report: 2003).

US Policy towards Russia

Another regional issue clouding Congress view of the region is US policy towards Russia. Congress is skeptical of Russia, and its relations with Iran. For many members of Congress opposing the Soviet Union was a major pillar in their political philosophy during 1980s. Today there are still resident effects of this cold war attitude especially Republican party. In 1997 dozens of bills were introduced seeking to impose sanctions on Russia. Congress has consistently opposed Russian efforts of nuclear cooperation with Iran.

Congress views the possible pipeline alternative through Russia, southern route through Iran, eastern route through Afghanistan and western rout through Georgia and Today Congressional view of the pipeline can be summed up in three ways: congress is opposed to pipelines routes through Iran, Congress is skeptical of routes through Russia, and is dubious of routes through Afghanistan. Turkey and Georgia are the only options in view of the Congress.

Therefore, it is obvious why Congress has expressed support for pipeline along an east-west axis. This also helps to explain why the US government (Congress and the administration) are increasingly calling the Baku – Ceyhan route “the preferred route” because it belongs NATO, ally, and avoid Iran and Russia.

During 1998, Congress continued to advocate isolation of Iran and continue the incremental progress in US relations with Azerbaijan. While formulating energy policy for the United States, Congress is the preeminent force. But congress is a house divided. Its authority is dispersed between the two chambers. It is due to the fact that its members are usually torn by the conflicting claims of local and national interest. In spite of having fragmented opportunity it can be expected for policy innovation. On the brighter side, the United States has important energy interests in Central Asia. With its recent energy resources, Kazakhstan could become one of the largest oil exporters in the world. The United States has a strong interest in this oil getting to the world market at reasonable prices via multiple pipelines (Congressional Hearings: 1998).

The 107th Congress supported government’s efforts to promote a new pipeline from Kazakhstan to Azerbaijan, Georgia, and Turkey, the gateway to the entire Western oil market. It was also acknowledged that in addition to energy interests, the United States also has a strong interest in working with the existing Central Asia governments on combating drugs and on divesting themselves of their weapons of mass destruction materials ( Congressional Hearings:2001).

Finally, domestic security concerns for the Central Asian region particularly about violent political movements also got due consideration.

The world gets nearly hal

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