Transcripts
Assistant Secretary Dan Sullivan Leads Roundtable Discussion in Astana
Assistant Secretary Dan Sullivan
Principal Deputy Assistant Secretary Steve Mann
Deputy Assistant Secretary Matt Bryza
Ambassador John Ordway
U.S. Embassy, Astana, Kazakhstan
February 5, 2007
Assistant Secretary Sullivan: I’d like to start with just a brief statement and then also introduce my colleagues here, and then we would be glad to take your questions.
We are here as part of a team. I’m Dan Sullivan. I’m the Assistant Secretary of State for Economic, Energy and Business Affairs. I am traveling with my colleagues Steve Mann, who is the Principal Deputy Assistant Secretary of State for Central Asia and South Asia; and Mr. Matt Bryza, who is also a Deputy Assistant Secretary of State focusing on the Caucasus region. We are here to essentially begin the follow-up to the visit by President Nazarbayev to the White House in September that looked at ways to deepen our strategic partnership. We are here particularly to look at ways to deepen the U.S.-Kazakhstan strategic partnership in the area of economics.
First of all, what I wanted to do was acknowledge the leadership and the positive success that Kazakhstan has achieved through its economic reform program and its leadership in this area, particularly with regards to its economic growth, poverty reduction, and per capita income growth over the last several years. We look at Kazakhstan, particularly in the area that I deal in, in the economic, energy and investment areas, as a leader for regional economic development and growth in Central Asia.
We want to look at ways in which we can deepen our cooperation between the United States and Kazakhstan in these areas so we will have a full set of meetings today with many of the leaders of your government. We plan to discuss many issues with them and also be making sure that we’re very much in a listening mode to see what their priorities and the economic opportunities they mention and economic challenges that they mention, ways in which we can work together on both of these. In particular we’re likely to discuss topics such as energy cooperation and export opportunities for Kazakhstan, regional integration issues with regard to economic regional integration and economic links in the region, economic diversification within the economy here, and WTO accession issues.
After our visit here we will be also visiting Azerbaijan, Turkey, Georgia and then heading to Paris for an International Energy Agency Conference on Caspian energy issues.
So again, we’re very glad to be here, and we look forward to your questions and a good discussion today. I’m very proud to have my strong team here. This is one of the finest teams in the U.S. State Department traveling, so I’m glad that not only I, but they will be very interested in taking your questions.
Question: This is a Liter newspaper. As I could understand, you will be talking about Kazakhstan’s joining the BTC pipeline?
Assistant Secretary Sullivan: I think one of the issues that we’re going to look at is, we’ll be discussing options for exports of Kazakhstan oil and gas and our discussions will focus on several different options that we think have potential.
Principal Deputy Assistant Secretary Mann: Also remember that a certain amount of the BTC is owned by Kazakhstan-based shippers already. So because of that, there’s an existing interest in shipping oil into the BTC.
I’d just say also, the BTC is an enormous success that is very financially attractive for oil producers, so I think it’s natural for Kazakhstan-based firms to look in that direction.
Deputy Assistant Secretary Bryza: You also asked which other export routes, and of course we want to work with the government of Kazakhstan as well as Russia and the investors to expand the CPC pipeline. That’s very important. And then of course we’re looking at natural gas over time. As gas production increases here in Kazakhstan, there will be a desire to increase the options that Kazakhstan has to reach European markets.
In my capacity, as Assistant Secretary Sullivan pointed out, I also am responsible for our relations with Turkey, with Greece, as well as in general Western European energy policies with the United States. So we’re looking forward for when Kazakhstan can help Europe as well meet its gas demand.
Question: So, in that way you are talking about deliveries of Kazakhstan’s oil and gas bypassing around Russia, not through Russia? All those routes bypass Russia.
Assistant Secretary Sullivan: No, I think we’re again looking at multiple routes, multiple areas. I think one of the things that’s important to recognize is the importance of diversification. We think there’s a lot of interest in diversification of routes for a number of reasons, but we certainly are not going to talk only about routes that exclude Russia. We have the CPC which is something that I think there’s a lot of interest in expanding, and this is something that actually goes through Russia. So there are a number of different areas that we think have potential, but the important point is diversification of the routes, it's something that we think we share an interest in with the government of Kazakhstan.
Ambassador Ordway: There’s another important point which is that the current routes through Russia are full. There is no room for any more oil to go through Russia. There is an effort which thus far has not been successful to double the capacity of the CPC route through Russia. Over the next years Kazakhstan’s oil production is going to grow dramatically. The question is, where is that oil going to go if there is no additional capacity through Russia? So even without the diversification issue, it simply has to go some place to get to market. BTC is a very attractive outlet under those circumstances.
Deputy Assistant Secretary Bryza: And if I could talk about gas, today 100 percent, 100 percent of the gas that Kazakhstan exports, goes through Russia toward the West. It’s not bad that Gazprom provides so much gas. It’s great that Gazprom is able to keep Europe warm and in the light in winter. But as for Kazakhstan, why wouldn’t Kazakhstan want more options? It’s good for its own business. It’s good for its own economic growth.
Assistant Secretary Sullivan: As Matt said, 100 percent of the gas goes through Russia. I believe the figure is about 90 percent of the oil exports currently go through Russia. So by the same logic, the options for diversification seem to be something that should be of interest to our discussions today.
Question: In this regard I would like to ask you to share the opinion of American companies regarding the trans-Caspian pipeline through Azerbaijan, the gas pipeline.
