November 22, 2013

Underwater Oil Reserves Create Foreign Policy Hotspots

By: Joseph Hammond

Today, many of the world’s likely flashpoints for conventional conflict lie under water. Such disputes have prompted states to stake their claim with methods ranging from tragic (China has refused to give more than token assistance to the typhoon-stricken Filipinos as part of its attempt to bully the nation over disputed reefs) to the comic (witness the Russian Federation planting a metallic flag on the arctic seafloor in 2007).


Underlying these disputed maritime boundaries, sometimes quite literally, are oil and gas reserves. With more and more oil and gas exploration occurring offshore, future discoveries will heighten pre-existing conflicts and create new flashpoints. The discovery of oil in the Falkland Islands has exacerbated Argentinean claims on what it considers the Malvinas. Similarly, natural gas and condensate deposits in the Eastern Mediterranean have created a complicated mix of tensions and territorial claims between Turkey, Israel, Lebanon and Cyprus.

Though it receives far less media attention than the conflicts mentioned above, a naval conflict in the Southern Caspian is indeed far more likely than one in the Eastern Mediterranean, Spratly Islands or certainly the Sea of Japan. For one thing, Caspian oil is very real and has been in production for decades. Just this year, a significant discovery was announced in Iranian-controlled waters of the Caspian. This new field promises a 10 billion barrel resource which could add around 7 percent to the Iranian reserves. Neighboring Azerbaijan, however, claims the region belongs to them. In order to strengthen its hold on the oil, Iran launched a new warship into the disputed sea this year.

A similar dispute exists between Turkmenistan and Azerbaijan over another oilfield. In a provocative move last year, Turkmenistan held its first naval war-game since gaining its independence and unconfirmed reports indicate a Turkmen warship fired on an Azeri oil platform in April. Turkmenistan has also sought to boost ties with Armenia, Azerbaijan’s traditional rival, whose forces have occupied a large slice of Azerbaijan since the 1990s. This year, Kazakhstan hosted its first combat parade since independence in 1991 as well as a naval exercise featuring the Kazakhstan, a naval vessel designed and built by the landlocked country. Despite these moves, Russia remains the dominant military power in the region.

None of the five littoral states surrounding the sea, from massive Russia to tiny Azerbaijan, is a liberal democracy. Thus, a small incident in the Caspian could spark nationalist tensions and a wider war. What’s more, the Caspian Sea is the largest body of water without a U.S naval presence. The Obama Administration has at best, maintained the policy of President George W. Bush of making Afghanistan the U.S.’s key interest in Central Asia. At worst, President Obama has failed to stake out a new policy in Central Asia. Recently, a senior Obama administration figure confided to me that the U.S shale gas revolution means there is less interest in the region’s pipeline.

While the prospect of Turkmen or Iranian raid on Azeri oilfields is unlikely to cause anyone at the State Department to lose sleep, this region remains important — certainly worthy of American policymakers’ attention. The prospect for a wider conflict is more likely than in many other places around the world and could have global ramifications. Even a short conflict could spike prices in jittery global markets.

Caspian Sea oil rig image courtesy of Big Stock Photo.