Sell Your Oil Shares

I just got back from Houston on the book tour, and managed to get in some private conversations with oilmen I know from the Caspian. As we've been discussing over the last week or so, the private talk within the industry is that short of an evolutionary shift in business plan the oil majors as we know them are done for.

Oilmen know that, short of an innovation of the magnitude of the invention of the transistor, Big Oil has little growth ahead of it in the next five years, and no growth – and probably absolute shrinkage – over the next decade and beyond.

The reason is that the oil majors can't maintain the foundation of their value – how much oil and natural gas they possess in total, or their so-called booked reserves. State-owned oil companies in Russia, Iran, Saudi Arabia, Venezuela and elsewhere control between 80% and 90% of the world's oil reserves, leaving the oil majors the remainder, and that is a slender reed indeed. Some of the majors may actually replenish their reserves for the short term, or even in some individual years beyond that. But they can't do so over the long term.

So why are oil shares largely buoyant this year? Because Wall Street hasn't yet seemed to absorb the fact that the current explosion in oil company profits is smoke – a deception. It's not company growth, but the oil price bubble. But it will figure it out.

And that's why, for those who own shares of the big integrated oil companies, it seems best in my opinion to pocket one's profit from the price run-up. Oh, there's some time, some more profit to be eked out because of the price bubble, now heading to break the inflation-adjusted 1980 record of $101 or so, depending who is doing the calculations.

But look for the smart money to start migrating elsewhere. If one wished to stay in oil, for instance, one could go for where the real, long-term growth will come – in the service companies like FMC, Schlumberger or Halliburton, or pure drilling plays.

These companies are going to be used more and more as a replacement for Exxon, Chevron, BP, ConocoPhillips, Shell, Total -- the states will identify the fields to be developed, and simply hire the service companies as contractors to bring them to market. It is they who will pocket the big margins, and not Big Oil.

The oil companies are innovators, so there is always the chance that one or more of them will discover some new way of making cars move, cities light up and factories work. But short of that, they are dinosaurs.

The Pipeline War

FYI for those interested in the U.S. failure to match Russia so far in the European pipeline war, Foreign Policy has a good interview with Zbigniew Brzezinski, the cold warrior and former National Security Adviser.

In it, Brzezinski, who served under Jimmy Carter when the Soviets invaded Afghanistan, calls reliance on Russian energy "a potential long-range threat" to Europe. He urges the West to head this off, for one thing by making sure that Caspian Sea natural gas gets to Europe. "If Europe and the United States jointly do not do what is needed to obtain great diversification of access to energy, Europe could become politically vulnerable," Brzezinski says.

Europe relies on Russia for more than 30% of its oil and natural gas. In the pipeline wars, Russia has proposed three primary natural gas pipelines: one strengthening its effective monopoly on Turkmenistan's and Kazakhstan's exports, another combining their natural gas with Russia's own and shipping it to northern Europe ("Nordstream") and a third shipping the gas to southern Europe ("South Stream").

Together, these pipelines would further isolate Central Asia from the rest of the world, and they would put Europe further at the mercy of Russia, which has compiled a record of using petro-power as a blunt instrument for political and economic influence.

A good start on leveling their impact would be the proposed trans-Caspian pipeline, which would carry Turkmen, Kazakh and Uzbek natural gas to Baku and on to Turkey for onward shipment to Europe.

For it to get off the ground, the Turkmen would need to be prepared for serious heat from Vladimir Putin.

And the U.S. would have to assure the republic that Washington would stand behind Turkmenistan as it did with Azerbaijan to promote construction of the Baku-Ceyhan pipeline, which last year shattered Russia's monopoly on oil exports from the region.

America's Unnoticed New War

As I've traveled this week for the launch of The Oil and the Glory, I've been asked if we're at the start of a new Cold War with Russia. Even my wife says that I at times seem to regard Russia as the devil.

The answer is no.

Yet, the West and Russia are undeniably in a new battle for influence and power.

