IRAN AND CHINA SIGN AGREEMENT TO EXPLORE OIL IN THE CASPIAN SEA

On January 18, Iran's North Drilling Company (NDC) and the Hong Kong-registered China Oilfield Services Ltd. signed an oil-exploration agreement for management, repair, and maintenance of the Alborz semi-floating platform, currently being constructed by the Iranian Offshore Industries Company.

A three-year contract with an estimated cost of $33 million will enable Iran, with China's help, to move its exploration activities to the deep waters of the southern Caspian (MehrNews, January 20). Until now, Iran has been unable to explore fields that were deeper than 90 meters.

In November 2005, the Iranian Offshore Industries Company (Sadra) announced that 97% of the Alborz platform had been completed and the rig would be ready for oil exploration operations in February 2006 (Iran Daily, November 24, 2005).

Tehran has not yet made public where exactly in the Caspian Sea it plans to use its Alborz platform. But the rig's name indicates that the drilling might take place in a contested offshore oil and gas field in the southern Caspian, which Azerbaijan calls Alov and Iran calls Alborz. This could lead to another crisis between Baku and Tehran.

In July 2001, Azerbaijan and Iran came close to confrontation when an Iranian gunboat threatened and chased away a BP-operated research vessel that was exploring the Alov/Alborz field. All exploration activities in this area were halted following the 2001 incident.

Azerbaijan and the United Kingdom signed a production-sharing agreement to explore this field in 1998. Iran, however, has refused to recognize the deal. Tehran claims that the agreement is not valid due to the undetermined legal status of the Caspian Sea.

Since the collapse of the Soviet Union in 1991, the legal status of the Caspian Sea has been in limbo. Only three -- Azerbaijan, Kazakhstan, and Russia -- out of the five littoral states were able to agree on how to divide the seabed of the Caspian. Iran and Turkmenistan adopted different positions, although Turkmenistan has been moving closer to the position of the three states.

Iran claims that the Caspian Sea should be divided into five equal parts with 20% for each littoral state. Azerbaijan disputes Iran's claim and argues that the division should be done according to a median line, which leaves Iran with only 12-13 %. The trilateral agreement signed among Azerbaijan, Kazakhstan, and Russia is based on the median-line approach, which has weakened Iran's stance. But Tehran insists on its right to 20% of the sea, as only then does the Alov/Alborz field fall under Iranian sovereignty.

In September 2005, Abbas Maleki, director of Tehran's International Institute for Caspian Studies, stated that Iran would not wait for a final resolution of the legal status of the Caspian Sea. "Iran is already active," added Maleki (IranMania, September 18, 2005).

In fact, the negotiations over the legal status of the Caspian Sea were used by the Iranian government as an opportunity to buy time and develop its deep-sea technology. During this lull, Iran has also negotiated with foreign companies, including some European and Brazilian energy firms, that were interested in taking part in exploration work (IranMania, September 18, 2005).

The executive director of NDC, Haidar Bahmani, declared that Iran chose the Chinese company "due to its technical capabilities and more reasonable offer in comparison with its European rivals" (MehrNews, January 20). Nonetheless, the timing of the agreement led many to believe that the contract had a political agenda as well.

As the members of the International Atomic Energy Agency (IAEA), scheduled to meet on February 2, seriously consider referring the Iranian nuclear program to the UN Security Council, Tehran hopes that Beijing will veto potential economic sanctions against Iran, which could damage China's energy interests in this country.

On January 20 the Governor of the Central Bank of Iran, Ebrahim Sheibani said, "We are moving our foreign exchange reserves to countries that we consider to be safe." Since most of the money is going to banks in Southeast Asia, and potentially China, observers have interpreted this move as Tehran's attempt to ease the impact of a probable UN economic embargo (Echo-Az, January 24).

In 2004, Beijing and Tehran signed a $100 billion mega-gas deal that enabled China to import as much as 10 million tons of Iranian liquefied natural gas (LNG) annually over a 25-year period (Asia Times, November 6, 2004). Hence, the Iran-China energy cooperation is not accidental.

