The Plan

[Dover]

1998 - This lays out our energy policy for Eurasia. It's not about terrorism, spreading democracy, getting Osama bin Laden, or any the other bogus stories we've been fed. They may play a small part, but if you want to know where the beef is, it's in oil/gas and other resources. The main agenda. That is why our country is run by the energy industry up to our highest office. And it's why we will be going BACK into Afghanistan/Pakistan, etc. in the near future with greater force. Despite the rhetoric, I don't think there is much, if any difference in our supposed two party system when it comes to foreign policy goals. Only in HOW we achieve them. So if you want a pretty good prediction of the future direction of this country - the basis for much of what we do abroad as well as here at home - here it is.

48–119 CC
1998
U.S. INTERESTS IN THE CENTRAL ASIAN REPUBLICS

HEARING

BEFORE THE

SUBCOMMITTEE ON
ASIA AND THE PACIFIC

OF THE

COMMITTEE ON
INTERNATIONAL RELATIONS
HOUSE OF REPRESENTATIVES

ONE HUNDRED FIFTH CONGRESS

SECOND SESSION

FEBRUARY 12, 1998

Printed for the use of the Committee on International Relations

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COMMITTEE ON INTERNATIONAL RELATIONS

BENJAMIN A. GILMAN, New York, Chairman

WILLIAM GOODLING, Pennsylvania
JAMES A. LEACH, Iowa
HENRY J. HYDE, Illinois
DOUG BEREUTER, Nebraska
CHRISTOPHER SMITH, New Jersey
DAN BURTON, Indiana
ELTON GALLEGLY, California
ILEANA ROS-LEHTINEN, Florida
CASS BALLENGER, North Carolina
DANA ROHRABACHER, California
DONALD A. MANZULLO, Illinois
EDWARD R. ROYCE, California
PETER T. KING, New York
JAY KIM, California
STEVEN J. CHABOT, Ohio
MARSHALL ''MARK'' SANFORD, South Carolina
MATT SALMON, Arizona
AMO HOUGHTON, New York
TOM CAMPBELL, California
JON FOX, Pennsylvania

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LINDSEY O. GRAHAM, South Carolina
JOHN McHUGH, New York
ROY BLUNT, Missouri
KEVIN BRADY, Texas
LEE HAMILTON, Indiana
SAM GEJDENSON, Connecticut
TOM LANTOS, California
HOWARD BERMAN, California
GARY ACKERMAN, New York
ENI F.H. FALEOMAVAEGA, American Samoa
MATTHEW G. MARTINEZ, California
DONALD M. PAYNE, New Jersey
ROBERT ANDREWS, New Jersey
ROBERT MENENDEZ, New Jersey
SHERROD BROWN, Ohio
CYNTHIA A. McKINNEY, Georgia
ALCEE L. HASTINGS, Florida
PAT DANNER, Missouri
EARL HILLIARD, Alabama
BRAD SHERMAN, California
ROBERT WEXLER, Florida
STEVE ROTHMAN, New Jersey
BOB CLEMENT, Tennessee
BILL LUTHER, Minnesota
JIM DAVIS, Florida

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RICHARD J. GARON, Chief of Staff
MICHAEL H. VAN DUSEN, Democratic Chief of Staff

Subcommittee on Asia and the Pacific
DOUG BEREUTER, Nebraska, Chairman
JAMES A. LEACH, Iowa
DANA ROHRABACHER, California
PETER T. KING, New York
JAY KIM, California
MATT SALMON, Arizona
JON FOX, Pennsylvania
JOHN M. McHUGH, New York
DONALD A. MANZULLO, Illinois
EDWARD R. ROYCE, California
HOWARD L. BERMAN, California
ENI F.H. FALEOMAVAEGA, American Samoa
ROBERT E. ANDREWS, New Jersey
SHERROD BROWN, Ohio
MATTHEW G. MARTINEZ, California
ALCEE L. HASTINGS, Florida
ROBERT WEXLER, Florida
MIKE ENNIS, Subcommittee Staff Director
RICHARD KESSLER, Democratic Professional Staff Member
DAN MARTZ, Counsel
HEIDI L. HENNIG, Staff Associate

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C O N T E N T S

WITNESSES

The Honorable Robert W. Gee, Assistant Secretary for Policy, U.S. Department of Energy
Professor S. Frederick Starr, Johns Hopkins University
Mr. John J. Maresca, Unocal Corporation

APPENDIX
Prepared statements:
The Honorable Robert W. Gee
Professor S. Frederick Starr
Mr. John J. Maresca
Additional material submitted for the record:
Opening statement for the record by The Honorable Benjamin A. Gilman, a Representative in Congress from New York and chairman, Committee on International Relations
Opening statement submitted for the record by The Honorable Alcee Hastings, a Representative in Congress from Florida
HEARING ON U.S. INTERESTS IN THE CENTRAL ASIAN REPUBLICS

THURSDAY, FEBRUARY 12, 1998
House of Representatives,
Subcommittee on Asia and the Pacific,
Committee on International Relations,

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Washington, DC.

The Subcommittee met, pursuant to notice, at 2:12 p.m., in room 2172, Rayburn House Office Building, Hon. Doug Bereuter (chairman of the Subcommittee) presiding.
Mr. BEREUTER. The Subcommittee on Asia and the Pacific will come to order. Before we begin today's hearing, the Chair would ask our witnesses' indulgence to take care of a small matter of Subcommittee business, H. Res. 350.


Mr. BEREUTER. I would like to proceed to the subject of the hearing for today, U.S. interests in the Central Asian Republics. I do have a statement. One hundred years ago, Central Asia was the arena for a great game played by Czarist Russia, Colonial Britain, Napoleon's France, and the Persian and the Ottoman Empires. Allegiances meant little during this struggle for empire building, where no single empire could gain the upper hand. One hundred years later, the collapse of the Soviet Union has unleashed a new great game, where the interests of the East India Trading Company have been replaced by those of Unocal and Total, and many other organizations and firms.
Today the Subcommittee examines the interests of a new contestant in this new great game, the United States. The five countries which make up Central Asia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, attained their independence in 1991, and have once again captured worldwide attention due to the phenomenal reserves of oil and natural gas located in the region. In their desire for political stability as well as economic independence and prosperity, these nations are anxious to establish relations with the United States. In response, last November, Secretary of Energy Frederico Pena led a Presidential mission to the Caspian-Central Asian region for discussions. The area's energy resources were also discussed during November visits to Washington of Kazakhstani President Nazarbayev and Uzbek Prime Minister Sultanov.

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Kazakhstan and Turkmenistan possess large reserves of oil and natural gas, both on-shore and off-shore in the Caspian Sea, which they urgently seek to exploit. Uzbekistan has oil and gas reserves that may permit it to be self-sufficient in energy and gain revenue through exports. Estimates of Central Asian oil reserves vary widely, but are usually said to rival those of the North Sea or Alaska. More accurate estimates of oil and gas resources await wider exploration and the drilling of test wells.
Stated U.S. policy goals regarding energy resources in this region include fostering the independence of the States and their ties to the West; breaking Russia's monopoly over oil and gas transport routes; promoting Western energy security through diversified suppliers; encouraging the construction of east-west pipelines that do not transit Iran; and denying Iran dangerous leverage over the Central Asian economies.
In addition, as has been noted by Deputy Secretary of State Strobe Talbott, the United States seeks to discourage any one country from gaining control over the region, but rather urges all responsible States to cooperate in the exploitation of regional oil and other resources.
Central Asia would seem to offer significant new investment opportunities for a broad range of American companies which, in turn, will serve as a valuable stimulus to the economic development of the region. Japan, Turkey, Iran, Western Europe, and China are all pursuing economic development opportunities and challenging Russian dominance in the region. It is essential that U.S. policymakers understand the stakes involved in Central Asia as we seek to craft a policy that serves the interests of the United States and U.S. business.
On the other hand, some question the importance of the region to U.S. interests, and dispute the significance of its resources to U.S. national security interests. Others caution that it will take a great deal of time and money to bring these resources to world markets. Still others point to civil and ethnic conflicts in Tajikistan and Afghanistan as a reason to avoid involvement beyond a minimal diplomatic presence in the area.

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The Subcommittee is fortunate to have an outstanding panel of witnesses today. Testifying for the Administration will be Mr. Robert Gee, Assistant Secretary of Policy for the Department of Energy. As Assistant Secretary, he is a principal advisor to the Secretary, Deputy Secretary, and Under Secretary of DOE on all domestic and international energy matters.
In our distinguished panel of private witnesses, we are privileged to welcome Professor Frederick Starr, founder and current chairman of Johns Hopkins Central Asian-Caspian Institute. Professor Starr, former president of Oberlin College, and founder of the Kennan Institute of Advanced Russian Studies at the Wilson Center, is a recognized authority on Russian and Central Asian affairs, and has authored recent articles which outline the emerging geopolitical relations in the Central Asia and the Caspian basin.
Mr. John Maresca is vice president of international relations for Unocal Corporation, one of the world's largest energy resource development companies. Prior to his Unocal service, Mr. Maresca enjoyed a successful diplomatic career, having served as U.S. ambassador to the Organization for Security and Cooperation in Europe, as well as minister in our U.S. embassy in France. It is also good to have him before our Subcommittee.
Mr. Berman, I moved through the process of taking up the Sri Lanka amendment, deferred any action, and would open to you now any comments you might like to make on that resolution before we proceed.