But there is a difference in how their armies are arrayed: Russia, in the person of Vladimir Putin, has fought brilliantly so far. But the U.S. seems barely to have noticed that it has a new war front in addition to terror.

The war is over the flow of oil and natural gas from the former Soviet Union to Europe. It's similar to the 19th and 20th century struggle for mastery of sea lanes in that the conflict is over who will control arteries vital to everyone.

The stakes are high -- influence in Europe, on whom the U.S. relies for support on political and economic issues around the world. And, so far, Russia has the pronounced advantage.

The odd thing is that the U.S. actually won the first battle of this war, but it's Russia that's learned the lessons and applied them.

The U.S. victory was the construction of the Baku-Ceyhan oil pipeline, linking the Caspian and Mediterranean seas. Its launch last year spelled the first break in Russia's nation-breaking economic stranglehold over Central Asia and the Caucasus, sending about 1 million barrels a day of oil to the West.

Yet, while the U.S. has now turned its focus to missiles, Russia is fighting the new war by building its own ingeniously plotted energy pipelines to Europe. They have names like Nord Stream and South Stream, and there are more.

This is Russia pursuing its national interests -- the market dominance of Europe for Gazprom, its natural gas giant, and its oil companies.

That's not evil. It's devilishly shrewd. And it's been all but unanswered by the U.S.

Guest Column: Craig Newmark's Lesson for Central Asia

By Sasha Meyer

What can Patrick Kolla, Craig Newmark and Radiohead teach Central Asia?

A new business model: It's possible to work for free and still make a lot of money.

Patrick Kolla has been giving away his top-rated software since 2000. Already by 2002, his website was receiving 30,000 donations a month. It's a safe bet that the dollar amount of the donations exceeded that figure.

Craig Newmark, along with Jim Buckmaster, runs Craigslist, a wildly popular online business, with the sole purpose of making as little money as possible. Despite their efforts, Craigslist is quite profitable. With staff of 24, its revenues this year are forecast to reach $150 million. Moreover, the pair is busy resisting the pressure to make billions more by selling out: The company is valued at $2.4 billion.

A few days ago Radiohead pioneered the same concept in the music world by offering its latest album online free (Radiohead said that customers would set the price, donating whatever they wished to). On the first day of release, 1.2 million copies were downloaded, bringing in $10 million. Under a record label contract, Radiohead's cut would have been 10%. But, instead the band gets all of that money, instead of having to sell ten times as many albums to make the same profit. Also, this time more albums were sold in the first week than Radiohead's last three releases combined.

Singers and music groups in Central Asia could follow suit. They would have a curious advantage. Most of them aren't locked into contracts with record companies. The costs of offering music online are low and continue to drop. Today, $15 buys a web hosting package with a 2-terabyte monthly quota; that's equivalent to visitors downloading 400,000 CD-quality songs or 40,000 DVD-quality music video clips.

More good news: If the product is good, there is no need for any kind of marketing. Kolla's software has been downloaded by tens of millions of people and Craigslist has expanded to 450 cities in 50 countries – all through word of mouth.

Central Asian artists already have admirers in unexpected places. Fans in Peru and Mexico blog about them and an American musicologist offers a downloadable album of Uyghur music, complete with a beautiful CD cover.

And this new approach needn't be limited to performing artists. For example, some painters in Tajikistan already have a website with samples of their work. They could add downloadable, life-sized high-resolution scans that could be printed out. People throughout the world already decorate their homes with such artwork.

Nine Inch Nails is already following Radiohead's example. So could Musicola, Uly Tau and Shahzoda.

Newsbits for the Weekend

James Giffen foreign bribery case - There will be no immediate selection of a trial date for former Kazakhstan oil gatekeeper Giffen. Today's federal court hearing in New York was postponed for six weeks -- until Dec. 13th. This is the second straight postponement in the already three-and-a-half-year-long case. Giffen is accused of passing along some $80 million in payments to Kazakhstan President Nursultan Nazarbayev from American oil companies. With the way things are going, some are starting to think that this will be another touchy item passed along from the George Bush administration to his successor. Could a trial really wait until 2009? It's hard to believe, but considering Giffen's defense -- that he was an effective asset for the CIA during his entire time in Kazakhstan -- it could indeed take many, many months to disgorge top-secret documents from the government. And, as for the prosecutors, it's not clear that they are as eager as they earlier seemed to go fast.