The recent Iran-China deal to develop oil fields in the Caspian Sea, however, may spark another crisis in the region if Iran unilaterally decides to start exploration of the disputed Alov/Alborz field. To confront Iran, Azerbaijan is likely to turn to Turkey and the United States for help, which will further escalate the situation in the region. Baku may also try to approach China and improve its bilateral relations, hoping that Beijing will not attempt to drill this field before the legal status of the sea is decided.

A lot of Iranian and Venezuelan oil is not being sold on world markets. Many times it's sold at a discount to curry favor with a particular nation. Forbes mag had an article how Cuba sends indentured doctors to Venezuela to minister to the masses of the poor who love them. In return Castro gets 100,000 barrels of oil a day from Venezuela.

We get our oil from the freely traded markets while China's lining up long term supplies under contract. Yesterday Iran abrogated a contract with India that was selling them oil a t $31/barrel

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Oil and gas are playing a growing role in world politics. Oil has become the lifeline of the modern industrialized society. The West has grown increasingly dependent upon the oil of the Third World countries. Russia has also become a very important supplier of gas to the Western European countries. As developing countries (like China and India) develop heir economies, their need for oil is also rapidly growing. They are trying to secure supply for their growing needs. This is leading to increasing competition for the existing resources. This is also giving more power to the oil-producing countries.

We have seen how Venezuela is gaining more clout in South America. Hugo Chavez has used oil as a very powerful leverage to advance his political goals. He has become one of the leading political figures in South America. He has used the oil money to oppose the policies of traditional globalization. He has spent the oil money for social welfare programs, and has shared the oil wealth with the poor people of the country. Evo Morales, the newly elected president of Bolivia, wants to follow footsteps of Hugo Chavez.

Oil has also played a very important role in the Middle East politics. Iran and Iraq are very good examples. Iran has become more and more defiant as its share of the Middle East Oil has grown. Both China and India have signed long-term oil deals with Iran for billions of dollars. It will be very difficult for China and India to vote against Iran. Iran is buying billions of dollars worth of arms from Russia. It has deals to develop nuclear energy with Russia. It will be very difficult for the Western countries to impose sanctions on Iran in the Security Council. Russia and China can veto any resolution against Iran.

Iran can cut back on its oil production and that can increase the prices of crude oil, which can jack up the prices of oil. This increase in the price of crude oil can hurt the western economies, which have become more and more dependent upon the Middle East oil. The terrorists have also learned to use oil as a weapon. They have attacked oil installations in Iraq and disrupted the oil production and supply. This has led to deepening of the crisis in Iraq and has led to an erosion of authority of the pro-American government. This is also leading to instability and anarchy in Iraq and may eventually lead to civil war and disintegration of Iraq.

In another example of oil playing a role in the world affairs is the visit of the Saudi King Abdullah to China and India. The Saudi king knows that China and India are going to become two of the biggest customers of the Saudi oil. China became the first country the king visited. After China, the king went to India where he was the chief guest at the Republic Day celebration in India.

Russia has found out that its vast energy resources are a powerful tool in pursuing its diplomatic objectives. Russia is increasingly flexing its energy muscle. A few years ago, Russia's economy was on the verge of collapse. But now, thanks to the growing demand for gas and oil, Russia has surplus budget. This newfound economic strength has revived Russia's desire to regain the status of an important player in world affairs. Russia has put pressure on its neighbors to reconsider their pro-Western stand. Russia, together with China, is trying to balance the influence of the Western powers. Russia traditionally has always had very close relations with India. A closer relationship between Russia and China will act as a big impetus for improved relations between India and China. Eventually, a grand alliance between Russia, China and India may lead to a new world order, where relations between the West and the East are more balanced.

It was the greed of the oil companies, which prevented any alternative source of energy for oil. It has made the whole world more dependent on oil. This has not only had serious political implications but also has compounded the environmental damage and global warming. Alternative sources of energy can be developed which will cause much less damage to the environment and in the long run, can also be cheaper. However, as long as we are governed by the traditional globalization, the welfare of humanity will not become the topmost priority. The traditional globalization has actually encouraged its opponents and achieved exactly the opposite results to what it intended.

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