More on Afghan pipelines

jonathan flanders jon_flanders at compuserve.com
Fri Sep 21 15:59:31 MDT 2001


Note,

 I insert some GWBush info in the middle of this article

 Jon Flanders


Afghanistan's pipeline dreams resurface
By Sarah Horner for eCountries

The ongoing civil war in Afghanistan has long stalled any ambitious plans
to build a potentially lucrative oil pipeline. In the last year, however,
talk of a new pipeline ha begun to resurface. But the old problems remain.

Building a oil and gas pipeline across the shattered country of Afghanistan
has long been the dream of many oil companies. But the ongoing civil war
always gets in the way.

In the 1980s, the country was officially estimated to be capable of
producing 100m barrels of oil. Untapped oil reserves are believed to be
considerably higher - especially given the Soviet interest in oil
extraction during its occupation of Afghanistan from 1979-89. Likewise,
proven coal reserves have been put at 100m tonnes but are reckoned to be
around four times that figure.

The biggest potential money-spinner, however, is a pipeline that would link
the huge untapped oil and gas reserves of the former Soviet state of
Turkmenistan with the energy-needy countries of South Asia, particularly
India. The most direct route is across western Afghanistan - which has
Turkmenistan on its northern border and Pakistan to the south.

A $6bn trans-Afghan pipeline was once the ambition of the US-based UNOCAL,
a energy company that often works in "difficult" countries.

**********************************

Here is a Bush-Unocal connection, as if we needed one.

JF

<<The family of Nicholas Brady has been allied for most of this century
with the Bush-Walker clan. During his Wall Street career at Dillon, Read,
Brady, like Bush, cultivated the self-image of the patrician banker,
becoming a member of the New York Jockey Club and racing his own
thorougbred horses at the New York tracks once presided over by George
Herbert Walker and Prescott Bush. Brady, like Bush, is a member of the
Bohemian Club of San Francisco and attended the Bohemian Grove every
summer. Inside the Bohemian Grove oligarchic pantheon, Brady enjoys the
special distinction of presiding over the prestigious Mandalay Camp (or
cabin complex), the one habitually attended by Henry Kissinger, and
sometimes frequented by Gerald Ford. When Senator Harrison Williams of New
Jersey was driven out of office by the FBI's "Abscam" entrapment operation,
Brady was appointed to fill out the remainder of the term to which Williams
had been elected. Brady is also reportedly a victim of dyslexia.

At the Regency in Lower Manhattan, Brady rubbed elbows each morning at
breakfast with Joe Flom and the rest of the the Skadden Arps crowd, Arthur
F. Long of D.F. King and Co., Marty Lipton, Arthur Liman, Felix Rohatyn,
Boesky's friend Marty Siegel, and Joe Perella of First Boston.

Brady's LBO experience goes back to the 1985 battle for control of Unocal,
the former Union Oil Company. T. Boone Pickens and Mesa Petroleum attempted
a hostile takeover of Unocal through a complex "two-tiered" tender offer by
which those shareholders willing to help Pickens to a majority stake in
Unocal would receive cash payment for their stocks, but those forced to
sell to Pickens after he had gone over the top would be compelled to accept
junk securities. In order to defend against this two-tier, front-loaded
hostile tender offer, Unocal management called in Brady's Dillon Read
together with Goldman Sachs.

Working with Goldman Sachs, Brady helped to devise a new form of
anti-takoever defense for Unocal: it was in effect a self-inflicted
leveraged buyout, a self-tender for a large portion of Unocal's stock which
the company offered to buy back at a higher price than the one stipulated
in the Pickens tender offer, although Unocal would refuse to accept any of
the shares held by Pickens. Pickens tried to overturn this selective
self-tender in the courts of Delaware, but he was defeated.

