No Comment, Six Questions — November 7, 2007, 12:26 am

Six Questions for Steve LeVine, Author of The Oil and the Glory

No Comment, which has been reporting from Central Asia for most of the last week, has taken a close look at Steve LeVine’s terrific new book The Oil and The Glory: The Pursuit of Empire and Fortune on the Caspian Sea just out from Random House. The book is the result of a more than decade-long labor of love by Steve LeVine, now the Wall Street Journal’s star reporter for the oil industry. Steve manages to make a business tale read like a cross between Doctor Zhivago and a gothic novel. And he gives a great interview to boot.

steve-levine

1. Your book reads like a history of the development of oil in the Caspian Basin, from the first wells near Baku to the current large-scale international consortium projects in Azerbaijan and Kazakhstan. But you present it as something close to a gallery of rogues, in which some gain luster with distance and time. The play for the region’s riches looks to be a three-way affair in which established multinationals vie with sharp-elbowed rogues (the Deusses, Kozenys and Giffens) and the region’s political leaders. What is it about the Caspian region that has made it so attractive for the rogue business element?

It’s a pleasure to talk to you Scott. I’ve followed your blog since its launch as an emailed newsletter, and it’s superb.

There are Giffens and Deusses all over the world, in every type of business, and oil, because of the magnitude of the profit involved, has attracted more than its share throughout the history of the industry. Giffen and Deuss for instance had their forerunner in the 1920s in Henry Mason Day, a New York entrepreneur who bounced into Baku after the Bolshevik revolution and ended up as the personal trade representative for Azerbaijan, Georgia and Armenia. Lenin invited him to replenish the oilfields ruined by civil war, and, tromping all over the oilfield rights held by Shell’s Henry Deterding, Rockefeller’s Standard Oil and others, Day took the money and helped to revive Baku’s oil. And, like Deuss and Giffen, Day had his problems with the law. He had his demise in a little case called Teapot Dome, imprisoned for jury tampering.

2. You note that you owe thanks to Peter Hopkirk and others who wrote the narrative of the “Great Game”—the historical struggle between Britain and Russia over the great borderland between India and Russia proper. From the early 1990s, it was popular among many analysts to talk about the quest for mineral resources in the region as a sort of new “Great Game.” Of course, it was no longer a struggle for empire in the 19th century sense. Indeed, the empires were clearly in retreat as the ancient nations of Central Asia and the Caucasus reasserted themselves. Did the “Great Game” analogies miss the mark?

I don’t think they did, though the skepticism in your question was shared by many. For instance Strobe Talbott, the Clinton-era deputy secretary of state and point-man on former Soviet affairs, denied the Great Game comparisons to such a degree that his lieutenants for a time actually struck the term from documents that crossed their desks. Talbott’s aim – and that of his successors today – of course was to tamp down friction with the Kremlin by saying that there was no zero-sum Great Game, and that we were all in this together.

That was nonsense, and the Russians knew it. They knew – and know now – that they were in a new contest for influence in Great Game territory.

I think the skeptics over-think the analogy with the original Great Game. The key components of similarity are there – both bouts of the contest involved rivalries between great powers for the spoils of control of Central Asia. One bout involved Britain and Russia, and the second the U.S. and Russia. In the second, the U.S. sought to emplant the flag through the construction of energy pipelines, and later military bases.

Russia will always win this game, geography being the first reality of geopolitics. But it still had to do battle with the U.S. on this turf. And I believe the contest is not over. It’s Russia that has learned the lessons of the pipeline war – that power today is projected in the region through the control of the flow of energy. Russia is taking the battle right into Europe, through its proposals for the Nord Stream and South Stream natural gas pipelines. And it’s the U.S. that seems so far to have missed the lesson of Baku-Ceyhan – it is in my view only half-heartedly seeking to temper the consequences of a Russian pipeline victory in Europe. But the U.S. – and Turkmenistan and Kazakhstan – could wake up, and there could still be an trans-Caspian natural gas pipeline that would dilute some of Russia’s leverage.

3. If there is one biography that assumes the center role in your book, then it seems to be Jim Giffen’s, whom you dub “The King of Kazakhstan.” You end your narrative with Giffen’s arrest, with the prospect of an enormous corruption trial hanging over his head which threatens to implicate the Government of Kazakhstan, and you say that his deal-making days in Kazakhstan are over. As your book appears, Giffen’s trial still hasn’t occurred as lawyerly squabbles have consumed years. Are you certain that the last chapter has been written on Giffen? Do you expect major fireworks at his trial?

Actually I don’t say that Giffen’s deal-making days are over – I say he has been dethroned as the King of Kazakhstan. For what I think are practical purposes, President Nazarbayev has kept Giffen inside the tent by continuing his advisory contract with the government. Practical, because Giffen was such an insider that Nazarbayev would be extremely concerned what secrets could spill out in court were he to be tossed overboard.

