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Gloomy picture overshadows oil bonanza

By Michael Lelyveld, Asia Times, 8 May 1999

[Note: Radio Free Eruope/Radio Liberty is a capitalist propanda agency]

BOSTON - The latest issue of National Geographic magazine paints a dark picture of Caspian Sea development at a time when governments are predicting a brighter future for the region if their plans proceed.

Author Robert Cullen has drawn an intimate portrait of the problems on every shore of the Caspian, touching on issues of poverty, pollution and corruption in the midst of oil exploration and wealth for the privileged few.

While Azerbaijan's President Heydar Aliyev signed three new oil deals in Washington last week, there was reason to worry that the wealth will not be shared. As Cullen makes clear, the vast majority of the region's people are still struggling with privation, inadequate services and a ruined environment. So far, their lives have not been improved by the oil boom. The concern is that more development may only make matters worse.

As the center of the earliest oil discoveries of the last century, Azerbaijan is still saddled with the legacy of oil exploitation from the Soviet and pre-Soviet periods. The residue of past damage remains. The search for new riches brings only the hope of needed income rather than the promise that the Caspian can ever be restored.

The most poignant picture from the National Geographic article is that of a refugee who has tried without success to farm a patch of oil-soaked land near Baku. Nothing here grows, she says. She is unlikely to reap the benefits of either big business or the political power plays over which way the Caspian's oil should flow.

As in other parts of the world, opportunity comes first and the environment finishes last. Big western oil companies have invested heavily in offshore projects, bringing a greater measure of safety to their operations than those of the careless Soviet past.

But even the latest contracts, valued at $10 billion, have followed a familiar pattern. As in earlier deals, the big companies like Exxon and Mobil are pursuing offshore projects while leaving onshore wells to smaller firms like Texas-based Moncrief Oil International.

Industry sources say the larger companies have steered clear of onshore development for two reasons. First, their huge capital resources are better targeted at the big offshore investments that need them. But secondly, there is concern that the deep pockets of the big companies could become a target for lawsuits if they take over the onshore wells, with potential liability for the environmental damage of the past.

As a result, the big companies have left onshore projects to smaller firms which have fewer resources to target in case things go wrong. It is a good defensive strategy for investment, but not one that is likely to leave the hapless farmer better off.

The environmental risk of trans-Caspian pipelines has been largely overridden as an issue because of the economic and political benefits of building them. Part of the problem is that Russia first raised questions about the danger of running underwater lines through an earthquake-prone region. Because of Russia's dismal environmental record, it was assumed that the objections were political rather than a sincere cause for concern.

Residents also bear blame for environmental damage caused through over-fishing of Caspian waters, threatening the precious sturgeon on which many must survive. Again, the emphasis is on daily survival rather than the consequences for the future.

A third problem highlighted by National Geographic is systemic corruption in Azerbaijan and the prevalence of bribery. The magazine reports shakedowns by customs officials who victimize the poor. The implication is far different from that drawn last month by the Economist Intelligence Unit's publication Business Eastern Europe, which called Azerbaijan's corruption problem reliable. That magazine concluded that because the country is tightly controlled, there is just one person to pay off, and a single payment generally ensures good treatment.

The problems of pollution, poverty and corruption are all failings of governance, as the multilateral lending agencies are fond of saying. Institutions in the region are simply inadequate when it comes to providing fair or protective treatment to their citizens, in either good times or bad.

U.S. officials have spoken of institution-building in the Caspian countries, a process which is expected to take place gradually along with oil development. But there has been little question as to which comes first, both in time and in importance.

Business demands that the Caspian must first become a paying proposition before there are revenues to distribute. But there is little confidence that revenues will be used to solve the problems that these countries face.

If investment dries up, the region and its environment may be no better off than before. But there is also no assurance that simply pumping money in and pumping oil out will improve it, either.