European Tribune - Kazakhstan swimming on Oil, US interested

Soj unravels an interesting story of lust for Kazak's Oil since the Reagan years, worthy of a John Le Caree book -- law

Our Man in Kazakhstan

by soj
Thu Jan 12th, 2006 at 09:21:54 AM EDT

Have you ever heard of James H. Giffen? Probably not, as he doesn't even have a Wikipedia entry.
James H. Giffen Giffen Kazakhstan oil politics US politics

In March 2003, Giffen was arrested by FBI agents at New York's JFK airport as Giffen was about to board a plane to Kazakhstan. Giffen was charged on 62 counts, including mail and wire fraud, money laundering as well as violations of the Foreign Corrupt Practices Act (FCPA).

Giffen was the CEO of a small company called Mercator Corporation, whose business was representing American petroleum companies in former Soviet countries, particularly Kazakhstan. The Department of Justice's case stated that Giffen pocketed millions of dollars in fees from oil firms when he successfully bribed the Kazakh government into awarding them lucrative contracts.

Despite the fact that nearly 3 years has transpired, Giffen's case is still not yet resolved. According to the last news report (December 17, 2005), Giffen may never serve a day in prison because his case could be dropped on national security grounds....

So why all the fuss? Why did I spend hours researching this article on a case which hasn't even finished yet?

It's because of the oil. Reading between the lines, it looks like Giffen used his contacts to get very close to the hideously corrupt Kazakh government (who by the way, has an atrocious human rights record). Oil companies wanted to get a slice of that oil and therefore they had to deal with Giffen, whose job was to "broker" the contracts to make sure the Kazakh elite got their pockets lined.

How much oil are we talking about? A lot:

According to the US State Department and the Department of Energy, the Caspian Sea region is estimated to hold between 200 and 235 billion barrels—10 times the amount of the North Sea, roughly as much as Iran and Iraq combined, and about a third of the reserves of the Persian Gulf. Working side by side with the US government, major oil companies have invested billions of dollars in the region—but have yet to realize most of their profits.

Kazahkstan, in particular, has been a focus of US oil efforts. In the Spring-Summer 2000 issue of CovertAction, Karen Talbot provided the following overview, which, in light of recent events, was prescient:

"Kazahkstan is a huge country bordering on the Eastern shore of the Caspian Sea. It has vast petroleum resources. A substantial portion of the oil reserves is in the Tengiz oil fields in the Caspian Basin. Western oil companies are heavily involved in Kazakhstan. However, the only way to transport the petroleum to market is through existing pipelines in Russia, especially the pipeline that crosses Chechnya and terminates at the Black Sea port of Novorossiysk. There is a feverish activity to construct an underwater pipeline beneath the Caspian Sea, which would make it possible to bypass Russia. The major obstacle to this is a treaty requirement that all five littoral states of the Caspian Sea must agree to such a project. That includes Russia and Iran. US officials have been urging that the legalities regarding the Caspian Sea be disregarded in order to move forward with the trans-Caspian pipeline."

The Tengiz oil field on Kazakhstan's Caspian coast is one of the 10 largest oil deposits in the world, and was first developed in 1993 in a joint venture headed by Chevron, which owns 50 percent of the consortium. The resulting enterprise, Tengizchevroil, was later joined by Mobil (now ExxonMobil), a 25 percent owner. The government of Kazakhstan owns another 20 percent, and Russian-American joint venture Lukoil holds a 5 percent share. In November 2000, the Tengizchevroil partners and Lukoil established the Caspian Pipeline Consortium to build a 900-mile pipeline carrying oil from Tengiz to the Russian Black Sea port of Novorossiysk (this pipeline is now operational).

The same Western companies—notably ExxonMobil and BP Amoco—are also involved in exploring another field, Kashagan, which was discovered in the late 1990s. This field is estimated to hold at least 50 billion barrels, but more optimistic projections put the potential figure at 600 billion barrels—twice the reserves of Kuwait.

The key issue for American companies with investments in Kazakhstan has been at the heart of US foreign policy and war planning throughout the region: how to transport oil and gas out of landlocked Caspian/Black Sea fields, while 1) bypassing "hostile" regimes in Iran, Iraq, Afghanistan to the south, and 2) avoiding Russia, and Russian participation (economic, political and military).

The above was written in 2002, before the U.S. was in full control of Afghanistan and before the invasion of Iraq.

Connecting the dots, it looks like the U.S. administration (since Reagan) looked the other way at Giffen's dealings because A) Giffen was informing them of what he was doing and what was going on in Kazakhstan and B) because Giffen was making sure American companies got a major slice of the Kazakhstan oil pie, as opposed to Russian companies. Giffen's tactics were sleazy and corrupt, but the government of Kazakhstan is hideously corrupt and that's just the price of doing business. And frankly I do expect the case to quietly disappear, one way or another.

Since none of the oil companies have been targeted in this case (and are not expected to be), and the only other man charged (Williams) pled guilty on a count of tax invasion, you may be wondering why the government is prosecuting this case at all. Why go to all the trouble of years of litigation to convict a man who was helping out American geostrategic interests?

The only answer I can come up with is that the U.S. Attorney who was in charge of the case is one very honest man: James B. Comey.

You might remember Comey as the man who appointed Patrick Fitzgerald as Special Counsel to investigate the Valerie Plame leak case. And Comey was also the man who refused to sign off on the illegal NSA wiretapping program in 2004 when he was Acting Attorney General.

European Tribune - Community, Politics & Progress.


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