Mr. BEREUTER. Returning now to the subject of this hearing, I would just conclude my opening remarks by saying consistent with the policy of the Subcommittee, I would tell our witnesses that their entire statement will be made a part of the record. But I would ask them to summarize their testimony, approximately in 10 minutes if they can, 10 minutes each, and thus allowing time for the Members' questions.
Mr. Berman, I recognize you now as the Ranking Democrat Member for any comments you might like to make on the hearing today.

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Mr. BERMAN. Thank you very much, Mr. Chairman. The Subcommittee has only been given jurisdiction over this region in this session of Congress. Many of us are just learning about this area. But all of us are quickly understanding the vital importance of the Caucasus to our future. The fact that the Subcommittee is holding a hearing on the region when at the time so much of the world's attention is diverted to events in the Middle East I think should be considered a signal that the United States is not solely focused on the Iraqi situation.
I know that some analysts believe that the recent assassination attempt at Georgian President Edward Shevardnadze and the forced resignation of Armenia's President Ter-Petrossian are not unrelated. Some believe that forces with differing agendas think that the diversion of world attention toward Iraq provides a chance to destabilize Central Asia, playing the traditional great game of espionage, deceit, and treachery in an effort to dominate the region. American interests in the region are simply to ensure its progressive political and economic development and to prevent it from being under the thumb of any outside power, be it Iran or Russia.
This hearing is an opportunity to draw attention to that objective and to signal to everyone that we remain focused on it, even as crises develop elsewhere. The region's geographical placement, its tremendous energy resources, are of major concern to us. We will do all we can to assist in the exploitation of that resource in a manner that benefits the people of the region.
I look forward to the hearing, and hearing from the witnesses. I want to thank the Chairman for holding this hearing today.
Mr. BEREUTER. Thank you very much, Mr. Berman.
Mr. Hastings, the gentleman from Florida, could not be with us because of a conflict. He is a Member of the Subcommittee, and asked that his statement be made a part of the record. Without objection, that will be the order.

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Mr. BEREUTER. Mr. Secretary, we are pleased to have your attendance today. We look forward to your testimony. Proceed as you wish.
STATEMENT OF ROBERT W. GEE, ASSISTANT SECRETARY FOR POLICY AND INTERNATIONAL AFFAIRS, DEPARTMENT OF ENERGY
Mr. GEE. Thank you, Mr. Chairman. Good afternoon, Mr. Chairman and Members of the Committee. My name is Robert Gee, Assistant Secretary for the Office of Policy and International Affairs at the Department of Energy. I am pleased and honored to appear before this Committee today to report on the U.S. energy policy in the Caspian region. I welcome the opportunity to discuss our government's strategic and economic interests in this important region, our policy to advance those interests, and how we can achieve our goals.
I also appreciate the opportunity to appear before you as you begin consideration of H.R. 2867, the House version of the Silk Road Strategy Act. While the Administration does not yet have a formal position on the bill, the underlying theme of the proposed legislation is consistent with our policy objectives and strategic goals in the region.
To begin, you may ask why is the United States active in the region? The United States has energy security, strategic, and commercial interests in promoting Caspian region energy development. We have an interest in strengthening global energy security through diversification, and the development of these new sources of supply. Caspian export routes would diversify rather than concentrate world energy supplies, while avoiding over-reliance on the Persian Gulf.
We have strategic interests in supporting the independence, sovereignty, and prosperity of the Newly Independent States of the Caspian Basin. We want to assist the development of these States into democratic, sovereign members of the world community of nations, enjoying unfettered access to world markets without pressure or undue influence from regional powers.

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We also have an interest in maximizing commercial opportunities for U.S. firms and for U.S. and other foreign investment in the region's energy development. In short, our interests are rooted in achieving multiple objectives. Rapid development of the region's energy resources and trade linkages are critical to the independence, prosperity, democracy, and stability of all of the countries of that region.
Four factors frame our policy. First, promoting multiple export routes. 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. Accordingly, our 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.
We have given priority to supporting efforts by the regional governments themselves and the private sector to develop and improve east-west trade linkages 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 of Ceyhan is inclusive, providing benefits to transit as well as energy-producing countries.
Second, emphasizing commerciality. While we recognize the influence regional politics will play on the development of export routes, we have always maintained that commercial considerations will principally determine the outcome. These massive infrastructure projects must be commercially competitive before the private sector and the international financial community can move forward. Our support of specific pipelines, such as the Baku-Ceyhan oil pipeline and trans-Caspian oil and gas lines, is not driven by any desire to intervene in private commercial decisions. Rather, it derives from our conclusion that it is not in the commercial interest of companies operating in the Caspian States, nor in the strategic interests of those host States, to rely on a major competitor for transit rights.

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In general, we support those transportation solutions that are commercially viable and address our environmental concerns and policy objectives. Based on discussions with the companies involved, a Baku-Ceyhan pipeline appears to be the most viable option. We have urged the Turks to take steps to make Baku-Ceyhan a commercially attractive option. For our part, we are also looking at steps the United States can take to provide political risk guarantees and to foster cooperation among the regional States on an approach that can lead to a regional solution for the longer term.
Third, cooperating with Russia. Our Caspian policy is not intended to bypass or to thwart Russia. In fact, two key projects closest to fruition go through Russia, those of the Azerbaijan International Operating Company northern early pipeline, and the Caspian Pipeline Consortium from Kazakhstan through Russia to the Black Sea port of Novorossiysk. We have also financed a major study to look at ways to export more volumes through the existing Russian pipeline system.
Russia is in the midst of tremendous change in its energy policy, moving toward privatization and embracing market reform. Russian energy companies are deeply involved in Azerbaijan and Kazakhstan. We support continued Russian participation in Caspian production and transportation. We would also welcome their participation in the Eurasian corridor. U.S. companies are working in partnership with Russian firms in the Caspian, and there will be future opportunities to expand that commercial cooperation.
Development of the region's energy resources creates opportunities for these countries to cooperate in new ways for the benefit of all. The pace and extent of that regional cooperation will have a direct effect upon the future economic prosperity of the individual States.
The United States supports regional approaches to Caspian energy development. The Eurasian corridor will enhance Turkey's energy security through diversification, and will ensure that Kazakhstan, Uzbekistan, Turkmenistan and Azerbaijan have reliable and diversified outlets for their resources.

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This corridor also addresses squarely the environmental issues associated with the Bosporus. We share Turkey's environmental concerns about the potential increase in traffic through the straits. Further, we seek to avoid having the Bosporus become a chokepoint for a significant share of the world's oil supplies, heightening environmental concerns and possibly impeding the development of Caspian energy.
Fourth, isolating Iran. Our policy on Iran is unchanged. The U.S. Government opposes pipelines through Iran. Development of Iran's oil and gas industry and pipelines from the Caspian Basin south through Iran will seriously undercut the development of east-west infrastructure, and give Iran improper leverage over the economies of the Caucasus and Central Asian States. Moreover, from an energy security standpoint, it makes no sense to move yet more energy resources through the Persian Gulf, a potential major hot spot or chokepoint. From an economic standpoint, Iran competes with Turkmenistan for the lucrative Turkish gas market. Turkmenistan could provide the gas to build the pipeline, only to see itself displaced ultimately by Iran's own gas exports.
How are we implementing U.S. policy? First, we have stepped up our engagement with the regional governments through Cabinet level and senior level visits to the region, and have established formal government-to-government dialogs. We also have invited regional leaders to Washington. Our Cabinet officers also are deeply engaged. Last fall Secretary Pena led a very successful Presidential mission to Turkey, Armenia, Azerbaijan, Georgia, and Turkmenistan. Secretary Daly recently returned from a trade mission to Turkey. I had the privilege of leading an inter-agency delegation to Turkey in mid-January to discuss Turkey's strategy for moving forward with development of its energy sector, meeting the growing demand for electricity, diversifying its gas supplies, and identifying further steps for the developing and constructing of oil and gas pipelines through Turkey.
Second, we are pursuing an aggressive strategy with the regional governments. The Eurasian energy transport corridor, spanning at least six countries and disputed regions, presents complicated problems for even the most efficient governments. The number of potential players ensures that negotiations and equity structures will be enormously complicated. The United States has stressed the importance of achieving agreement on concrete project proposals among the relevant countries as early as possible. Along these lines, we have encouraged the regional governments to accelerate multilateral discussions with their neighboring States and with the private sector shippers through the establishment of national working groups. These groups have a critical role in resolving regulatory, legal, tariff, and other issues that will make the Eurasian corridor most commercially attractive.

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In sum, we enthusiastically support an ongoing dialog with Congress on Caspian and Central Asian issues. We also support and encourage the positive contribution of the numerous congressional delegations that have traveled to the Caspian region. We must maintain the momentum behind our support for these governments and for our private sector. Developments this year will be critical in advancing regional energy development and export. We look forward to working with you in meeting the upcoming challenges.
Mr. Chairman, that concludes my prepared remarks. I stand available to answer any questions you may have. Thank you.