The self-tender sponsored by Brady's investment bankers was actually a
usurious chicken game: Unocal's tender offer to buy 80 million shares at an
astronomical $72 per share in comparison with the $54 offered by Pickens.
This meant $5.8 billion in new high-interest junk-bond debt for Unocal, in
another triumph of debt over equity. The premiss was that if Pickens
insisted on going ahead, he might very well take over Unocal, but the new
debt burden would mean that the company would soon go bankrupt and Pickens
would lose all his money. In this case, the Unocal management advised by
Nick Brady was more than willing to gamble with the existence of their
entire company, and thus with the livelihoods of thousands of workers and
their families, to ward off the advances of Pickens. In the end, this
device would load Unocal with a crushing $3.6 billion of high-interest debt
as a result of the plan advocated by Brady's firm.>>

George Bush: The Unauthorized Biography --- by Webster G. Tarpley & Anton
Chaitkin

Continuing pipeline dreams.............

 Representatives from UNOCAL and from their Saudi partners, Delta Oil,
frequently did the rounds of Afghanistan's warring factions in 1996 and
1997. In particular, relations with the Taliban movement, which was on the
rise during this time, were cultivated by UNOCAL.

The Afghan capital, Kabul, fell to Taliban forces in September 1996. UNOCAL
and Delta spent the next year trying to get a deal with the Taliban and
with the opposition Northern Alliance, which then controlled the northern
one-third of Afghanistan. The two companies formed the Centgas consortium
in October 1997 with the Turkmen government, Itochu of Japan, Hyundai of
South Korea and Pakistan's Crescent Group. The Russian firm, Gazprom, was
due to sign on at a later date. UNOCAL began to offer donations to aid
agencies in Afghanistan, although most turned down the funds. The company
also tried to get a training project of the ground that would train Afghans
to work on the pipeline.

It all came to nothing. As the hard-line policies of the Taliban gained
international notoriety - particularly the movement's harsh treatment of
women - UNOCAL was forced to distance itself from the extreme Sunni Muslim
group. In early 1998 UNOCAL finally announced that it was putting the
pipeline plan on hold, owing to financing problems. As long as Afghanistan
remained unstable, the company said, it could not proceed.

Vying with UNOCAL to build a pipeline was the Argentinean firm, Bridas,
which also managed to build close relations with the Taliban. The firm had
previously signed an agreement with the government of Burhanuddin Rabbani,
which was ousted by the Taliban in 1996 but is still recognized by the UN
as the government of the Afghanistan. But, Bridas fell out of favour with
the Turkmen government - each party took out lawsuits against the other -
and then faded from the scene.

But the pipeline dreams have surfaced again. In May 2000 there were reports
of discussions of the issue involving Afghanistan, India, Pakistan, Iran
and Turkmenistan. And the Taliban newspaper, the Kabul Times, recently
reported that the mine and industries minister, Mullah Mohammed Isa Akhond,
met representatives of the Central Asia-based US company, Central Asia Oil
and Gas Industry. The newspaper quoted company representative, Rafiq Yadgar
as saying: "Central Asia Oil and Gas Industry is ready to invest in
Afghanistan in the field of oil and gas extraction and meanwhile is willing
to build an gas and oil refinery in Afghanistan." He added that Turkmen
authorities are ready to co-operate with his company.

No doubt they are. The country's dictatorial president, Saparmurad Niyazov,
has long engaged the Taliban, in a bid to stem off cross-border
instability. Niyazov has squashed any squeaks of opposition but manages to
appease his poor population with promises of future oil riches.

"With the establishing of this project the mutual interest of both sides
will be secured," the Taliban's mine and industries minister told the Kabul
Times. But even the shared goals may not ensure that this plan, or any
other, will get off the ground. Afghanistan has been at war for more than
20 years. Its infrastructure is shattered, its economy in tatters and the
worst drought in three decades is compounding the misery of its
long-suffering population. The sole remaining opposition to the Taliban,
the United Front, is trying to hang on to the 5-10% of the country that it
still controls. Should any pipeline actually get off the ground it will be
a prime target for sabotage the United Front whose leader, Ahmad Shah
Massoud, excels at guerrilla tactics.

And wider, international interests may also get in the way. Iran would like
to see Turkmen reserves flow across its borders while Russia would like any
pipeline to head its way. Also staking a claim is the US, which would like
Turkey to be the end-point for Turkmen oil and gas. The pipeline plan looks
set to remain on the drawing board for the foreseeable future.
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