(A) Rising energy demands by newly industrializing countries in the Third
World increase the importance of the search for new energy sources.  The
countries of the European Union already import half of their primary energy
requirements.  This fraction that will rise to three.quarters by the year
2020.  One authoritative survey estimates that Turkmenistan possesses the
largest remaining undiscovered gas resources in the former Soviet Union
(FSU),1 and that Kazakhstan has half the undiscovered oil and gas in the
FSU outside Russia. Azerbaijan, Ukraine, and Uzbekistan all have major
deposits as well.i  Developing all these resources and bringing them
smoothly to market could stabilize global energy balances for decades, make
prices more predictable, and reduce Western dependence on Middle East oil.
The wise development of Central Asian energy resources will guarantee
Western energy security if the region's socio.economic development is
well.balanced.
(C) BUT CRS  Yet the present distress in Transcaucasia and Central Asia
will be remembered with fond nostalgia if wholly predictable demographic
and geographic sources of forthcoming conflicts are not addressed.  In
central and southwest Asia, where the median age is in the low twenties, a
demographic explosion is inevitable.  The population of the crescent of
countries from Turkey through Kazakhstan, already over a third of a
billion, will double in the next quarter.century.ii  People will migrate to
the cities..they have already started..and there  they will become a
lumpenized mass, while an increasingly educated middle class seeks a
greater voice in the political process.  To this demographic fact we must
add geographic facts.  Already there is an evident shortage of water,
whether for drinking or for agriculture, and there is little if any
currently uncultivated arable land on which to raise more food for that
exploding population.  An average annual growth rate of 5% would be
necessary in the GNP to cope with the demographic explosion, but GNP is
currently declining. // Indeed, oil and gas will be the engine of economic
development in CIS.space; but the region could fall under the shadow of
Islamic fundamentalism if development in the region is unbalanced as it
undergoes the "demographic transition"..the accelerated population growth
experienced by every industrializing country as death rates begin to
decline before birth rates do so much later.
(F) Western companies are concerned mainly with economic investment in the
region, but Western states must be concerned with its balanced economic
development and related ethnopolitical equilibrium.iii  Energy security
requires the region's balanced socio.economic development, and the latter
requires harmonious relations among the states of the region.  Only on this
basis can real progress be possible towards satisfying the basic human
needs of food, shelter, and access to medical care for the publics there:
not to mention the transfer of technology, expertise, and training for
which only the West can provide the vast amounts of capital and know.how
necessary.  If this is done wisely, then there is a potential for
diminishing or immunizing Central Asia from the destabilizing effects of
fundamentalism and demographic upheaval.2
(E) Despite the multitude of deals with Western companies being negotiated
with the NIS, only a few projects are operating.  Uncertainty about
pipelines, and the threat of political instability, block the path to
developing the strategic energy assets of Eurasia.  Natural resource
development, while answering the main problem, thus threatens to sow
geopolitical and geo.economic rivalry in the former Soviet space.  Indeed,
it has already done so.  In the attempt to put together the right
combination of financial and technological packages, including transport,
games are being played where some win and some lose.  However, as recent
advances in academic game theory demonstrate, simple utility.maximizing by
players in a game does not optimize the outcome.iv  What is needed now is
neither the ad hoc preventive diplomacy that seems to keep a lid on
potential conflicts, nor crisis management that keeps existing conflicts
from boiling over, but real preventive policy that is constructively
oriented toward the common strategic future of the region and the West.
----- jump to III -----
----- jump from I (make segway from E/F) -----
III.  Three Policies In Search Of Reality
[see footnote]3
1. "We can get the Russians to make sure we get what we need"
Following the "divide and rule" precept, Russia has manipulated the
Georgian.Abkhaz conflict and the Karabakh conflict in order to preserve
instability in the Transcaucasus.  But Russia could hardly act as a
guarantor of Western energy security in the FSU even if it were inclined to
do so.  Political conflicts within Russia itself among the Russian oil and
gas bureaucracies waste scarce institutional and economic resources and
inhibit the transnational coordination of investment and development
policies.  Russia's recent emphasis on CIS political cooperation has had
nothing to do with the regions of the Russian Federation itself.   CIS
activity was non.existent in connection with the Chechen War.  On Karabakh,
the OSCE contact group has worked feverishly to find a settlement.  The EU
has even dispatched its own mediators to Erevan in the attempt to promote a
breakthrough.  This is in their direct interest:  oil from Azerbaijan
exported through Armenia and Turkey would go straight to Western Europe.
The interminable delays in developing the oil industry in Azerbaijan in
particular are partly due to the country's domestic political turmoil, but
that very domestic instability was stoked by Russia in order to prevent
either Turkey or Iran from consolidating any influence in the region.