The Vladimir Putin show - Can the Russian president go anywhere abroad without getting into a schoolyard scrap? In Lisbon today, Putin lashed out at European concerns regarding Russia's rising dominance in Europe's energy market. Russia has established a post-Soviet record of using its enormous petro-power as a blunt instrument for political and economic gain. But Putin said that it "makes me laugh" when he hears Europeans worry about Russians buying up European energy properties. Putin will have to do something more than be combative in order to calm European nerves.

Godfather-in-Law - Rakhat Aliyev, who until recently was the powerful son-in-law of Kazakhstan President Nursultan Nazarbayev, is writing what appears to be a tell-all memoir of life inside the first family. Its working title, he says, is Godfather in Law. Aliyev's saga is a window into the sordid post-Soviet ruling class that's emerged in Central Asia and the Caucasus, many of whose states resemble sultanates rather than elective republics. The difference is that in Kazakhstan -- primarily because of the documentation that's been disclosed in the James Giffen case -- the mess is being played out in public. Aliyev was tossed out of the Kazakh ruling family earlier this year after a series of rows with the country's business elite, and the disappearance of two executives from his Almaty bank. Among the allegations he will make in his book is that Nazarbayev himself ordered the murder of Altynbek Sarsenbayev, a former Kazakh ambassador to Russia who joined the political opposition, then was murdered in February 2006. Critics have accused Aliyev himself of the murder. Aliyev has lived in exile in Austria since Nazarbayev ordered him arrested. RFE-RL has a good interview with Aliyev.

Sign of the Times

Russia has provided evidence for the direction in which Big Oil is headed: smaller and humbler.

This indication comes with Russia's announcement that it's selling a 24% stake in one of its most strategic natural gasfields -- Shtokman -- to Norway's Statoil. Read AP report on WSJ.com

That deceptive news release by the Kremlin hides a bitter fact for the company -- the likelihood that Statoil will be a mere contractor; it will not occupy the accustomed role of developer.

The fine print is what the industry calls booked reserves. These are the standard underpinning of an oil company's worth -- how much oil and natural gas they themselves control, and thus can sell at some point at, say, $90 a barrel or $260 a thousand cubic meters.

In the Russian case, Moscow is denying the companies the right to book the reserves. Hence, there is no real reason to celebrate. That's the deal that France's Total got in July, when the Kremlin gave it a 25% stake in the operating company developing the field, and though no details were released on the Statoil deal, one would expect them to get the same terms.

Why do the companies go along? Because they are desperate for any entree into places like Russia, and hope (without basis) for better terms later.

This is a blueprint for how Big Oil is likely to be increasingly treated around the world. Somewhere between 80% and 90% of the world's oil and natural gas is controlled by countries like Venezuela, Saudi Arabia and Russia, not Exxon, Shell or BP. And, over the next two or so decades, those countries are going to turn the big oil companies into employees.

Is that bad or good for the buyers of the actual end product -- motorists and homeowners? It could very well mean even higher prices than Big Oil commands since the countries are not under the same competitive or cost pressures as the companies.

Steve on NPR's Fresh Air

Listen to the Terry Gross interview with Steve

The Wheels of Justice in New York

On Friday, a three-and-a-half-year-old question will hang again before Federal Judge William Pauley in New York: When will James Giffen's foreign bribery trial commence? (Photo by Andy Freeburg)

The California-born Giffen, former chief oil adviser to Kazakhstan President Nursultan Nazarbayev, has managed to stall his trial -- the largest foreign bribery case since the U.S. law was passed in 1977 -- since his arrest at JFK Airport in March 2004.

