Russian President Vladimir Putin has been in office for less than a month, but he has already shown that reasserting Russia’s authority in Caspian energy politics is one of his top priorities.
Last week, he appointed Viktor Kalyuzhny, removed as Fuel and Energy Minister last week, as Deputy Foreign Minister with special responsibility for Caspian affairs.
This is a new post, and Kalyuzhny’s appointment is seen as evidence that Putin takes the region, which has enormous oil and gas reserves and great geopolitical significance, seriously. It is not the first such sign.
Even before his Prime Minister, Mikhail Kasyanov, had formed a government, Putin visited the Caspian republic of Turkmenistan and signed a deal to buy vast volumes of gas for years to come.
As well as tying the countries closer together, the move effectively scuppered, at least for now, a planned gas pipeline from Turkmenistan to Turkey, as Russia has bought all the gas.
Shortly after Putin’s return to Moscow, Russia’s three largest energy companies, gas giant Gazprom and oil companies LUKOIL and YUKOS said they would set up a joint venture to explore the Russian sector of the Caspian.
And Kalyuzhny’s replacement as energy minister, Alexander Gavrin, said in an interview published on Tuesday that he too wants to see more cooperation between Caspian producers.
“The idea is very interesting. Historically…the economies of our states have been very closely connected, so this question must be examined very deeply,” he said.
All the former Soviet republics bordering the Caspian, Turkmenistan, Kazakhstan and Azerbaijan as well as Russia, want to exploit the huge reserves and have a say over how they are exported.
But while no one doubts that there are reserves there, Russia has been slow to join the race to develop them.
Russia once produced half the world’s oil
A century ago, the Russian empire produced half the world’s oil from the giant fields of Baku, now in Azerbaijan.
But the industry’s centre shifted in the 1930s when oil was discovered in Baskhortostan in the southern Urals and in the Volga region of Tatarstan.
It then moved decisively in the 1960s when the huge deposits of Western Siberia were discovered. By comparison with these fields, the Caspian basin, then part of the Soviet Union, was difficult to develop, and was largely left alone.
Interest returned only after the break up of the Soviet Union at the end of 1991, when the region’s newly independent countries saw oil and gas as their routes to prosperity, and lost no time in seeking foreign investment.
Azerbaijan and Kazakhstan were quickest off the mark, with giant oil companies such as Chevron Corp and British Petroleum – now BP Amoco – making large investments.
Chevron operates Kazakhstan’s huge Tengiz field, and BP Amoco is operator of Azerbaijan’s flagship AIOC consortium.
Another large international consortium is exploring a field offshore Kazakhstan with reserves initially put at some four billion tonnes, or 30 billion barrels, making it one of the world’s largest exploration plays.
Limited success for Russia
Russia has dragged its feet in comparison. Its only success in the region came in March this year, when LUKOIL announced it had found at least 300 million tonnes (2.2 billion barrels) of crude at its Severny field in the northern Caspian.
The planned joint venture between Russia’s three richest energy firms could greatly advance this field’s development.
But for Putin the Caspian matters not just because of the oil it contains, but because whoever controls the export routes for the oil has huge sway over the region’s politics.
Stephen O’Sullivan of United Financial Group said Putin was reversing the policy of former President Boris Yeltsin, who put relatively little effort into relations with Caspian states, and under whose leadership Russian influence there had diminished.