Western assessments of the situation in Central Asia immediately after the
disintegration of the Soviet Union tended to stress the competition between
Iran and Turkey, ignoring Russia, but Russia's interest in the region is no
longer low.  Russia is consolidating its influence in Central Asia through
proxy military force.  Although the officer corps is starting to disappear
through attrition and repatriation, the continuing presence of Russian
troops makes Russia also the preponderant military power.  Next to this,
the military role of either Turkey or Iran pales.  The Russian Army in
Central Asia is not a CIS army (although in conformance with CIS agreements
it has undertaken to guarantee the security of FSU external borders) but is
paid by the Russian state budget.  The successor organization to the KGB is
in control of the border guards, and Central Asian military districts
remain unchanged.  Lines of military supply and communication, command, and
control have not changed since the Soviet period, and Almaty is
headquarters of the ex.Soviet forces in Turkmenistan.
//who need? ABRIDGE// Russia also relies on economic ties to maintain
political stability, indeed the political stagnation, in Central Asia.
Uzbekistan and Turkmenistan were totally unprepared for economic autonomy.
Oil supplies from Moscow determine whether or not airplanes fly out of
airports in Kyrgyzstan.  In the summer of 1993, Russia halted exports of
fuel for agricultural machinery to Kazakhstan, injuring the harvest.  This
is one reason Kazakhstan is now building a domestic system of oil pipelines
(all present pipelines are export pipelines to Russia) and increasing its
refining capacity.  But Russian.induced political and economic stagnation
does not serve the West's interests.  The example of Iran illustrates the
danger of political stagnation in a situation of rapid industrial growth
and demographic explosion.  Just as in the Caucasus, where Russia has used
has the interests of other regional powers for its own ends (alternately
welcoming first Turkey and the Iran as intermediaries in Nagorno.Karabakh
according to the geo.ethnic balance at the time), so in Central Asia,
Russia is hardly about to forego its influence to meet Western
requirements.  The present situation bears this remarkable similarity to
the years immediately following the Bolshevik Revolution:  Moscow seeks,
despite early declarations of universal independence, to reassert of
Russian power in Central Asia; to exclude foreign influences where
possible; and, where that is not possible, to establish its own hegemony by
dividing and ruling.  Yet any putative Russian hegemony over CIS.space is
not in keeping with the international norms to which the West proclaims its
adherence; nor, frankly, is it in the West's interest either.  Indeed,
Russia's own security is more dependent upon Western multilateral activity
than is usually recognized.  Principally through multilateral instruments,
the West has in fact taken significant steps to assure Russia's security.
Through the Council of Europe, the West has helped to assure the status of
ethnic Russians in Latvia and Estonia.  Through the EU TACIS program and
the U.S. AID, it is assuring that Kazakh ethnonationalism will not drive
Russians off the land in northern Kazakhstan.  Western norms of human
rights aid the realization of Russia's concerns about ethnic Russians and
Russified non.Russians outside the border of Russia.
The West has also been able to work with Russia toward the demilitarization
and economic development of Kaliningrad, which two years ago was in a very
dire situation.  This resolution is due in large part to the work of the
EU, which has encouraged the implantation of a branch of a German bank
there, which makes loans now to small industry and for agricultural
development.  Moreover, the participation of the Kaliningrad region along
with St. Petersburg as Russia's representatives in the Council of Baltic
Sea States (not to be confused with the Baltic Council, which comprises
only the three newly independent post.Soviet republics) is a great force
for stability.  Here again the role of the West in contributing to Russia's
own security is often passed over or taken for granted.
What is significant about this is that when the West acts consciously and
in a coordinated multilateral manner through its own specific.purpose
international organizations, it is not passive or helpless as individual
Western countries often feel,
Effective Russian control over transportation of energy supplies risks
turning into control of the rest of the NIS; switching the taps on and off
is a way to bring recalcitrant satellites to heel.  But the West cannot
depend exclusively on Russia.  Indeed, the restriction of Russian influence
is also an interest of the West, whose desire for the economic security and
peaceful development of the NIS is compounded by its own search for energy
security.  Secure and dependable access to energy resources in the NIS is
key to the West, to Russia, and to the other NIS.  What the West needs and
wants for the former Soviet area is stability, predictable development, and
the mollification of any preponderant political force in Central Eurasia.
If it cannot rely on Russia to provide these, another strategy is to
mobilize the non.Russian republics politically to counterbalance Russia.
2. "We should mobilize the non.Russian NIS against Russia"
But that cannot work either.  If the West ever wanted to pursue that
strategy, it has by now waited too long.  Russia has tried to put CIS
peacekeeping on a multilateral basis.  In South Ossetia, Moldova, Abkhazia,
and Tajikistan, Russia participates in multilaterally established
peacekeeping arrangements, sometimes with participation of states that were
not CIS participants at the time of the agreements' signature.  During 1994
the CIS gained an institutional structure permitting it to function as a
consultative security organization.  In Karabakh, Russia sought moral and
legal recognition of the CIS as a conflict.management tool in keeping with
the principles and practices of CSCE/OSCE documents and the UN Charter.