Mr. BEREUTER. Mr. Secretary, thank you very much for your concise testimony, very significant information presented to us. On page two, you talk about the Baku into Turkey route. You indicate that this should take—likely to take tax and tariff regime changes that are attractive and ensuring ways for acquisition and development, and that our government is looking at ways that we can provide some political risk guarantees. Obviously one of them would be the traditional route through OPIC. But also, we have the World Bank's similar institution. What did you learn in your recent visit to Turkey beyond what you have told us here, about Turkey's interest, the actions that Turkey is likely to take to facilitate the total implementation of that proposal?
Mr. GEE. Turkey is keenly interested. They are interested in building infrastructure that not only would allow their country to be a transit route for the export of oil that would be taken from the Caspian Sea, but also they are keenly interested in providing a consumption market for the natural gas that would be developed in that region. They strongly favor a pipeline that would carry the volumes of oil and gas from Baku, Azerbaijan, through Georgia, and ultimately through Turkey, ending in Ceyhan, a port on the Mediterranean.
They recognize that they need to take proper steps to reform some of their governmental infrastructure in order to make the environment much more commercially viable. Among other things, they are experiencing some difficulties in reforming some of their legal requirements relative to the privatization of the power generation market in order to allow private investment to come in, with the necessary guarantees of securing investment, to provide the gas market that would facilitate the transport of gas into Turkey.

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We have worked with them, have given them some technical advice on some of the aspects of private sector expectations that are necessary to make a pipeline commercially viable through that region. They have indicated to us that they are willing to take a leadership role, both in securing a consensus within their own government to try to make the governmental reforms occur on a timely basis. They have also offered to assert a leadership role within the entire region in talking with all of the neighboring States through which that pipeline would be routed.
Mr. BEREUTER. What, if any, major impediments do you see on the ability of the Turkish Government to take those steps? What impediments or significant hurdles do they see and discuss with you? What is the progress of their visitation with their neighbors as we can best determine it?
Mr. GEE. Let me take your questions one by one. They have within their own government obviously different individuals and different ministries that work under the leadership of their Prime Minister. We have been talking separately both with their Foreign Ministry and with their Energy Ministry to ensure that their decision making process internally within their government can be expedited. So I guess it would be fair to say that one of the subjects that we did discuss with them is how best to facilitate decision making within their own government, to give the private sector the necessary measures of expectations that are needed, such as the necessary tariff regime that's required to be adopted by law, the rights of way that are explicit, the environmental policies that need to be made explicit. We are working with them. They are obviously interested in making sure that they can make their decision making more expeditious so that the private sector can make their own decisions timely.
Another matter that we discussed was engaging them with their neighboring States to talk about developing a consensus on some of the issues I have just described relative to the proper tax and tariff regime and rights of way. Since this pipeline would traverse multiple governments, it's very important for each of those affected transit governments to be working in close cooperation so that they can coordinate their policies together. They realize that talking to other neighboring States is not an easy process because this is the first time they have been required to work in such close collaboration on a project of this magnitude. But they have made commitments to us that they are willing to advance the ball in that direction.

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I do understand that they are sending representatives to our country at the end of this month so that we can continue to get a progress report on how well those discussions have ensued between themselves and the governments of their neighboring States. They have committed to us that they will be working with the Foreign Ministry of each of those neighboring States through which the pipeline would be routed. We are looking forward to getting a progress report from them later this month.
Mr. BEREUTER. Thank you. We would very much of course like to have an opportunity to also have that information from the department.
I did mention, without asking a question, the role of OPIC and of course the multilateral organization, MEGA. OPIC would facilitate American firms' participation. We would expect to see other countries do something similar in a worthy project. Is it essential to the Turkish Government that there be a multilateral investment guarantee agency or are they satisfied with simply the various developed countries that have such loan guarantee programs like OPIC, to provide them one by one under a competitive kind of environment?
Mr. GEE. I think that they are holding their options open. They expressed interest in whatever level of U.S. Government support could be provided, whether it's in the form of loan guarantees, underwriting insurance. We indicated to them that we are in discussions with OPIC, Eximbank, to see at what level of participation they could be involved. They have indicated to us that they are looking at the proper steps that need to be taken for their involvement. In fact, we did take an OPIC consultant with us on our visit to Turkey to give them advice on the fundamentals of pipeline finance so that they could begin to understand better exactly what the private sector requires and so that OPIC itself could be in a position to become a more active player.
I think that the government of Turkey is willing to entertain any opportunities for the U.S. agencies to be involved. I think that they would also welcome other international agency participation as well.

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Mr. BEREUTER. Are there any impediments in American law to our cooperation and assistance to Turkey and to the countries of this region? Are there any, for example, sanctions in place that would have a negative effect?
Mr. GEE. I think the only obstacle that we see, and I think it's indicated in my testimony, is section 907 of the Freedom Support Act. It has hindered our ability in working closer with the government of Azerbaijan, which is obviously an affected government through which oil and gas would be transported. In helping facilitate that government's development toward a transparent reliable legal regime, we have worked with the neighboring States of that region to build new legal institutions through the democratization process. Unfortunately, section 907 has been a barrier in our efforts to bring along similar improvements in Azerbaijan. That would be the only existing obstacle that I could relay to you today, Mr. Chairman.
Mr. BEREUTER. Switching geography slightly, what is the status of proposals by Unocal and others to build a gas pipeline through Afghanistan to Pakistan?
Mr. GEE. Perhaps the Unocal witness can give you more detail. I do understand that they do have an agreement with the government of Turkmenistan. They have also been in discussions with the various factions within Afghanistan through which that proposed pipeline would be routed.
The U.S. Government's position is that we support multiple pipelines with the exception of the southern pipeline that would transit Iran. The Unocal pipeline is among those pipelines that would receive our support under that policy.
I would caution that while we do support the project, the U.S. Government has not at this point recognized any governing regime of the transit country, one of the transit countries, Afghanistan, through which that pipeline would be routed. But we do support the project.
Mr. BEREUTER. Secretary Gee, could you briefly tell us what the formal Chinese involvement in the region is at this moment with respect to energy resources?

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Mr. GEE. I believe China is interested in a potential project that would allow Turkmenistan production to be transported in an easterly direction through a pipeline that some have estimated would cost anywhere from $10 to $12 billion. Most technical experts are of the view that this is a project which is not feasible for the near or intermediate term. It may well be something that could be viable in the long term, particularly as the countries of East Asia undergo economic development and as their energy requirements begin to surge. But, given the enormous capital cost that undertaking the project would entail, it is not one of the projects that most observers are focused on over the next 5- to 10-year horizon.
Mr. BEREUTER. Thank you. It is my pleasure now to turn to the distinguished Ranking Democrat Member of the Subcommittee, Mr. Berman, for comments or questions.
Mr. BERMAN. Thank you very much, Mr. Chairman. I don't know all that much about the energy business generally nor this area specifically. So I would like to get a little help from you, if I could.
The Baku-Ceyhan oil pipeline goes from Baku to Ceyhan. Where is Ceyhan?
Mr. GEE. Mr. Congressman, Ceyhan is located at the southern part of Turkey near the Turkish-Syrian border. I don't know if you have a map before you.
Mr. BERMAN. Yes. Alright. So it's——
Mr. GEE. It's on the Mediterranean Sea coast in southern Turkey.
Mr. BERMAN. So this is how you avoid the Bosporus chokepoint?
Mr. GEE. Correct. We would bypass the Bosporus, which is located in a northwesterly direction.
Mr. BERMAN. Yes. I see that.
Mr. GEE. It would bring the supply on a land-based route to the Mediterranean.

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Mr. BERMAN. Are pipelines exclusively oil or gas?
Mr. GEE. The proposal is that there could be potentially both an oil and gas transit route that would run along parallel paths. This particular delivery point I believe is generally contemplated to be oil because that's where the oil would be discharged and loaded upon tankers. But the particular route could also be used for a parallel gas line that could be used to connect with the distribution grid within Turkey to serve Turkey as a gas market.
Mr. BERMAN. And how would countries like Turkmenistan or Uzbekistan or Kazakhstan feed into this pipeline?
Mr. GEE. That pipeline would require the building of a sub-sea pipeline through the Caspian Sea, roughly from Turkmenistan to Baku. There are different possible routes that this pipeline could transit, but generally it would run in the water on a sub-sea basis connecting at Baku in Azerbaijan. The pipeline would then go from Baku to——
Mr. BERMAN. This pipeline would have to go through Azerbaijan and Armenia I take it?
Mr. GEE. One of the routes I saw would actually go around Armenia.
Mr. BERMAN. Through Georgia?
Mr. GEE. Through Georgia, yes.
Mr. BERMAN. That would not be the most direct way.
Mr. GEE. Correct.
Mr. BERMAN. So the pipeline would go sub-Caspian Sea to some port presumably on the eastern side of the Caspian?
Mr. GEE. Yes, in Baku.
Mr. BERMAN. And then would be connected with other pipelines or would it be——

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Mr. GEE. There is currently a pipeline that is already in place from Baku that goes northward and terminates in Novorossiysk, which is on the coast of the Black Sea in Russia.
Mr. BERMAN. I am thinking of how Uzbekistan, Kazakhstan—is this a pipeline for their use or is this primarily for Caspian Sea oil?
Mr. GEE. It would be a pipeline generally for production from Kazakhstan and Turkmenistan, which is where most of the potential reserves are thought to be located.
Mr. BERMAN. In oil, OK. You write in your testimony, and you have said it as well, our support for this pipeline derives from our belief that it is not in the commercial interests of companies operating in the Caspian States nor in the strategic interest of the host States to rely on a single major competitor for transit rights. Who are you talking about?
Mr. GEE. We are talking specifically about Russia and Iran, which would be potentially the two dominant players where most of the transit routes are situated in those two countries.
Mr. BERMAN. We see transit routes, at least on that map. Obviously it's not a map of current pipelines because it has the Baku-Ceyhan pipeline, but you in your testimony mentioned there are now pipelines going from Baku through Russia, emptying in the Black Sea, right?
Mr. GEE. Yes.
Mr. BERMAN. So there is no pipeline at this present time from this area through Iran to the Persian Gulf. Is that correct?
Mr. GEE. That's correct.
Mr. BERMAN. And you do not take an Iranian pipeline as the appropriate competition for the Russian pipeline?

