Caspian Oil is Good for Armenia, Melconian Argues in Armenian Forum

Caspian Oil is Good for Armenia,
Melconian Argues in Armenian Forum

Princeton, N.J. (3 March 1999)—Caspian oil pipelines represent "a millennial opportunity" for Armenia and Karabagh, argues Melcon G. Melconian, a widely respected oil industry analyst. Melconian makes his case in an article in the current issue of the journal Armenian Forum.

Melconian’s essay appears alongside an informative report on Caspian oil supplies. The report is by Onnic Marashian, the distinguished editor emeritus of Platt’s Oilgram.

Marashian’s Report

Onnic Marashian notes that the Caspian Sea basin has been "promoted as the next Persian Gulf." In promoting the Caspian, however, host governments and the Clinton Administration have used "grossly inflated" numbers.

Marashian makes distinctions between potential, possible, probable, and proven reserves and emphasizes that not all reserves are "recoverable." He argues that "the public relations hype inspired by geopolitics deliberately confused these geological distinctions." He supports his case with numbers and evaluations issued by various disinterested sources.

A further hurdle to Caspian oil supplies is the high cost of transporting Caspian oil, along with declining oil prices worldwide, Marashian writes. He acknowledges, nonetheless, that after all is said and done, Azerbaijan is still going to export a good deal of oil.

Melconian’s Analysis

Melcon G. Melconian’s article takes up the question of what all this means for Armenia and Karabagh. Melconian zeroes in on the question of reliability: "Reliability of oil supplies to world markets is the single most important consideration in oil companies’ investment and operating decisions," he writes.

Melconian notes that the oil pipeline routes supported by the West are within Armenia’s "gaze." He argues that "inasmuch as this strategic juxtaposition may convey a threatening aspect," it puts Armenians in a strong negotiating position. It effectively gives Armenians the power "to guarantee security of the pipeline routes." Without such a guarantee, oil companies will not have the reliability they require.

Melconian’s analysis flies in the face of the conventional wisdom that Azerbaijan’s oil resources represent an unmitigated disaster for Armenia. Karabagh is continuously advised to be "rational and realistic" and to settle immediately on unfavorable terms. Armenians are given dire warnings that Azerbaijan, as it becomes wealthier, will use its wealth to destroy Karabagh. Armenian commentators have been particularly concerned about the U.S.–supported pipeline route through Turkey.

Melconian’s emphasis on reliability is a reminder that oil-exporting states cannot afford to engage in warfare. Azerbaijan needs peace at least as urgently as Armenia and Karabagh do. By raising these issues, Melconian’s essay sheds light on the foundations of Armenia’s and Karabagh’s foreign policies.

The two articles appear in the Autumn 1998 issue of Armenian Forum: A Journal of Contemporary Affairs.

Vincent Lima

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