The OSCE decision to send military observers to Nagorno.Karabakh, the first
instance of such a deployment, represents a Western recognition that CIS
mechanisms are not a likely vehicle for restraining Russia's interests as a
great power.  Since summer 1994 there have also been important moves toward
reinforcing the economic integration of Soviet successor states in the CIS
framework.  But it is clearly not in the West's interest that energy
security cooperation be undertaken within the institutional structure of
the CIS, because the West has no voice there.
At the same time, Russia's formal claims to special interests in the former
Soviet area shrank in 1993.1994 from the whole of the FSU to a so.called
Slavic Union with Ukraine and Belarus.  This represents a step towards the
normalization of the international profile of Russia as a modern state.  It
is likely that over time Russia will further redefine and restrict its
claims of special interest to the existing territory of the Russian state,
though with an increasing attention to the "Near Abroad" in Central Asia.
On that basis, it will be possible in the future for multilateral relations
among at least some of the Soviet successor states to go forward; and in
that future development, Ukraine will play a leading role, much as France
in the EEC at first hesitated to expand West European integration, and then
became one of the greatest proponents of that expansion in order to
restrain German influence.  As with France, for Ukraine this will occur
when the state is sufficiently secure to trust multilateral initiatives as
a way to restrain Russia's influence.  Once Russia has defined its interest
as falling totally within its own existing borders (or at least not in
Ukraine's), such a rejection of a Russian "Monroe Doctrine" will enable
Ukraine to seek multilateral cooperation confidently with other post.Soviet
states without the fear of ulterior Russian motives.  It is true that
Ukraine blocked the institutionalization of the CIS for a while, and it is
true that Ukraine was supported in this by other NIS.  But Ukraine balks at
all multilateral initiatives in CIS.space, including those designed to
"contain" Russia such as the proposal of President Nazarbaev of Kazakhstan
for a EurAsian Union (EAU).4
It is worth noting that Russia has unwittingly promoted multilateralism
from which it is excluded.  After being forced out of the ruble zone in
1993, Kazakhstani diplomacy established a trilateral customs union and
development bank with Uzbekistan and Kyrgyzstan.  This cooperation makes
good sense:  the national economies of the three countries complement one
another, and the three countries already participate in an economic and
financial union aimed in the first instance at currency stabilization.  The
EU is studying the feasibility of this developing into a payments union or
other multilateral clearing arrangement, and the Asian Development Bank has
shown interest in its future evolution.   However, post.Soviet economic
reintegration of the NIS with Russia is already occurring, partly because
of the West's failure up to now, to define and promote its own interests.
With the exception of the Baltic states, whose road to Europe is
increasingly clear, that reintegration between Russia and the NIS has
reached the point where it cannot now be avoided.
The question for the West is whether to continue to do next to nothing,
allowing that reintegration to become an iron lock (the Chechen example
should give pause here), or to act so that its own interests are reflected
in the way that reintegration occurs.  The TNCs cannot solve these problems
either with Russia or with the non.Russian NIS.  Chevron was powerless
against Russian delays in the pursuit of constructing a Caspian pipeline.
Russia's 1993 embargo on petrochemical exports to Kazakhstan at the height
of the latter's harvest, together with the Tengiz imbroglio, has pushed
Kazakhstan to begin construction of a domestic network of pipelines (from
the Western oil.producing regions to refineries in Pavlodar in the north
and Shymkent in the south) in order to decrease her future energy
dependence on Russia.  In the long run this may well be in Kazakhstan's
interest, but from the West's standpoint the net effect of the Russian
actions has been to push Kazakhstan's diplomatic horizons southward in
tandem with Uzbekistan, which has always promoted a joint Central Asian
foreign policy pointed in the direction of Pakistan, India, Iran, and the
Islamic world generally.
The integrity of the CIS external border cannot be defended without Russia
participation, but what Moscow has been implementing is in practice nothing
less than Russian control over the nature and pace of economic development
in the other CIS countries.  That is equivalent to an infringement of their
sovereignty..an economic Brezhnev Doctrine..and cannot be tolerated. An
aggrandized Russian sphere of influence in CIS.space would be neither in
the West's interest nor in that of the non.Russian NIS, nor for that matter
in Russia's in the long term.
3. "Let the TNCs and the free market do it all for us"
If the West cannot rely on Russia alone to guarantee the West's interests
in the FSU, nor count upon the non.Russian NIS to promote Western interests
by reflexively opposing Russia, it could still simply to rely on the TNCs.
But TNCs will not pursue investment projects in the absence of political
stability.  A precondition of that political stability in the FSU is
national security, and this is problematic for NIS states that are not well
institutionalized and have not penetrated their societies.  However,
intergovernmental cooperation in currency and financial affairs can promote
political stability, and so diminish economic disequilibrium.  Indeed, it
is precisely in financial and legal matters, and in integrating developing
national economies with prevailing international norms, that the
international organizations most heavily involved in the FSU excel.  Yet
Russia will not promote this.  The non.Russian NIS may wish to promote it
but do not have the means.  The TNCs will not promote it but rather wait
for it to appear.  TNCs inevitably depend on states: they constrained by
legal norms and will not generally act in a legal vacuum of uncertainty.