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Mr. GEE. Correct.
Mr. BERMAN. That doesn't solve the problem.
Mr. GEE. That is not an alternative. That is correct.
Mr. BERMAN. The last Turkish Government, I believe, announced a deal with Iran to build a pipeline, I'm not sure if it was from this area, but it was a trans-Iranian pipeline.
Mr. GEE. Yes.
Mr. BERMAN. Through Turkey to empty I think in the Mediterranean. I haven't heard much about this agreement. What is the status of it?
Mr. GEE. I believe you are referring to the agreement to purchase Turkmenistan gas. It was Turkey's purchase of Turkmen-istan gas that would be transported through Iran. It is my understanding that that particular agreement for that production is still in place. The building of the pipeline is the next critical phase that would transport that production from Turkmenistan through Iran. That is one of the projects that we are opposed to.
The actual transaction is already in place. It is going to be dependent upon building the facilities that would transit that gas from Turkmenistan to Iran.
Mr. BERMAN. Let me spin out a scenario here. I would like just to get your implications. Let's just say that the French and the Russians decided to make a major energy investment in Iran and it went ahead without any sanctions from the United States. Would you anticipate then that there would be other oil companies, energy companies that would seek then to move ahead on an Iranian pipeline to transmit Central Asian oil and gas reserves through Iran?
Mr. GEE. Are you asking me if that were in the event there were no sanctions imposed by the United States?
Mr. BERMAN. Yes.
Mr. GEE. In the absence of ILSA or a decision by the United States not to impose sanctions which is now pending.

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Mr. BERMAN. Let's assume there was a waiver of the sanctions. Do you think that that act would encourage energy companies then to more seriously pursue the trans-shipping through Iran of Central Asian oil?
Mr. GEE. That is a difficult question to answer.
Mr. BERMAN. Why? It seems easy.
Mr. GEE. Because, among other things, we have talked to a number of private sector companies who have indicated to us that even in a scenario, assuming the United States had normalized relations with Iran in the absence of ILSA, there is still some country risk relative to investments in Iran because of the unpredictability of the decision making process in Iran.
I think that ultimately a commercial decision in the private sector would have to be made, factoring in all of these factors. I am not in the private sector.
Mr. BERMAN. Well, Total is not a fly by-night operation. I understand it was a pretty good investment.
Mr. GEE. I can only tell you based upon my discussions with members of the private sector. They have indicated to us that it would not be a certainty that they would necessarily seek to invest in Iran, even in the absence of sanctions.
Mr. BERMAN. Let's put it a different way. Do you think the waiver of sanctions or the failure to impose sanctions would enhance the likelihood that these companies would more seriously consider investments in a trans-Iranian pipeline?
Mr. GEE. I know that it would be a factor. I don't know whether that would be dispositive in ultimately forcing a decision in that direction, all things considered.
Mr. BERMAN. Given our sanctions on our own American companies, would the consequence of European and other companies investing in such a pipeline put American energy companies at a competitive disadvantage?

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Mr. GEE. I would say it would depend. It would depend both upon exactly what other opportunities there are relative to the other investments in the Caspian. It would depend again upon how an individual company assesses country risk within Iran. If a company has determined that the existing Iranian regime or the Iranian regime for the foreseeable future is inherently unreliable in terms of committing a large capital investment, they may well conclude that this is a competitive market they wish to forego, even though others in the private sector have reached opposite conclusions.
Mr. BERMAN. I'll stop my questioning at this point. I understand your predicament.
Mr. GEE. Right.
Mr. BERMAN. But I think it's fair to say that American efforts to dissuade the Europeans and others from investing in Iran was not out of a concern that those companies were seeking to engage in a commercially risky venture in a politically unreliable country. It was to achieve, I think, an important political and economic and security goals for, we thought, the United States, and these other countries should be sharing together. It was not an effort to persuade European-based companies these were commercially risky and you'd be making a terrible mistake.
Thank you, Mr. Chairman.
Mr. GEE. I understand. Let me add too that I think any company that assumes that a waiver by the United States of those foreign companies involved in that transaction signals an unwillingness of the United States to enforce the law under ILSA, is going to be proceeding at great risk. So I don't think it is reasonable to conclude necessarily that any U.S. company would necessarily jump into it feet first. They would have to assess whether the U.S. Government would look favorably upon their activity in that region.
Mr. BERMAN. No, I understand that. I just didn't think the U.S. companies are at a significant competitive disadvantage. Thank you very much.

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Mr. GEE. Yes.
Mr. BEREUTER. Mr. Secretary, I have two specific questions. The staff did hand me the note, if I interpret it correctly, that Royal Dutch has indicated it might invest $2 billion in a trans-Iranian line to Turkey? Is that correct?
Mr. GEE. That's correct.
Mr. BEREUTER. There is an oil field in Kazakhstan, Tengiz, or something like that.
Mr. GEE. The Tengiz oil field, yes.
Mr. BEREUTER. Reportedly the world's largest known untapped field. That may be subject to dispute. It began to be exploited apparently most recently about 1993, I am told. How much have U.S. firms invested? Have they received any substantial return on their investment at this point?
Mr. GEE. I believe that the transit route for that field is still under development. I don't know whether there have actually been sales of production from the Tengiz field.
I am informed by our staff that there have been sales from that field. I can provide that information to you. We don't have it available today as to any specific volumes or monetary returns from that sale.


According to our calculations, total foreign direct investment in Kazakhstan's oil and gas sector from 1991 through 1996 was approximately U.S. $2 billion. Total commitments for new, future direct investment in Kazakhstan's oil and gas development now stands at over U.S. $35 billion. The Tengiz field has estimated reserves of 24 billion barrels of crude oil and over 1800 billion cubic meters of associated natural gas. Oil production has slowly risen to its current level of approximately 160,000 barrels per day. Production is currently being hampered by limited access to export pipelines. Once the Caspian Pipeline Consortium pipeline is constructed, oil production from Tengiz is expected to increase to 750,000 barrels per day by 2010. Even at production of 160,000 barrels per day, the venture has been profitable. Tengizchevroil, the consortium producing the Tengiz field, reported profits of U.S. $80 million in 1996, up from only U.S. $1 million in 1995.

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Mr. BEREUTER. Finally, Kazakhstan and Azerbaijan have agreed to explore building a large oil pipeline from Kazakhstan through Turkmenistan and under the Caspian Sea. We have had reference to that earlier, to link up with the plan, Azerbaijan-Georgian pipeline to Turkey. What support has the United States given to this plan beyond what we have talked about with respect to Turkey? Anything in addition to what we have been doing with the Turkish Government?
Mr. GEE. This is the oil pipeline that would go from Kazakhstan, Turkmenistan——
Mr. BEREUTER. Yes.
Mr. GEE. And then to Azerbaijan, Baku?
Mr. BEREUTER. Then across the Caspian to Baku.
Mr. GEE. This project that you have described is part and parcel, a piece of the entire project that the United States is vigorously seeking——
Mr. BEREUTER. What specifically in support have we given beyond what we have done to encourage the Turkish Government to make changes?
Mr. GEE. Secretary Pena, when he was in that region in November, met with the Heads of State, I believe almost all of the Heads of State of those countries that you have just described. He was able to get from them assurances that they would give serious consideration.
Mr. BEREUTER. Is there any financial support in any fashion or incentives that have been delivered at this point?
Mr. GEE. The United States, to my knowledge, has not given in the form of any loan guarantees or insurance underwriting any specific support. I believe there may have been some participation by one of our agencies on some feasibility studies, but in terms of any underwriting support, as far as I know there have been none yet.

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Mr. BEREUTER. Thank you. Mr. Secretary, I appreciate very much your testimony. Are there any final words that you would like to call attention to here before you leave?
Mr. GEE. My staff and I are available at your leisure for any additional discussions you may wish to have in private. We welcome the opportunity to engage you and your staff more deeply in this subject. It is a critical area and a high priority for our department to advance U.S. interests abroad. We welcome the opportunity to work with you.
Mr. BEREUTER. Mr. Secretary, if you think that it would be appropriate from your point of view, for us to be informed in a classified briefing, would you let us know? Our Subcommittee would be convened for that purpose.
Mr. GEE. Yes. I appreciate that.
Mr. BEREUTER. Thank you.
Mr. GEE. Thank you.
Mr. BEREUTER. Thank you very much.
We now call the second panel of two witnesses. Please come forward. Gentlemen, thank you very much for agreeing to testify today. We very much appreciate that you have done that. I have made a brief introduction for you previously. I think you were both in the room to hear that. Your entire statements will be made a part of the record. I would ask you to summarize, if you can, in approximately 10 minutes or so.
Professor Starr, we'll proceed with you first since you are listed first.
STATEMENT OF FREDERICK STARR, CHAIRMAN, CENTRAL ASIA INSTITUTE, NITZE SCHOOL OF ADVANCED INTERNATIONAL STUDIES, JOHNS HOPKINS UNIVERSITY
Mr. STARR. Thank you very much. Mr. Chairman, I welcome the opportunity to comment on H.R. 2867 and also on the question of exploitation of Central Asian and Caspian energy. I want to note parenthetically that it has taken a while for U.S. policy to recognize this part of the world as warranting the kind of attention that it is now getting in your Committee rather than treating it as a sub-issue of some other world region. This is a very welcome step indeed.