Giffen is an irrepressible meddler. I would not be surprised if he is advising the Kazakhs right now in their contract dispute with Italy’s Eni and the other oil majors on the Kashagan oilfield. Even if the Kazakhs may be resentful of the west’s air of superiority and entitlement (which I think they are – resentful that is), Giffen is a master at working himself into a situation, and he may be advising them on what parts of the contract to rewrite, and especially what they can expect to gain notwithstanding the oil companies’ remonstrations. And they would be smart to listen to him. As an American who sat on the same side of the negotiating table years ago told me, Giffen knows precisely how much blood there is in the turnip, and how to squeeze it out.

I do expect revelations at the trial. In effect it’s not Giffen who is in the dock, but Nazarbayev, an unindicted co-conspirator who after all was the recipient of much of the $80 million in payments in question.

Once the judicial process is over, in whatever fashion, I think that will spell the end of Giffen’s role in the region, and really as the dealmaker he has been for more than three decades. Were he to be acquitted or serve only a short sentence, he could remake himself as something else, a la Michael Milken. But he will never be the gatekeeper to big oil deals anywhere, in my opinion.

4. You call your book “the pursuit of empire and fortune,” which sounds a bit like a pirate romance. You focus on a series of high-profile personalities and neglect many of the social and political aspects of the story. Certainly a major question is how the governments of the region cope with their newly found natural resource wealth; how they will avoid the “Dutch disease,” for instance, and will insure that when the last of the resources are extracted, they still have a sustainable economy that can assure a dignified life for their people. How are the governments of the Caspian littoral doing in this regards today? Doesn’t this need closer scrutiny from the press?

oil_and_glory

Hmmm. Pirate romance. I like the sound of that.

Yours is a point well taken. You need to understand how I approached the book. My starting point was the observation when I arrived in Central Asia in early 1992 that there was no contemporary reference work tying together the entire region – something of the ambitions of Peter Hopkirk or Dan Yergin, but profiling the events and personalities of the modern-day Caucasus and Central Asia in a straight-forward manner. What dismayed me was not just the absence of such a book, but what I considered a premature leap, mostly by political scientists, to analyze and prescribe policy before knowing almost any of the facts. What we needed – what I felt I could have sorely used as a journalist working in the region — was to have the facts on the table, chronologically and contextually, on the canvas of the entire former Soviet south.

But how to tie together the whole of this disparate region in a single narrative (as opposed to a Gibbonian series of volumes)? Something that would attract a broad audience, since I would like more people to know about this region. I turned to oil as that thread.

The resulting book as you know is more than 400 pages. I do ponder the questions you raise in the epilogue. But as you suggest, the social questions – in addition to the questions of dictatorship and torture — deserve book-length treatment. I hope that someone will pick up the mantle and do that companion volume.

5. Turkmenistan is the Caspian state that seems to be downplayed in your description. I assume this is because the multinationals have had such a difficult time penetrating Turkmenistan and securing contracts there. With the sudden death of Saparmurad Niyazov and the transition to a new government there, do you expect things to change? Is there a new game afoot today for Turkmen gas?

Niyazov, as you suggest, pulled himself out of the game quite early with his bizarre eccentricities. He does occupy the whole of Chapter 17 – on Unocal’s ill-fated attempt to build an oil pipeline from Turkmenistan, through Taliban-controlled Afghanistan to Pakistan – but then falls off the map. I do have a hunch that his successor, Berdymukhamedov, will be far more open to outsiders. There definitely is a contest for Turkmenistan’s natural gas, and the prospect of the country balancing its exposure to Russian leverage by supporting the construction of a cross-Caspian natural gas pipeline to Baku and on to Europe. That would more than anything open up Turkmenistan into the outside world.

6. It’s now fifteen years since you arrived as a reporter in the Caspian region. During that time there have been broad changes as the states became untethered from the old Soviet world and started to chart truly independent paths. But more recently, Russian investments and commercial interests have begun to pour into this region, in many countries far outstripping those of the west. At the same time, the Chinese are much more active in the scene, and South Asian interests are also ubiquitous. Will the Central Asian states maintain their autonomy and succeed in balancing these great power interests to their own advantage?

Initially these states and their leaders – Nazarbayev, Azerbaijan’s Aliyev and so on – were taken by westerners do be rubes. They proved themselves by and large, however, to be shrewd and worldly-wise. While one can be dismayed by the state of civil rights and political freedom in the republics, these two presidents, in addition to Georgia’s leadership, have demonstrated a keen capacity for playing one power off the other. I continue to be puzzled by Nazarbayev’s caution. Unlike Heydar Aliyev, he is unwilling to confront Russia directly. But I think he will manage Kazakhstan’s independence. I also think that Uzbekistan’s Islam Karimov is misunderstood in this fashion. The prevailing wisdom is that he has discarded the West and gone over to the Russians. But this is his style – he vacillates between one great power and another without forming any permanent alliances.

Steve LeVine’s The Oil and the Glory: The Pursuit of Empire and Fortune on the Caspian Sea is in bookstores now and can be ordered here. Steve blogs for the book at http://www.oilandglory.com.

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