The general absence of national and international legal frameworks for
development ventures in the NIS is, other than the threat of political
instability, the most obvious obstacle standing in the way of energy
resource exploitation.v
The responsibilities of states are broader and deeper than those of TNCs.
The latter, motivated by quantifiable economic gain, have depended on the
former to assure the political stability necessary to realize that gain.
They have essentially been "free riders" profiting from states' capacity to
provide security goods, but not contributing to that security.  Yet when
Western elites and publics are myopic, only businessmen and TNCs are able
to drag their attention beyond their narrow national concerns.  Where
Western business goes, there Western governments will follow.  In the past,
states benefited from TNCs when the latter acted in consonance with the
states' strategic political goals.
At present TNCs are the only major source for investment that is necessary
to assure the political stability that comes from balanced development.
The publics and governments of both importing and exporting states have an
interest in promoting such growth, which is moreover in the interests of
the TNCs themselves.  The development of energy resources in the NIS is too
important to be left to the NIS and oil executives alone.  Oil companies
have economic clout but need an environment of investment stability,
businesslike ethics, and the necessary legal framework,  to promote that
development.  All that takes political clout, which only Western
governments can offer.
It is hardly in the West's strategic interests, or in the political
interests of its elected leaders, to allow Russia to consolidate a new
COMECON on former Soviet territory.  Indeed, security problems in the FSU
are intrinsically multilateral.  Ukraine is a case in point.  Any adequate
understanding of Russian.Ukrainian relations, for example, must include
Germany in a triangle.  Then.President Kravchuk of Ukraine played a "German
card" as early as February 1992 when, hoping to gain Germany's help in
joining European institutions, he decreed the rehabilitation of the ethnic
German nationality in Ukraine.  This theoretically allowed nearly a half
million Germans to return to Ukrainian territory, particularly in southern
Ukraine and in the agricultural sector, including resettlement in Crimea.
Germany thereupon decided to increase its spending on ethnic Germans in the
NIS, an option less expensive than resettling them in Germany.  But if a
Zhirinovsky.type figure becomes more successful in Russian politics, then
future Ukrainian.Russian conflicts could increase ethnic German emigration
to Germany.  This would lead to a rise in rightwing sentiment in Germany
that would put pressure on the German government to cooperate with the
Zhirinovsky type in Moscow.  Despite the great powers' recent formal
assurances of territorial integrity to Ukraine, the best possible security
guarantees for Ukraine remain massive economic cooperation with the Central
and West European countries.  That, however, is out of the question until
economic reforms, political stability, and a friendly financial.legal
environment come to pass.
Russia's control of the territory over which pipelines through which the
oil must flow has also given rise to conflicts of interest within the newly
independent states and the Russian Federation itself.  In early 1995
Washington signaled its diplomatic support for the Turkish route as a
counterweight to Russian influence in the region.  Under this plan, natural
gas from Turkmenistan as well as oil from northwest Kazakhstan could also
be pipelined through the Caspian to Turkey and across Turkey to the
Mediterranean.  The Tengiz project could generate annual revenues of $6
billion at today's oil prices when it is in full swing in fifteen years, of
which Kazakhstan's share would be $4 billion.  Kazakhstan could then
promote development of a range of industries from food processing to
metallurgy to petrochemicals.  Recent experience suggests that the West can
hardly count on Russia to facilitate this plan.  Indeed, neither Russia nor
the non.Russia NIS nor the TNCs can separately guarantee a single one of
the West's three energy security concerns in the former Soviet space:
either the financial environment, the transport, or the political
stability.  Sustained political engagement by the West in cooperation with
these other actors is necessary for that.
IV. What Is To Be Done
(B: to INTRO) It is frequently overlooked that no one party alone can
successfully exploit the region's oil and gas wealth.  The littoral states
of the Caspian Sea and Black Sea together form a region larger than Western
Europe that is central to the new geo.economics of natural energy
resources.  This new region opens onto China and the rest of Asia in the
East, Iran and Afghanistan and the rest of the Islamic world to the south,
and Russia and Eastern Europe to the north and west.  The technical and
technological problems of constructing the pipelines are inseparable from
the political issues of who will build and control the pipelines, who will
finance them, and where will they be built.  Russia, because of the
geography and the dependence of the other NIS upon it, can set its own
terms for development of FSU energy resources in the absence of Western
will.  If this is permitted, then the development of energy resources
outside Russia will be stunted.  The last five years is transparent
testimony to this effect.  If the situation persists, development will not
occur fast enough to defuse the demographic timebomb in Central Asia: a
political explosion will become foreseeable.  Today, only Western
governments working actively together with the oil companies and democratic
forces in the NIS can provide the vital incentives to promote economic
development and to provide the food, shelter, and access to medical care
that will render narrow ideologies impotent.  Without that cooperation the
necessary development of natural resources to assure the West's energy
security is unlikely.  The West's primary interest is to ensure a political
environment that not only restrains conflict but also implements
cooperation for common energy security.  Only the West can establish the
political incentives and promotes the technical means for this.
