(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