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In this progress toward formulating an American policy toward this region, it seems to me that the so-called Silk Road Strategy Act, H.R. 2867, goes further than any previous official act of the U.S. Government toward translating our principles with regard to this region into concrete action.
I want to comment if I may, on only a couple of points in the act. First, I want to observe that money is to be provided to enable the countries of the region to develop their security to the point that they can protect their borders from trans-border drug trafficking, arms trading, and organized crime. This is a laudable goal. I would simply note that, beyond this, the securing of one's border is an essential feature of sovereignty, and that this is therefore a very important measure indeed. I hope when the time comes, that we are generous in providing help of this sort because it is, as I say, an essential element of the development of the new states' sovereignty.
Second, with regard to support for infrastructure development in the area: H.R. 2867 lists various areas in which infrastructure can be provided. I would like to suggest that water be added to this list as well. You know that Central Asia is a very arid region. For thousands of years conflicts over water have been among the most hard fought in the region. There is much knowledge that can be brought to bear on water problems there from elsewhere, including our own country. We should be eager to do so.
Third, with regard to infrastructure projects: the legislation refers to ''energy'' and to support of projects for the transmission of gas and oil. It does not specify electricity. I would like to suggest that this be done. The two poorest countries of Central Asia in terms of resources are Tajikistan and Kyrgyzstan. Both of them are rich in water and rich in hydro-electric potential. Anything we can do to help them develop those assets will go far toward making them economically viable.
Now please permit me to turn to the second issue before the Subcommittee, namely the exploitation of energy reserves in the region. The U.S. Government has over the last several years enunciated a series of what seem to me very sound principles on this. These have been repeated for us this afternoon by Secretary Gee. I have nothing to add. What I want to suggest is that these laudable principles are very complex in their application. If there exist problems, it is in the transition, if you will, from ''cup to lip''.

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I would like to draw your attention here to several concerns in the application of the principles that govern our action with regard to pipeline development. First, much has been said about the ''East-West energy corridor''. This corridor places Azerbaijan at the hub. That country is in an absolutely crucial position for the transport of energy not only from Azerbaijan itself, but from across the Caspian. Yet the section 907 of the Freedom Support Act of 1992 prevents the United States from extending to Azerbaijan most of the assistance that other Newly Independent States are receiving in order to foster their development.
In other words, with one hand we are placing Azerbaijan in a position that calls for stable, free development, and internal security. Then with the other, we are undermining Azerbaijan's ability to achieve these ends. Meanwhile, the location of its neighboring State, Armenia, is problematic. Its border is a mere 4 miles from the pipeline that has been discussed here. Armenia has recently witnessed a seizure of power by a veiled military coup. This is the first and only military seizure of power to occur in any of the Newly Independent States. Prior to that, Armenia had a notoriously corrupt election. All this in a country that is receiving more support per capita from the United States under the Freedom Support Act than any other country. I would therefore propose that the Subcommittee consider removing the contradiction to U.S. principles and policy objectives in the region by striking section 499(F)(d)(3) from the proposed legislation.
The second issue that I want to raise here concerns the place of Iran in our policy toward Central Asian energy. Let me stress and stress several times if necessary, that I am not here to defend or to criticize our policy toward Iran. Under any circumstances I would not consider myself qualified to do so. My concern here is to point out the apparent conflict between our goals in Central Asia and the Caspian and our policies vis a vis Iran.
Now, I won't review the various legislative acts that are relevant here. I want simply to say that the heaviest burden of the measures we are taking toward Iran fall disproportionately on Azerbaijan, Kazakhstan and Turkmenistan, for it prevents them from exporting their gas and oil by one of the obvious alternative routes to Russia, namely Iran. The U.S. position has been to argue that this would not be in the Central Asians' own interest. None of our friends in the region agree.

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Meanwhile, French, Malaysian, Russian firms are already investing in the construction of facilities in Iran. Thus, a pipeline is being constructed across northern Iran from Turkmenistan. The United States has not objected to this, by the way. Turkmenistan and Kazakhstan are working out swap deals with Teheran to enable them, in effect, to export through Iran without really doing so. In short, the American quarantine of 1995–1996 is not holding.
The recent events within Iran exacerbate this situation. I won't review them for they are well known to you: The election of President Khatami, his New Year's statements, et cetera. The impact of these is to change the environment for investment in the Caspian east-west pipeline. Everyone is waiting. There is no money yet in hand to build this supposedly favored pipeline. People are correctly waiting to see what is going to happen because anything in Iran will change the economic coefficients with regard to this project, on which the United States has placed such emphasis.
It seems to me this leaves us with three options. First, the United States can seek to impose its sanctions against those investing in Iran with such severity as to cut off the flow of funds and projects. The problem with this is that events in Iran are making this approach more difficult to defend and are likely to make it even less sustainable in the future.
Second, the United States can acknowledge that its policies toward Armenia and Iran are adding to the risk and cost of the east-west pipeline and seek to neutralize that political cost through additional forms of subsidies that would, if you will, create a level playing field for market forces. I would imagine, however, that such subsidies would raise eyebrows among those who would see them as unwarranted support for one favored industry over others.
Third, the United States can adopt a wait-and-see posture toward Iran, one that would replace our current all-or-nothing approach. The objective of this wait-and-see approach would be to find a lot of nicely calibrated positions between all and nothing. I spell them out in the written statement. Suffice it to say that, by having such intermediate positions, we would be able to respond not only more effectively, but also more proactively to the evolving situation throughout the region as well as in Iran.

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On balance, it seems to me that the third of these alternatives holds the most promise for achieving a balance between U.S. objectives in Central Asia and the Caspian, on the one hand, and in Iran. But my point in raising them is not to champion one course of action or another. Rather, it is to suggest that it is no longer possible to treat U.S. policy toward Central Asia and toward Iran as totally separate from one another. Our Iranian policy, however just its goals, has a powerful and, for the most part, negative impact on our ability to achieve our stated objectives in Central Asia and the Caspian. Simply to acknowledge this reality would be to open a path to more sustainable effective policies toward both areas. Thank you, Mr. Chairman.

Mr. BEREUTER. Thank you very much, Mr. Starr.
Next we would like to hear from Mr. John J. Maresca, vice president of international relations, Unocal Corporation. You may proceed as you wish.
STATEMENT OF JOHN J. MARESCA, VICE PRESIDENT OF INTERNATIONAL RELATIONS, Unocal CORPORATION
Mr. MARESCA. Thank you, Mr. Chairman. It's nice to see you again. I am John Maresca, vice president for international relations of the Unocal Corporation. Unocal, as you know, is one of the world's leading energy resource and project development companies. I appreciate your invitation to speak here today. I believe these hearings are important and timely. I congratulate you for focusing on Central Asia oil and gas reserves and the role they play in shaping U.S. policy.
I would like to focus today on three issues. First, the need for multiple pipeline routes for Central Asian oil and gas resources. Second, the need for U.S. support for international and regional efforts to achieve balanced and lasting political settlements to the conflicts in the region, including Afghanistan. Third, the need for structured assistance to encourage economic reforms and the development of appropriate investment climates in the region. In this regard, we specifically support repeal or removal of section 907 of the Freedom Support Act.

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Mr. Chairman, the Caspian region contains tremendous untapped hydrocarbon reserves. Just to give an idea of the scale, proven natural gas reserves equal more than 236 trillion cubic feet. The region's total oil reserves may well reach more than 60 billion barrels of oil. Some estimates are as high as 200 billion barrels. In 1995, the region was producing only 870,000 barrels per day. By 2010, western companies could increase production to about 4.5 million barrels a day, an increase of more than 500 percent in only 15 years. If this occurs, the region would represent about 5 percent of the world's total oil production.
One major problem has yet to be resolved: how to get the region's vast energy resources to the markets where they are needed. Central Asia is isolated. Their natural resources are landlocked, both geographically and politically. Each of the countries in the Caucasus and Central Asia faces difficult political challenges. Some have unsettled wars or latent conflicts. Others have evolving systems where the laws and even the courts are dynamic and changing. In addition, a chief technical obstacle which we in the industry face in transporting oil is the region's existing pipeline infrastructure.
Because the region's pipelines were constructed during the Moscow-centered Soviet period, they tend to head north and west toward Russia. There are no connections to the south and east. But Russia is currently unlikely to absorb large new quantities of foreign oil. It's unlikely to be a significant market for new energy in the next decade. It lacks the capacity to deliver it to other markets.
Two major infrastructure projects are seeking to meet the need for additional export capacity. One, under the aegis of the Caspian Pipeline Consortium, plans to build a pipeline west from the northern Caspian to the Russian Black Sea port of Novorossiysk. Oil would then go by tanker through the Bosporus to the Mediterranean and world markets.
The other project is sponsored by the Azerbaijan International Operating Company, a consortium of 11 foreign oil companies, including four American companies, Unocal, Amoco, Exxon and Pennzoil. This consortium conceives of two possible routes, one line would angle north and cross the north Caucasus to Novorossiysk. The other route would cross Georgia to a shipping terminal on the Black Sea. This second route could be extended west and south across Turkey to the Mediterranean port of Ceyhan.