1. The Idea of EAOGA
A framework is needed that will allow capabilities to be pooled, costs
shared, and benefits distributed.  The answer is to establish a EurAsian
Oil and Gas Association (EAOGA, pronounced "yoga") to free the vast energy
potential of the NIS, guaranteeing the West's energy security and
preserving Western interests by short.circuiting the fuse of the
demographic timebomb in Central Asia.  The groundwork has already been
established for achieving Western energy security simultaneously with
EurAsian development.  It remains only to extend the work already
accomplished.  In the early 1950s France and Germany, in order to prevent
yet another European and world war, created the European Coal and Steel
Community (ECSC).  The ECSC placed under international control those
resources upon which conventional war.making depended.  EAOGA would be
inspired by the same project of guaranteeing national and international
security multilaterally; however, it would work differently.  EAOGA would
be an association, not a community.  This means that not just governments
would participate.  Transnational oil companies would be there.  From the
NIS, local political groups (including environmental groups) would be
there; international sponsorship of their participation will promote "civil
society" in these countries.5
EAOGA would build upon and implement the vision of the Energy Charter
Treaty (ECT).  Politically, ECT seeks to trade Western capital and
technology for CIS energy, diminish Europe's dependence on OPEC, encourage
post.Soviet reform by promoting free trade and assuring access to
resources, and guarantee nondiscrimination and transparency in the
application of international norms on industrial and commercial property.
Economically, ECT's main aim is to establish conditions for a functioning
energy market by mobilizing the private sector through intergovernmentally
established incentives.  ECT is a legally binding trade and investment
agreement intended to stimulate investment in resource.rich and
transit.rich countries and signed by all members of the OECD, the EU, the
FSU, and the ex.CMEA countries (excluding the Third World).  It will enter
into force because it requires ratification by 30 of the 52 signatories:
the EU members, plus its members.in.waiting, plus the NIS, plus the ex.CMEA
countries in East Europe together satisfy that limit, and they have all
been very favorable to the Treaty.  It will enter into force with support
from the U.S. government and the international oil industry, and it can
provide a point of reference for EAOGA's activity.
2. EAOGA in Theory
EAOGA itself need not be an international organization in the classical and
traditional sense.  Indeed, this may not even be politically feasible.
EAOGA would not create an international bureaucracy like UNCTAD, nor would
it seek to cede national authority to an international body like the Law of
the Sea Treaty.  Nor would EAOGA control FSU natural resources or their
extraction and sale.  A start toward such a lean institution could be made
with a limited series of international conferences like those called in the
early part of the decade on assistance to the newly independent states
after the USSR disintegrated.  That differentiated series of large
international meetings, structured as a set of Coordinating Conferences and
Technical Assistance Working Groups, could even serve as a model.  The key
and indispensable function of such meetings is to gather together in one
venue of a  large number of responsible decision.makers and highly
qualified experts, focusing their attention on issues that are not in
themselves political but which have strong political overtones.
<<R:...mideast?>>
EAOGA could be organized along working.group lines, at least at first, with
provisions for a broader general.purpose forum to deal with
energy--security that ECT did not address.  ECT covers issues of the
repatriation of capital, other capital transfers, and energy transit
through "GATT.by.reference" treatment, i.e., by "calling down" the relevant
articles into national tariff schedules.  These questions have never before
been addressed in the CIS context.  Indeed, no international treaty has
even addressed them in this manner.
EAOGA itself would promote international regimes for the development of
energy resources and ensure that the national systems of banking, finance,
and legislation in the NIS would dovetail with international requirements.
It would give the non.Russian NIS a collective voice advantageous to
Western energy security, decrease Russia's ability to be arbitrary, and at
the same time encourage Russia's positive cooperation and involvement
through concrete incentives and rewards.  EAOGA would do no more than be
the crucial catalyst to establish the rules of the game, create the general
framework for the necessary cooperative regimes, provide a forum for
coordinating crisis management, define criteria for guiding behavior, and
provide stable expectations for routine commercial and political
transactions. <<~?>> All the players in the game agree that these are
desirable.  Certainly it is enough for starters.
There are other ways that the development of EAOGA could follow on the
basis that ECT has established.  ECT requires the harmonization of national
legislation and international practice, and it has provisions for
implementing essential environmental protection.6  It extends a
national.treatment regime to all investment in the energy sector both
pre.existing and subsequent to the Treaty.  <<N:Exceptions are made for
investment in place on the day of the Treaty's signature, but no new
exceptions are to be made.  Existing exceptions are to be diminished over
time to the point of elimination.>>  Two extant problems that ECT did not
address were are the tremendous instability of legal regimes for foreign
direct investment, particular in the energy sector, and punitively high
rates of taxation.  Some NIS are dealing with these issues on a piecemeal
basis; however, concerted Western encouragement and support are needed.
This support will cost next to nothing but it will require conscious effort
to avoid a patchwork quilt of noncomplementary legal and financial regimes.
