Oil puts Kazakhstan on Cheney’s itinerary

Marketplace Staff May 5, 2006

KAI RYSSDAL: It’s not the typical undisclosed location . . . but Kazakhstan is about as far away from Washington as you can be and still make news. Vice President Cheney was there today. The fourth top administration official to make the trek to Central Asia. There was some politics of course. Iran. And the war on terror. But there was some business to be done, too. Marketplace’s business editor Cheryl Glaser explains.

CHERYL GLASER: Check the map, and you’ll see that Kazakhstan is a mountainous country sandwiched between Russia, China, and Iran. What’s its big attraction? Oil — and lots of it, says Barbara Shook of the Energy Intelligence Group:

BARBARA SHOOK: We’re talking about possibly a maximum of 100 billion barrels. That’s equivalent to about what Iraq has.

Shook says Western oil companies have been doing business in Kazakhstan for years.

SHOOK: Chevron, ExxonMobil, Total, ENI— which is an Italian company.

Add to that Haliburton, the oil-field services company Vice President Cheney used to run.

So why the sudden flurry of interest in Kazakhstan on the part of the White House? The Bush Administration is looking for reliable energy sources outside the Middle East. And energy economist Phil Verleger says the White House wants to stop Russia from controlling Kazakhstan’s oil and natural gas.

PHIL VERLEGER: The White House has suddenly realized that the Russians really believe the Cold War is still going on and that while they lost the first battle of the Cold War with the break-up of the Soviet Union, they have the potential to win the second.

A battle, Verleger says, for energy reserves. Earlier this year, Russia disrupted natural gas shipments to Europe as part of a spat with Ukraine. But getting oil out of Kazakhstan is tricky. The country’s landlocked. Most of its oil right now is piped out through . . . You guessed it: Russia. So the White House is pushing for a new pipeline route. But trying to outfox Russia can be tough, says Verleger.

VERLEGER: The Russians for years have been the world’s chess champions. They’re very smart about this. And they’re trying to come up with a strategy that ensures their wealth.

And with crude oil going for 70 bucks a barrel, there’s more at stake here than just a game of chess.

I’m Cheryl Glaser for Marketplace.

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