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But even if both pipelines were built, they would not have enough total capacity to transport all the oil expected to flow from the region in the future. Nor would they have the capability to move it to the right markets. Other export pipelines must be built.
At Unocal, we believe that the central factor in planning these pipelines should be the location of the future energy markets that are most likely to need these new supplies. Western Europe, Central and Eastern Europe, and the Newly Independent States of the former Soviet Union are all slow growth markets where demand will grow at only a half a percent to perhaps 1.2 percent per year during the period 1995 to 2010.
Asia is a different story all together. It will have a rapidly increasing energy consumption need. Prior to the recent turbulence in the Asian Pacific economies, we at Unocal anticipated that this region's demand for oil would almost double by 2010. Although the short-term increase in demand will probably not meet these expectations, we stand behind our long-term estimates.
I should note that it is in everyone's interest that there be adequate supplies for Asia's increasing energy requirements. If Asia's energy needs are not satisfied, they will simply put pressure on all world markets, driving prices upwards everywhere.
The key question then is how the energy resources of Central Asia can be made available to nearby Asian markets. There are two possible solutions, with several variations. One option is to go east across China, but this would mean constructing a pipeline of more than 3,000 kilometers just to reach Central China. In addition, there would have to be a 2,000-kilometer connection to reach the main population centers along the coast. The question then is what will be the cost of transporting oil through this pipeline, and what would be the netback which the producers would receive.
For those who are not familiar with the terminology, the netback is the price which the producer receives for his oil or gas at the wellhead after all the transportation costs have been deducted. So it's the price he receives for the oil he produces at the wellhead.

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The second option is to build a pipeline south from Central Asia to the Indian Ocean. One obvious route south would cross Iran, but this is foreclosed for American companies because of U.S. sanctions legislation. The only other possible route is across Afghanistan, which has of course its own unique challenges. The country has been involved in bitter warfare for almost two decades, and is still divided by civil war. From the outset, we have made it clear that construction of the pipeline we have proposed across Afghanistan could not begin until a recognized government is in place that has the confidence of governments, lenders, and our company.
Mr. Chairman, as you know, we have worked very closely with the University of Nebraska at Omaha in developing a training program for Afghanistan which will be open to both men and women, and which will operate in both parts of the country, the north and south.
Unocal foresees a pipeline which would become part of a regional system that will gather oil from existing pipeline infrastructure in Turkmenistan, Uzbekistan, Kazakhstan and Russia. The 1,040-mile long oil pipeline would extend south through Afghanistan to an export terminal that would be constructed on the Pakistan coast. This 42-inch diameter pipeline will have a shipping capacity of one million barrels of oil per day. The estimated cost of the project, which is similar in scope to the trans-Alaska pipeline, is about $2.5 billion.
Given the plentiful natural gas supplies of Central Asia, our aim is to link gas resources with the nearest viable markets. This is basic for the commercial viability of any gas project. But these projects also face geopolitical challenges. Unocal and the Turkish company Koc Holding are interested in bringing competitive gas supplies to Turkey. The proposed Eurasia natural gas pipeline would transport gas from Turkmenistan directly across the Caspian Sea through Azerbaijan and Georgia to Turkey. Of course the demarcation of the Caspian remains an issue.
Last October, the Central Asia Gas Pipeline Consortium, called CentGas, in which Unocal holds an interest, was formed to develop a gas pipeline which will link Turkmenistan's vast Dauletabad gas field with markets in Pakistan and possibly India. The proposed 790-mile pipeline will open up new markets for this gas, trave

[Dover]

1. 2006 Update of the Silk Road Strategy Act of 1999

1999 Version:
http://webu2.upmf-grenoble.fr/espace-europe/publication/ares/50/Vassort.pdf


109th CONGRESS

2d Session



S. 2749



To update the Silk Road Strategy Act of 1999 to modify targeting of assistance in order to support the economic and political independence of the countries of Central Asia and the South Caucasus in recognition of political and economic changes in these regions since enactment of the original legislation.


IN THE SENATE OF THE UNITED STATES


May 4, 2006
Mr. BROWNBACK (for himself, Mr. KYL, and Mrs. HUTCHISON) introduced the following bill; which was read twice and referred to the Committee on Foreign Relations


http://www.govtrack.us/congress/billtext.xpd?bill=s109-2749

-----------------------------------------------------------------------------


A BILL

To update the Silk Road Strategy Act of 1999 to modify targeting of assistance in order to support the economic and political independence of the countries of Central Asia and the South Caucasus in recognition of political and economic changes in these regions since enactment of the original legislation.


Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the `Silk Road Strategy Act of 2006'.

(b) Table of Contents- The table of contents for this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Definitions.

TITLE I--UNITED STATES POLICY TOWARD COUNTRIES IN CENTRAL ASIA AND THE SOUTH CAUCASUS

Sec. 101. Relationship between the United States and the countries of Central Asia and the South Caucasus.

Sec. 102. Protecting United States business abroad.

TITLE II--PROTECTION AND PROMOTION OF UNITED STATES INTERESTS IN CENTRAL ASIA AND THE SOUTH CAUCASUS

Sec. 201. Relationships between the United States and the countries of Central Asia and the South Caucasus since passage of the Silk Road Strategy Act of 1999.

Sec. 202. United States interests in the countries of Central Asia and the South Caucasus.

Sec. 203. Sense of Congress on safeguarding of United States interests in the countries of Central Asia and the South Caucasus.

SEC. 2. DEFINITIONS.

In this Act:

(1) CENTRAL ASIA AND THE SOUTH CAUCASUS- The term `Central Asia and the South Caucasus' means the area including the countries of Afghanistan, Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan.

TITLE I--UNITED STATES POLICY TOWARD COUNTRIES IN CENTRAL ASIA AND THE SOUTH CAUCASUS

SEC. 101. RELATIONSHIP BETWEEN THE UNITED STATES AND THE COUNTRIES OF CENTRAL ASIA AND THE SOUTH CAUCASUS.

(a) In General- The United States has significant long-term interests in the countries of Central Asia and the South Caucasus. These interests concern security, economic development, energy, and human rights. Accordingly, it is the policy of the United States to seek political and economic stability in the social development of, and cooperative relationships with, the countries of Central Asia and the South Caucasus, including by providing assistance in accordance with the Foreign Assistance Act of 1961 (22 U.S.C. 2151 et seq.).

(b) Democracy, Tolerance, and the Development of Civil Society- It is the policy of the United States to promote independent, democratic government and the protection of human rights, tolerance, and pluralism in Central Asia and the South Caucasus within the overall framework of United States national interests, including the global war on terrorism, counterproliferation efforts, the fight against extremism and ethnic and religious fanaticism, and energy security.

(c) Conflict Resolution- It is the policy of the United States to aid in the resolution of ethnic, religious, interstate, and intraregional conflicts and to support political, economic, and security cooperation in Central Asia and the South Caucasus in the interest of fostering regional stability, development of the rule of law, cooperation based on free markets supported by strong institutions, and economic interdependence.

(d) Economic Assistance- It is the policy of the United States to reduce poverty in Central Asia and the South Caucasus through economic growth, promoting sustainable development through private investment in all economic sectors, including agriculture, education, private sector development, and capacity-building.

(e) Development of Infrastructure- It is the policy of the United States to aid in the development of infrastructure in Central Asia and the South Caucasus for energy and energy transit, communications, transportation, and health and human services.

(f) Defense and Border Control Assistance- It is the policy of the United States to assist the countries of Central Asia and the South Caucasus in developing indigenous defense capabilities, securing borders, and implementing effective controls to prevent the proliferation of materials related to weapons of mass destruction and trafficking in conventional weapons, persons, and narcotics.

SEC. 102. PROTECTING UNITED STATES BUSINESS ABROAD.

Consistent with the purposes of the Overseas Private Investment Corporation, it is the policy of the United States to promote and protect the interests of United States businesses and investments in Central Asia and the South Caucasus.

TITLE II--PROTECTION AND PROMOTION OF UNITED STATES INTERESTS IN CENTRAL ASIA AND THE SOUTH CAUCASUS

SEC. 201. RELATIONSHIPS BETWEEN THE UNITED STATES AND THE COUNTRIES OF CENTRAL ASIA AND THE SOUTH CAUCASUS SINCE PASSAGE OF THE SILK ROAD STRATEGY ACT OF 1999.

(a) In General- Since the enactment of the Silk Road Strategy Act of 1999 (22 U.S.C. 2296 et seq.), significant changes have occurred to the political, economic, and security conditions in Central Asia and the South Caucasus, requiring modifications to United States policy toward the countries in the region in order to protect and promote United States interests.