In view of this, it may be worthwhile to establish a new international
financial institution somewhat like the Bank for International Settlements,
originally founded after the First World War to track and account for
German reparations payments imposed by the Treaty of Versailles.
Like the BIS this new institution, a complementary technical component of
EAOGA.s broader mandates, would not have to be a bank per se.  It would not
have to have executive authority.  Its focal task, analogous to the BIS's
original charge, would be to track payments and financial arrangements for
oil and gas development in the FSU.  The chaos of the banking systems in
many of the NIS7 makes this most essential, but no one at present does it.
This new financial institution would not duplicate work already performed
by such organizations as U.S. AID and the EU.  Rather, it would serve as a
clearing house to evaluate what has worked where and what has not worked
elsewhere, and how well or how badly.  The EU already tries to act as
clearinghouse for all development projects in Central and Eastern Europe.
However, not even the International Energy Agency (IEA) set up by the West
in Paris after the 1973 oil embargo tries to do this for the NIS even in a
restricted sphere such as oil and gas development.  This new bank could
also coordinate the IEA's work with that of other international
institutions as appropriate, acting not only as an information
clearing.house but as an analytical center for EAOGA itself as well.
3. EAOGA in Practice
Such a EaogaBank, especially if it were given authority to grant an
international certification or accreditation for oil and gas development,
as just mentioned could moreover impose operational discipline upon banks
in the FSU.  Working closely with the IBRD and IMF, it would give the West
leverage on Russia byd providing a forum for joint cooperation among the
non.Russian NIS, as well as between them and the West.  Its evaluation of
the banking situation in the NIS could be the basis for a comprehensive
development not only of banking and tax law in those countries, but also
accounting, inheritance, property, insurance, and bankruptcy law, all of
which need to be developed and integrated with international norms.  The
worst sticking point in this regard, taken seriously by gas and oil
industry executives as well as by most governments but glossed over by most
academic research, is not even the question of enforcement but rather the
very absence of appropriate legislation in the NIS.  The NIS, including
Russia, generally fail to understand how Western investment decisions are
made, how bad an uncertain business environment is, and how little Western
governments influence investment decisions by Western TNCs.  (The absurd
and irrational decisions taken by the Yeltsin government, against the
advice of its own experts in 1992.93 concerning exploitation of the
Shtokmanovskoe, or Stockmann, oil and gas condensate field in Western
Siberia/Barents Sea, are precisely an example of this.)
===>>> Creating such a EaogaBank is one of three concrete steps that EAOGA
could take to resolve the practical problems outlined above in this
article.  Recall that there were three problem areas:  a positive
investment climate, reliable transport to market for the resources, and
political stability.  EAOGA would solve the first problem by helping to put
in place the transnational financial and legal regimes into the present
international.legal vacuum.8  Legal issues are the difficult starting point
because the NIS do not generally have their legal systems in order and have
no strong procedures in place where systems are established.  This
complicates the more traditional economic and political issues, which
themselves interact in the issue area of energy security.  For example, an
airing of all the issues involved in the Caspian pipeline construction,
including the contentious legal questions about the Sea itself would
promote commonly acceptable financing arrangements in particular.9
On that basis it could work toward solving the second problem, i.e.,
financing a rational and secure transport system.  The unique forum
provided by EAOGA would help to depoliticize transport and pipeline
problems, motivating their resolution.  The most difficult areas are often
environmental and legal.financial issues in particular.  These two field of
sub.issues frequently interrelate in practice, complicating the more
traditional economic and political issues, which themselves interact in the
issue area of energy security.  This is exactly where EAOGA can help most
in the beginning.  EaogaBank could thus have two initial tasks.  As a
financial institution it could seek to regularize payments transfers with
the West and particular among the NIS themselves.  <inter alia> As a
research institution, it could coordinate a comprehensive environmental
study of the environmental disaster that is threatened by the continuing
rise of the level of the Caspian Sea.  <<NOTE: If the Caspian Sea continues
to rise, and it could rise ten feet in the next 25 years, it would
seriously threaten to inundate oil refineries in Baku and petrochemical
plants in Sumgait.  The resulting pollution would be enormous and it would
contaminate rich agricultural land.vi  Environmental issues are difficult
because these are not typically included on the traditional agenda of
international affairs, yet they are extremely expensive, interdisciplinary,
and especially requisite of cooperation.  A comprehensive study of the
Caspian Sea ecology would create a shared understandingvii on the basis of
which all the issues involved in the Caspian pipeline construction could be
aired, including the contentious question of the Sea's status under
international law.  On the basis of a political consensus emerging from
that exercise, important in itself, and indeed during the exercise itself,
it would be possible to discuss frankly and openly different routes for the
necessary network of multiple pipelines in the Caspian/Black Sea
macro-region, and to arrive at commonly acceptable financing and
implementation arrangements.>>
The third issue mentioned above is the general problem of political
stability in the region.  EAOGA cannot assure the solution of this
directly, but again as a technical, relatively depoliticized forum, it
would serve as a venue for the dispassionate discussion and even resolution
of burning issues.  Take, for example, the issue of [Armenian]
intransigence over Karabakh, which is today the result of a domestic
political impasse in Erevan.  By inviting not just government
representatives but insisting on participation by "nongovernmental
organizations" from Armenia, and with the TNCs at least in the hallway,
EAOGA could bring to bear in one place a huge amount of political pressure
and moral suasion that could possibly change things, especially after the
recent elections in Armenia were judged by the OSCE to have been "free but
not fair."  EAOGA could even contribute to the solution of the
Transcaucasus problems.  As mentioned above, the critical element blocking
all progress at present in the domestic political situation in Armenia.