Deputy Assistant Secretary Bryza: We’re talking to American companies, but not only American companies. We’re not here only to support American companies. The gas that’s produced here will never be consumed by Americans, probably, and maybe our companies will be involved, or maybe they won’t. We are here exploring these options, one, because Kazakhstan’s our friend. It may sound naпve, you may not believe us, but we care about Kazakhstan. It’s an important partner for us on a wide range of issues, and we care about our European allies and we see a natural partnership between Kazakhstan and our European allies on meeting Europe’s fundamental energy supply needs. But of course we hope that the American companies that are here will decide that that sort of an investment does make sense.
Question: When do you think this gas pipeline, this trans-Caspian pipeline may be implemented?
Assistant Secretary Sullivan: It really depends on when the gas will be available, when it will be produced here in Kazakhstan. It’s the supply of gas and its need to find a market that will drive the investment decisions. It’s not diplomats like us who will make those sorts of decisions. But hopefully that will be in the next five to ten to fifteen years.
Question: I am from Business and Power. I have two questions.
The first is, what is the oil price, the level of oil price that the U.S. is interested in seeing? And the second is, what’s your assessment of a pipeline to China and a pipeline from Russia to Iran?
Principal Deputy Assistant Secretary Mann: On the level of oil price, and the Assistant Secretary can give more information because he’s a greater economics expert than the rest of us, the United States fundamentally believes that the market should set oil prices in a free and competitive way.
Question: Based on interests of the U.S. economy.
Principal Deputy Assistant Secretary Mann: Let me go ahead and talk about the other pipelines. With regard to the China pipeline, the United States has always welcomed Kazakhstan’s efforts to diversify its oil exports. So we looked at the China pipeline in that optic.
Iran is different, because as a matter of U.S. law and U.S. policy, we are firmly opposed to any pipelines going into or through Iran. Those kinds of projects can open the companies to U.S. sanctions and I think those pipelines, because of that, those pipelines carry a higher degree of risk than in other directions.
With regard to pipelines in Russia, as my colleagues have mentioned, we’re proud to have worked so hard on the CPC pipeline. But note this. The CPC pipeline is the only pipeline in Russia with a quality bank. When Kazakhstani producers, when any oil producer looks at new export pipelines, I think that issue of a quality bank is something that must be high on the list of desired qualities.
Assistant Secretary Sullivan: Just to follow up on the point that Steve made, which is the correct one on market price, it is the point that we believe the market should set the price of oil. But one of the issues that we’re looking at while we’re here is to increase energy security for Kazakhstan, its neighbors, and the United States. One of the ways in which you do that is by increasing diversification of routes and supplies.
Question: I would like to ask you how exactly oil products in Kazakhstan would be delivered or transported to the BTC. Would now, after your visit, American companies come up with more specific projects in that area in delivering Kazakhstani oil to the BTC pipeline? Will it be an additional pipeline which is laid on the bottom of the sea, an undersea pipeline? Or will it be delivered by barges?
Assistant Secretary Sullivan: I think the answer to that is, what is commercially reasonable for the companies who would be discussing this with the government of Kazakhstan. As was mentioned earlier, given what the current export routes of oil are, and what predicted or anticipated production is going to be with regard to oil, there seems to be opportunities and options in possibly both areas, but this would be something that the companies will be focused on, again if it’s commercially reasonable. Steve, do you want to --
Principal Deputy Assistant Secretary Mann: No, I think that’s reasonably complete.
Deputy Assistant Secretary Bryza: I’d just like to add one point. It seems that right now the companies are first focusing on moving the oil across the Caspian by ship, but as volumes increase, they may get interested in a pipeline, and from our perspective when it comes to the environment, a pipeline would be much safer in the long run, as is generally the case, than shipping. Just because the risk is lower once you have a pipeline in place. But we expect the companies that are developing the barges to do so at the highest possible technical standards using the world’s best technology to make the shipping as safe as possible, of course.
Question: As you know the government of Kazakhstan is completing its negotiations on WTO accession and we intend to join this organization this year, in 2007. What do you think our prospects are?
Assistant Secretary Sullivan: As you know, the United States is very supportive of Kazakhstan’s WTO accession. We want to work very closely with the government to move forward on that, on the accession process, as soon as we can. However, you probably also know the WTO accession process can be very complicated, involving negotiations with several other countries. So to make a prediction on the timing I think is difficult. But we do place significant importance to the issue and we want to help Kazakhstan with its accession process as much as possible.
Question: About the environment, our new Minister of Environment and Protection says that oil producers in Kazakhstan, including American companies, violate Kazakhstani environmental law. Do you think that companies like Chevron should observe Kazakhstan’s environmental law?
Principal Deputy Assistant Secretary Mann: Of course all companies should, and we are absolutely confident that our American companies are second to none in the world on environmental protection. But let me give you a couple of other aspects of this. Our companies work in a very intense legal system in the United States so they are accustomed to giving the highest standards of environmental protection. Secondly, our companies are publicly traded companies on the major stock exchanges. Failure to observe environmental protections hurts their brand and hurts their stock price, so they have very practical reasons for giving the highest level of protections.
Question: Will the United States support Kazakhstan’s initiatives in development of IT technologies? And if so, how, in what manner?
Assistant Secretary Sullivan: I think we look forward to cooperating with Kazakhstan in a number of areas in terms of economic diversification. In terms of working with Kazakhstan to further develop the economic sector and the technology sector - this is something that we, and as importantly the U.S. government, American private sector companies I think would like to do as you move forward with your diversification plans, your economic diversification plans which we strongly support.
Thank you.