(b) Findings- Congress makes the following findings:

(1) Since September 11, 2001, the need for mutually beneficial security cooperation between the United States and the countries of Central Asia and the South Caucasus has grown, while the United States has come to view democratization of the countries in the region as essential to enhanced security.

(2) Such development features popular sovereignty, institutional checks and balances, and a vibrant civil society. These in turn require a civil administration that is competent, honest, respectful of citizens' rights, and sensitive to the needs of a market economy.

(3) The liberation of Afghanistan from Taliban misrule and the new course in Afghanistan toward political and economic openness make possible the country's reintegration into Central Asia.

(4) The ouster of the Taliban from Afghanistan has diminished threats to that country's neighbors in Central Asia, allowing for accelerated progress toward democracy, open economies, and the rule of law across the region. Afghanistan's embrace of popular sovereignty and political pluralism demonstrates the universal applicability of these values.

(5) The Governments of Azerbaijan and Kazakhstan, which have contributed to United States military deployments in Iraq, Afghanistan, and Kosovo, are key United States partners in diversification of energy sources and transportation routes, enhancing and contributing to United States energy and security interests.

(6) In recognition of global and regional threats to stability, prosperity, and democracy in Afghanistan, including terrorism, political-religious extremism, and production and trafficking of narcotics, and in recognition of Afghanistan's geographic location and cultural and historical identity, Afghanistan should be considered to be among the countries of Central Asia, and not separate from them.

(7) In recognition of security cooperation from the Government of Kazakhstan, including deployment of the Kazakhstan contingent in Iraq, progress toward a market economy, United States business participation in energy and infrastructure development in Kazakhstan, and an ongoing Government of Kazakhstan policy of ethnic and religious tolerance, a relationship with Kazakhstan is of high importance to the United States.

(8) The 2003 Rose Revolution in Georgia, the 2004 Orange Revolution in Ukraine, and the 2005 Tulip Revolution in Kyrgyzstan demonstrate the essentialness of steady progress toward democracy and the rule of law. While these revolutions resulted in the ouster of corrupt and ineffective regimes by largely peaceful protest movements, the long-term interests of security, stability, good governance, and economic growth are better served by evolutionary democratization.

(9) Relations between the United States and the Republic of Kyrgyzstan are of great importance, in particular in view of the democratic developments in that country and in light of the location of a United States military base at the Manas Airport near Bishkek, Kyrgyzstan.

(10) The President of Turkmenistan, Saparmurat Niyazov, engages in persistent gross violations of human rights, including the suppression of democratic and religious freedoms, brutality, and leads a government that lacks accountability and rejects the rule of law.

(11) There has been a deterioration of democratic freedoms, rule of law, norms of democracy, and human rights in Uzbekistan, as well as a deterioration of relations between the Governments of the United States and Uzbekistan.

(12) The President of Uzbekistan, Islam Karimov, engages in continued gross violations of human rights, including the killing of hundreds of protestors at a rally in Andijan in 2005.

(13) The pressing need for diversification of energy resources makes access to Central Asian and Caspian Sea oil and gas resources a high energy security priority of the United States.

(14) The dangerous and destabilizing policy statements of the President of the Islamic Republic of Iran, Mahmoud Ahmadinejad, and actions by the Islamic Republic of Iran in the area of nuclear power, including uranium enrichment, threaten international security in general and regional security in Europe and Asia in particular.

SEC. 202. UNITED STATES INTERESTS IN THE COUNTRIES OF CENTRAL ASIA AND THE SOUTH CAUCASUS.

Congress makes the following findings:

(1) The economic and political stability of the countries of Central Asia and the South Caucasus has a direct impact on United States interests.

(2) Stability, democratic development, protection of property rights, including mineral rights, and rule of law in countries with valuable energy resources and infrastructure, including Kazakhstan, Azerbaijan, and Turkmenistan, are important to safeguard United States energy security.

(3) Preventing any other country from establishing a monopoly on energy resources or energy transport infrastructure in the countries of Central Asia and the South Caucasus that may restrict United States access to energy resources is important to the energy security of the United States and other consumers of energy in the developed and developing world.

(4) Extensive trade relations with the energy-producing and energy-transporting states of Central Asia and the South Caucasus will enhance United States access to diversified energy resources, thereby strengthening United States energy security, as well as that of energy consumers in developed and developing countries.

(5) Stability in the countries of Central Asia and the South Caucasus is important to the security interests of the United States.

(6) In order for the United States to maintain bases for its troops in the proximity of the military conflicts in Afghanistan and Iraq, the United States should seek to maintain good relations with the countries of Central Asia and the South Caucasus.

(7) It is in the interest of the United States and the global war on terror for the United States to maintain friendly relations with Muslim states in Central Asia and the South Caucasus that promote democracy, open economies, and the rule of law in the region.

(8) It is in the interest of the United States to make any and all efforts to prevent the proliferation of materials for weapons of mass destruction and the trafficking in narcotics and persons, much of which can be attributed to porous borders and insufficient security between the countries of Central Asia and the South Caucasus.

SEC. 203. SENSE OF CONGRESS ON SAFEGUARDING OF UNITED STATES INTERESTS IN THE COUNTRIES OF CENTRAL ASIA AND THE SOUTH CAUCASUS.

(a) Promotion of Democracy, Tolerance, and the Development of Civil Society- It is the sense of Congress that political legitimacy is founded upon popular sovereignty and is critical to stability, that key components of political legitimacy are regular elections, and that the United States Government should engage in the following programs and activities designed to promote democracy, tolerance, and the development of civil society in Central Asia and the South Caucasus:

(1) Support for free and fair elections, including the formation of election bodies that are broadly representative of the political spectrum and the maintenance of equal conditions for candidates and parties.

(2) Instruct the United States delegation to the Organisation for Security and Cooperation in Europe (OSCE) and to other international bodies to resist efforts by some member states to undercut the role of OSCE election monitoring conducted by the Office for Democratic Institutions and Human Rights (ODIHR) and to aggressively promote the role of independent and local election monitors.

(3) Support for the development of independent media outlets, including print, radio, television, and Internet, and the provision of authoritative news and a broader range of media options than is currently available.

(4) Support for satellite television broadcasting into Uzbekistan, Turkmenistan, and Iran in the native languages of these countries through Radio Freedom/Radio Liberty, Radio Farda, Al Alam, and independent radio and television broadcasters in the United States and Europe, including in the languages of Azerbaijani, Pashtun, Persian, Uzbek, and Turkmen, specifically to inform the populations in those countries of the ideas and values of freedom, democracy, and human rights and development issues relating to their diasporas in the United States.

(5) Assistance in the establishment of regional academic programs to train civil servants in modern systems and principles of good governance, including the rule of law, transparency, conduct of elections, respect for citizens' rights, and the needs of a market economy.

(6) Support for the establishment of reputable think tanks, independent public policy research organizations, and centers for strategic and economic studies in the countries of Central Asia and the South Caucasus.

(7) Support for the development of separation of powers, specifically the emergence of independent legislative and judicial branches of government.

(b) Conflict Resolution- It is the sense of Congress that the United States Government should engage in the following programs and activities designed to promote conflict resolution in Central Asia and the South Caucasus:

(1) Active assistance in the resolution of regional conflicts and the removal of impediments to cross-border commerce.

(2) Recognizing that China and Russia are neighbors and regional powers of Central Asia and, in the case of Russia, of the South Caucasus, and that those countries have in the past taken steps at odds with United States security interests, such as in the case of curbing the United States military presence in Uzbekistan, the continuation and expansion of a strategic dialogue with Russia and China, including United States participation as an observer in the Shanghai Cooperation Organization (SCO) for the purpose of promoting stability and security in the region.

(3) Acknowledgment of the importance of maintaining peace in the Caspian region for the prosperity and long-term stability of the countries in greater Central Asia, including calling on the Caspian littoral nations, including Iran, to step up maritime border delineation and demilitarization efforts, making the Caspian Sea a zone characterized by peace and cooperation.

(4) Encouragement of conflict settlement in the South Caucasus to further increase trade, specifically by supporting the restoration, expansion, and usage of the railroad through the Georgian region of Abkhazia, the highway through the Georgian region of South Ossetia, and the `Road of Peace' through the Azerbaijani region of Nagorno-Karabakh.

(5) Calling on the Governments of Azerbaijan and Turkmenistan to resolve the outstanding debt issue, which is hindering cross-border cooperation and development, and to jointly develop the Kyapaz (Serdar) disputed offshore oil field, which would contribute to the peace and stability of the Caspian region.

(6) Calling on the governments of the five littoral states of the Caspian Sea, Russia, Azerbaijan, Iran, Turkmenistan, and Kazakhstan, to establish a legal order demarcating the seabed and its resources based on a national sector regime, one that goes beyond the Iranian-Soviet treaties of 1921 and 1940, which defined rules for shipping and fishing, but not for oil and gas exploration and development.

(7) Assistance in the removal of legal and institutional barriers to continental and regional trade and harmonization of border and tariff regimes, including improved mechanisms for transit through Pakistan to Afghanistan and other countries in Central Asia, and the recognition of Turkey as a crucial energy transit and consumer country, vital for the successful development of large-scale energy infrastructure and cross-border projects.

(c) Economic Cooperation and International Trade- It is the sense of Congress that the United States Government should engage in the following programs and activities designed to promote economic cooperation and international trade with countries in Central Asia and the South Caucasus:

(1) Assistance in accelerating the broad and equitable privatization of state enterprises in a manner that does not promote oligarchical rule and the deregulation of national economies in a manner that allows equal access to nonresident companies to privatization procedures.