Recent elections which confirmed the uncompromising government of
Ter.Petrosian in power have been called "free but not fair" by the OSCE.
Opposition press organs and public rallies were suppressed in the weeks
preceding the elections.  The existence of a transparent multilateral forum
gives the Western governments added leverage by providing another tool
through which to put pressure on Russia and the other NIS as needed.10
EAOGA would thus have both the potential to act in all three of the issue
areas outlined in the second section of this article and the means to take
concrete steps to resolve specific issues currently outstanding in those
issue areas.  By providing a forum of transparency, including transparency
of information about the financing of foreign direct investment by TNCs,
EAOGA would afford the non.Russia NIS countries a common voice, decreasing
Russia's ability to be arbitrary.  At same time, this would not represent a
threat to Russia but indeed encourage Russian involvement and even promote
the cooperative interest of the oil and gas ministries in their struggle
within the Kremlin against other narrower.minded political forces.  Just as
the ECSC created the possibility of positive.sum bargains by giving the
parties incentives to cooperate and participate even though they had to
relinquish some things, so EAOGA as a loose institution would enable the
parties to compromise because they would get something in return.  An
example of this already occurring is the progress made in the Barents
Council toward resolving the dispute over the Shtokmanovskoe (Stockmann)
oil and gas condensate fields.11
V. Conclusion: Just Do It
(( this Para. to INTRO ?? ))  The West's failure to promote cooperative
energy security has already had deleterious effects on its interests in the
former Soviet Union, including the retarding of democratization and
exacerbation of ethnic conflict in Central Asia.  It has, for example,
objectively encouraged Russian intransigence (verging on disdain and
contempt) vis.�.vis Kazakhstan.  The Russian insistence on participation in
exploration ventures having the effect of delaying the start of production,
has retarded Kazakhstan's economic recovery from the era of central
planning and increased Kazakh ethnonationalism in the country.  Indeed, in
Kazakhstan, President Nazarbaev's dissolution of parliament and assumption
of emergency powers can be traced partly to his need to placate anticipated
Kazakh ethnonationalist discontent over his signature of bilateral
agreements with Russia, advantageous to the latter.  A corollary result has
been to motivate ethnic Russian out.migration from Kazakhstan, harmful both
to Kazakhstan (loss of expertise) and to Russia (increased social tension
due to social resource drain).  The West's development of oil and gas
resources in the former Soviet Union also has an indirect influence on the
multilateral resolution of military questions.  Well-planned foreign direct
investment can promote the conversion of former military.industrial plants
to civilian production, with positive effects on the evolution of political
and social forces in the CIS (such as the predominantly ethnic Russian
workforce in northern Kazakhstan).
The international community is also providing large amounts of purely
economic assistance to Russia and the other NIS, but this is of the
band.aid variety and is unmotivated by a clear vision of ultimate purpose.
The NIS lack of technical capability, and therefore need to tap western
companies for know.how.  The NIS countries cannot finance their own
modernization to exploit their own natural resources, so they also depend
upon foreign direct investment.  After the disintegration of the Soviet
Union, TNCs rushed to fill the economic vacuum.  Not only must the
resources be exploited; their benefits must be captured to the advantage of
balanced economic and social development to guarantee stable Western access
to the natural resources being developed.  Yet the NIS clearly also lack
economic structures that could digest these vast inflows of capital and
expertise.  Even when the NIS have significant bargaining cards when it
comes to negotiating with Western companies, they often do not have the
experience to recognize them or to play them wisely.  Add to this the need
to dovetail TNC development projects with reasonable plans for the
development of the various concrete economic sectors.
ECT is unprecedented in international commerce, law, and practice.  It sets
the terms for providing most.favored.nation status to all countries for the
exploitation of resources in the energy sector across three continents:
Europe, Asia, and North America.  It establishes the precondition for
harmonizing national and international legal regimes governing foreign
direct investment in this economic sector transnationally and
internationally.  It does this by invoking existing norms of international
law established by Western practice, and by motivating their integration
into national legal systems.  It provides a transition period to protect
the industries native to CIS territory.  Fears among the non-Russian NIS
that a multilateral organization to develop oil and gas reserves may become
a kind of CIS superministry can be assuaged through Western participation
and oversight, and the development of  specific modalities for this.
