|                                                                                                                                                             |  | INTO THE CASPIAN BASIN                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsPublicationsSourcesof FinanceLeadsand EventsExchangeRatesState ExportsOtherSources** |  | February 1998by Stuart Schaag & Pam FeodoroffThe Caspian Basin is one of the most commercially important areas in the NIS.  Since the early
1990s, U.S. companies have worked intensively in the Caspian, not only on the region's vast
energy resources, but also on the infrastructure needed to support broader economic
development.  Transportation of energy to world markets has emerged as a major commercial and
political challenge for American firms in the region.  Consequently, the construction of a
diversified, commercially-viable transportation network has become a major focus of U.S.
Government policy towards the Caspian Basin.Any solution to the region's transportation problems must make sense economically.  It is the
private sector, after all, that will provide the investment and take the risks.  This is why U.S.
officials have urged countries in the region to work closely with the U.S. companies that are
developing innovative solutions to these complex problems.  Working groups in the producing
and transit countries, cooperating with interested companies, help integrate the many parts to the
transportation puzzle and ensure private sector resources are brought to bear.Commercially Viable Pipeline System
U.S. commercial diplomacy, in working to advance private-sector goals in this region, has
supported development of a commercially-viable pipeline system as the single most important
thing that can be done to advance development in the Caspian Basin.  More than two years ago,
the U.S. Government began advocating for multiple pipeline routes to transport Caspian oil and
gas to international markets.  Multiple pipelines were seen to make sense both for commercial and
for broader policy reasons:  they reduce the risks of interruption; they spur competition in
transportation tariffs and other costs; and the  export volumes involved more than justify their
additional capacity--to say nothing of the stimulus they provide to the region's broader economic
development.  In fact, a "dual-pipeline" approach was eventually adopted by the Azerbaijan International
Operating Company.The United States continues its efforts to advance private-sector goals in the region by advocating for an expanded
pipeline system that will take oil and gas from both sides of the Caspian to world markets.  To do this, both the
public and private sectors must develop an approach that takes into account the many different parts of the
Caspian  puzzle':  oil versus gas; East versus West Caspian development; national versus regional interests; energy
development and broader transportation and infrastructure needs; and today's immediate needs versus underlying
strategic and economic interests.Eurasian Transportation Corridor
The development of oil and gas pipelines is only the first step in building a greater "Eurasian Transportation
Corridor," which will include development of road and rail links and allow trade with the region to grow. 
Infrastructure development will grow in importance as the Caspian countries expand their ties to the countries
beyond the NIS.  As the economies of the Central Asian nations begin to grow and diversify, they will seek
markets in which to sell their goods and will purchase more from abroad.In fact, the Eurasian Transportation Corridor is already taking shape in small ways.   Oil produced at the Tengiz
field in Kazakhstan is now shipped across the Caspian on barges and transported by rail from Baku, Azerbaijan to
Poti on Georgia's Black Sea Coast (see BISNIS Bulletin, April/May, 1997, Page 7) for shipment to Western
markets.  This rail line is also used in the opposite direction, to ship goods and equipment from the Black Sea to
Baku.  Barge service also links Baku to Aktau, Kazakhstan and Turkmenbashi, Turkmenistan.  Since the summer
of 1996, Uzbekistan has shipped cotton by rail across Turkmenistan, by ferry across the Caspian to Baku, and by
rail to Poti.  Eventual development of a Chinese pipeline through Kazakhstan will serve as an additional catalyst
for increased trade between the Central Asian states and China, expanding the scope of the  "transportation
corridor" even further.  The Chinese and Kazakhstani governments have already made some improvements to rail
crossings on their common border, helping to facilitate the flow of goods and people.The challenge of developing a viable Eurasian Transportation Corridor, which can support transportation of the
region's energy and other resources, is a daunting one.  The task at hand now is to ensure that this process
continues to build upon its many successes through a focused and concerted public-private sector partnership with
the countries in the Caspian region.   It is through this important partnership that the United States can continue to
support trade and investment, economic and political reform, and the independence and stability of the Caspian
countries, as well as their integration into the global economy.  For more information, visit BISNIS Online at
www.mac.doc.gov/bisnis/bmibl.htm.Stuart Schaag and Pam Feodoroff work on Caspian Basin issues in the Russia and Independent States
Division of the U.S. Department of Commerce.This report is provided courtesy of the Business Information Service for the Newly Independent States
(BISNIS)