(2) Expansion of activity under the Trade and Investment Framework Agreement (TIFA), including reducing barriers to trade and investment, protection of workers' and property rights, fostering an environment of transparency and predictability, encouraging private sector growth and foreign and domestic investment, and removing impediments to increased intraregional trade and investment, particularly with respect to Afghanistan.

(3) Support for the completion of the review process of the Export-Import Bank of the eligibility of countries in the region for financing under the Export-Import Bank Act of 1945 (12 U.S.C. 635 et seq.).

(4) The facilitation of greater access for Afghanistan and other countries of the South Caucasus and Central Asia to loans from the Export-Import Bank.

(d) Economic Reform- It is the sense of Congress that the United States Government should engage in the following programs and activities designed to promote economic reform in Central Asia and the South Caucasus:

(1) Promotion of structural reforms in financial and banking institutions that increase transparency and efficiency and enhance macroeconomic stability.

(2) Promotion of the development of the Trans-Caspian Oil and Gas Pipelines (TCOP/TCGP), while encouraging the Governments of Azerbaijan, Kazakhstan, and particularly Turkmenistan to improve their business climate and investor confidence by fully disclosing their internationally audited hydrocarbon reserves.

(3) In light of greatly increased revenues from energy exports and the related dangers of macroeconomic instability and economic overheating, the establishment of a bank, the Caspian Bank of Reconstruction and Development (CBRD), where excess revenues can be funneled to infrastructure development projects in the region, and the tasking of the Export-Import Bank and the Overseas Private Investment Corporation with assisting in setting up and operating the bank.

(4) Support for countries in the region seeking qualification for Millennium Challenge Account (MCA) funds, including assistance in achieving necessary further reforms, recognizing that while Armenia and Georgia have qualified and signed compacts with the Millennium Challenge Corporation, other advanced economies of the region, such as Azerbaijan, Kazakhstan, and Kyrgyzstan, should be aided with more rapid improvement of their rankings to become first `threshold' and then `candidate' countries for purposes of such assistance.

(5) Support for countries in the region seeking accession to the World Trade Organization (WTO), furnishing assistance to facilitate economic reform for countries in the region, and extension of unconditional and permanent nondiscriminatory treatment (permanent normal trade relations treatment) to countries in the region, especially to Azerbaijan and Kazakhstan.

(6) Encouraging governments of countries in Central Asia and the South Caucasus and United States businesses operating in the region to adhere to the Extractive Industries Transparency Initiative (EITI), and in recognition that Azerbaijan, Kazakhstan, and Kyrgyzstan have joined the EITI initiative, encouraging other countries of the region to follow suit.

(7) In conjunction with increasing transparency of energy-related payments and revenues by the governments of, and companies in, the Central Asia and South Caucasus region, encouraging geological data on all energy resources and assets in the region to be made available to better understand remaining reserves, which would stabilize the global energy markets.

(8) Promotion of antimonopoly initiatives, particularly to diversify transportation routes for hydrocarbon and electric energy, and promotion of competition in these sectors.

(e) Infrastructure Development- It is the sense of Congress that the United States Government should engage in the following programs and activities designed to promote infrastructure development in Central Asia and the South Caucasus:

(1) Assistance in the development of the infrastructure necessary for communications, transportation, education, health, and energy and trade on an east-west axis in order to build strong international relations and commerce between the countries in the South Caucasus and Central Asia region and the Euro-Atlantic community.

(2) Support for activities that promote the participation of United States businesses and investors in the planning, financing, and construction of infrastructure for communications, transportation, and trade, including aviation, highways, railroads, port facilities, shipping, banking, insurance, telecommunications networks, and gas and oil pipelines.

(3) Support for the development of physical infrastructure for continental and regional trade, including the completion of the crucial core road system in Afghanistan, the linking of other regional roads with the road system, and working with other donors to complete east-west and north-south transport corridors in the region.

(4) Support for the addition of a crucial rail link in Kazakhstan from Almaty to the port city of Aktau, which would allow tankers and cargo ships to transport crude oil and other goods across the Caspian to Baku, and from there to Europe through Georgia and Turkey; this east-west corridor, which is already partially financially supported by the European Union within the Transport Corridor Europe-Caucasus-Asia (TRACECA) initiative, would greatly increase and accelerate cargo and container traffic across the Caspian Sea and from the greater Central Asian region.

(5) Support for the construction of energy transit infrastructure, including the Trans-Caspian Oil Pipeline (TCOP) in Kazakhstan, from Aktau to Baku, which would carry oil from the Karachaganak field, and the Trans-Caspian Gas Pipeline (TCGP), from Turkmenistan or neighboring areas of Kazakhstan to Baku, which would carry natural gas.

(f) Defense and Border Control Assistance- It is the sense of Congress that the United States Government should support regionwide initiatives in Central Asia and the South Caucasus to train and coordinate border control, law enforcement, and security forces between contiguous countries.

(g) Additional Mechanisms for Implementation of This Act and Achievement of Its Objectives- It is the sense of Congress that the United States Government should, for the purpose of further implementing, and achieving the objectives of, this Act, promote and support establishment of one or more of the following:

(1) A Silk Road Advisory Board, which would include experts with the necessary contacts and expertise in the region in sectors such as sustainable agricultural development, oil and gas extraction, energy transportation infrastructure planning and construction, democratic development, banking, finance, and legal reform.

(2) A specialized private sector energy consultancy, tasked with coordinating business community projects and promoting investment opportunities in trade as well as infrastructure for the production, transportation, and refining of energy and petrochemicals.

(3) An annual conference of the sponsors and beneficiaries of assistance provided pursuant to this Act to be held in conjunction with the annual United Nations Economic Council of Europe (UNECE) Energy Security Forum, which seeks to promote the security of energy supplies for all members of the Economic Council of Europe through well-balanced networks of energy transportation infrastructure, improvements in sustainable energy technology and efficiency, and through the integration of legal standards for transparent energy extraction, transportation, and pricing.
END

[Dover]

2. So the question we should be asking presidential and VP candidates

that will NOT be asked by the MSM or in the debates is this:

How does the next administration's foreign and domestic energy policies differ or resemble that laid out by the Silk Road Strategy?

[Lorien]

3. Kick nt

[kristopher]

4. The NEW Plan

http://www.wecansolveit.org/content/solution/clean_energy_economy/

Thousands of new companies, millions of new jobs, and billions in revenue generated by solutions to the climate crisis -- this is the clean energy economy we can adopt with today's technologies, resources, know-how, and leadership from our elected officials. Although our reliance on fossil fuels has created global warming, we now have the opportunity and obligation to begin a transformation towards a robust clean energy economy -- one that is supported by highly efficient industries, fueled by clean, renewable resources (like wind, solar and geothermal energy), and based on modern infrastructure and smart transportation planning.

A clean energy economy is a win for American jobs. A recent report showed that investment in a clean and efficient economy would "lead to over 3 million new green-collar jobs, stimulate $1.4 trillion in new GDP, add billions in personal income and retail sales, produce $284 billion in net energy savings, all while generating sufficient returns to the U.S. treasury to pay for itself over ten years."

Studies by leading research institutions have shown that if we invest in clean energy over fossil fuels, we will create more American jobs. A report released by the United Steelworkers and the Sierra Club, for example, found that thanks to the growth of wind energy, approximately 5,200 manufacturing jobs could be created in Iowa alone over the next decade. Additional studies have found that thousands more jobs could be created in other states that have suffered industry job losses and that welcome the opportunity to train workers for the new energy economy.

Even without strong U.S. leadership, clean energy is catching on around the world. Global investment in renewable energy climbed 25% in 2006 (from $80 billion to $100 billion). Three clean-energy industries—biofuels, wind, and solar photovoltaics—each surpassed $20 billion in revenue in 2007. Just last year, clean energy received $2.7 billion in US venture capital investment.

But, in order to fully transition to a clean energy economy, we need our elected officials to take action. Absent policies from government, the private sector may continue to invest in old-fashioned, polluting technologies. More than 70 coal plants without technology to capture carbon pollution are now being considered. If these projects go ahead, this will be billions of dollars invested in technology that is outdated and not “clean coal.” We need effective policies that unleash American ingenuity and innovation to propel growing clean energy industries forward.

America is up for the challenge. In the past two decades, the United States took the lead in the high-tech revolution, exporting trillions of dollars worth of products around the world and employing millions of American workers. We can do it again, this time with clean energy technologies, from solar panels to hybrid vehicles.

Each of us can play a role in bringing about this much-needed transition. Tell your business and elected leaders that the next generation deserves to grow up in a world powered by clean energy. Tell your mayor that you want city planning that encourages more efficient new buildings and sidewalks and bike paths that make it easy to walk or ride a bike. Tell your state and national officials to invest in energy grids that can deliver renewable energy to everyone. Tell your utility company that instead of old-style coal power you want to buy solar, wind, or geothermal energy. And tell your elected officials that you want national policies that encourage investors to make long-term commitments to clean energy.

This is the opportunity of our generation— to lead the transformation to an economy that is robust without causing environmental harm. Please get involved today.

http://www.wecansolveit.org/content/solution/clean_energy_economy/