Russian fears of loss of "control" of CIS.space can be answered by the fact
that Russia's participation is the condition sine qua non.
Russian diplomacy is at a crossroads in her conduct toward international
cooperation.  The reason why is that since the Treaty of Utrecht nearly
three centuries ago, the Russian state has always been able to ally itself
either with the liberal West European states against the Central European
empires, or with these latter (or their successor states) against the
Western antimonarchists (or anti.Bolsheviks).  Today, Russia is unable to
balance between Eurocentric alliance systems because Europe is unifying
politically and economically.  The vagaries and ambivalences of Russia's
attitudes towards NATO and OSCE are indicators of her loss of this
diplomatic mooring.  The real test of Russia's multilateral pretensions
today will be whether she ceases to play the interests of her NIS neighbors
against those of other states or one another (Ukraine's interest in the
Druzhba pipeline versus first Turkey and then Greece, for example, or
exerting stark economic pressure against Turkmenistan or Kazakhstan).
Russian domestic politics will lead her international interests to wander
into Asia, but the West must provide incentives to assure that Russia is
anchored in Europe and the West, particularly as the trade patterns her
former CMEA partners in Eastern Europe continue to reorient themselves
towards the industrialized democracies.  EAOGA is an even better vehicle
for anchoring Russia economically and politically in the West than is the
G.7.  The West cannot deal with these issues ad hoc.  It has to take
strategic perspective.  Its false belief in its impotence to influence how
these situations evolve has prevented it from doing this.  One could
justifiably speak of "obsessional indecision."viii
Here is the incentive structure that has conditioned Western engagement
until now.  All "political" instruments at the West's disposal are either
pure types or combinations of three aspects of international life:
financial.legal, economic, or military.strategic.  (There is actually also
a fourth, .political-cultural. instrument involving the propagation and
activization of democratic participation of market.based competitive
entrepreneurialism.)  This list of instruments also represents a typology
of Western interests and of the issues that engage it in the NIS.  To
realize its interests, the West can spend any of three things:  words,
lives, and money.  Spending words (the deployment of "ideological" or
"cultural" instruments) entails small risk and costs very little, except
perhaps in prestige if the words are shown later to be hollow.  As valuable
as this tactic is for building civil society in the NIS, it does not
greatly affect the international scene in the FSU, and will not do so for
the foreseeable future.  Spending lives (i.e., the deployment of military
instruments) nowadays entails often unacceptable risk, especially if the
lives are American.  Spending money (i.e., the deployment of economic
instruments) can mean either the TNCs. investment of their own money, which
entails relatively great private risk, or governments spending the money
that they have collected from their citizens.  This latter entails
relatively little (public) risk.  If the funds have first been allocated to
a multilateral international financial institution, then what is involved
is the deployment no longer of economic instruments, which are primarily
bilateral, but rather of (international.)legal and financial instruments,
which are primarily multilateral and which have given a phenomenal return
on investment so far.  This return is sometimes overlooked because it is
hard to see and hear:  we know it has worked when the dog has not barked.ix
<to .for domestic...>
For domestic political and economic reasons, the only bilateral action open
to West states is piecemeal economic assistance and cultural.ideological
propaganda (again in a value.neutral, purely descriptive sense).   (For
example, Germany will not send troops to Moldova, and the U.S. will not
send troops to Karabakh.)  For all other tasks multilateral institutions
are needed.  This is clearest with regard to engagement in legal.financial
issues, where further multilateral instruments are useful despite those
which already exist.  Because private capital seeks a stable investment
environment, economic relations with the West require, in order to create
legal and financial stability, prior engagement by both the West and the
NIS (including Russia).  Precisely this kind of engagement is what has, in
the last five years, been most successful, least costly, and least risky.
Present successes are to be found in Latvia, Estonia, and probably
Lithuania; oncoming successes in Kazakhstan and Kyrgyzstan; and potential
successes in Ukraine and Belarus (though more attention is needed
urgently).  The U.S. has supported ECT exactly because it offers a lost
cost way (in terms of taxpayer dollars) to help the CIS economies to
rebuild, as well as a source of natural gas and oil other than North Africa
and the Persian Gulf, to energy hungry Western Europe.  The common sense in
founding EAOGA is clear.  All major contestants in this, the Greatest Game
in Eurasia, are tired of playing without a set of rules or, worse still,
with rules dreamed up by the competitors on the fly.  The rules will not
determine the result of the game.  But as the TNCs' hesitation shows,
without rules everyone is just going to stay home and make their own.x
Since we are all condemned to live in the same house anyway, the only
result of that way of proceeding will be collective cabin fever.
The ripeness of the moment is passing.  The more different paths the NIS
take (an inevitable development over time and not intrinsically a bad one),
the more diversified Western interests will become.  Each Western country
will look to different post.Soviet partners, following either its capital
or its historical ties (or its instincts or its idiosyncrasies).  If the
opportunity for concerted action in favor of the common good, both East and
West, is not to pass irretrievably, action must be taken now.

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