The trial is bound to be intriguing, not only because of the sums involved, but also because the theatrical Giffen himself -- with a three-and-a-half-decade-long insider's career in the Soviet Union and former Soviet Union -- is one of the most colorful foreign characters of the Caspian oil boom era. The case has come to characterize many of the excesses of the epoch.

In addition, Nazarbayev is an unindicated co-conspirator -- again, a symbol of the alleged official corruption of the post-Soviet period -- and the case has already damaged U.S. relations with Kazakhstan, an important U.S. ally on the Caspian Sea.

Federal prosecutors claim that the 66-year-old Giffen passed on some $80 million in payments from U.S. oil companies to Nazarbayev and some other prominent Kazakhs from oil deals that the American negotiated during the 1990s.

Giffen so far has not disputed that claim, but has asserted that when he served as Nazarbayev's adviser, he was simultaneously consulting with and assisting U.S. intelligence agencies including the CIA on Kazakhstan matters.

The judicial delay has resulted from wrangling between Giffen's lawyers -- insisting on CIA documentation that they claim will prove his asserted defense -- and ultra-resistant prosecutors from perhaps the most secretive presidential administration in U.S. history.

Giffen's apparent hope is that eventually the prosecutors will drop some of the more serious charges rather than release documents they are seeking.

There have been signs of meddling from the Justice Department in terms of attempting to classify sensitive testimony already long released in open court. Otherwise, like Giffen himself, the prosecutors have not publicly indicated that they are prepared to compromise.

In the past, Judge Pauley has pressed the two sides to accelerate their work so jury selection can begin. But he canceled the most recent scheduled pre-trial hearing, since apparently there was no indication that the sides were nearer to being ready to try the case.

Will Judge Pauley finally going to put his foot down and set a date? The trial certainly will not begin this year. But if Pauley does act, it could easily start in the first half of 2008.

The Cheshire Grin in Kazakhstan

Talks under way between Kazakhstan and Big Oil are about much more than the nation's unhappiness with the work on the world's largest oilfield discovery of the last three decades.

It's about the future of oil. And what is it?

Despite their unprecedented profits, the Big Oil companies are on the decline, and in our lifetime -- except for those that manage to reinvent themselves -- will largely go the way of former industrial behemoths like United States Rubber, Goodyear and Bethlehem Steel.

Petro-states like Kazakhstan and Russia, meanwhile, are demanding and obtaining more control over their own fields, and increasingly marginalizing the once-omnipotent oil majors. In just two decades or a bit longer, they will be the world's big, self-contained providers of energy, and companies like BP, Shell and Exxon Mobil will either be transformed into something else, or be far smaller and mousier. They will be employees -- contractors -- for Kazakhstan, Azerbaijan, Russia, Nigeria and so on.

Already, the petro-states control between 80 percent and 90 percent of the world's oil reserves; the clock is ticking for the companies, based on reserves booked long ago, something that Wall Street will recognize at some point too.

The talks in Kazakhstan make it plain that at least Exxon -- long the most far-sighted of the companies -- understands this shift. The discussions are on the supergiant Kashagan oilfield, which is at least five years behind schedule for first oil and well over two-times over budget.

As partial compensation to irate Kazakhstan, the companies (Exxon, Shell, France's Total, Italy's ENI, ConocoPhillips and others) yesterday agreed to grant the state a larger share of the field. It's clear that Kazakhstan wants an equal share with the bigger companies, and since no dollar figures were mentioned there is still the question of whether it's willing to pay market price -- or anything at all -- for that increased stake.

In this gentlemanly form of back-alley extortion, Exxon had the gumption to insist of the man wielding the knife the equivalent of train fare home so as to live another day. Kazakhstan could have this increase, Exxon said -- but only if the contract were extended beyond its current expiry in 2041.

Kazakhstan so far has refused (it's not clear, for instance, if Exxon -- as brazen as any petro-state -- offered any money extension), but the demand is brilliant.

If such an extension is granted for, say, a decade or longer, Exxon and its partners would be on the road to extending their lives just that little bit.

There has seemed to be a Cheshire grin on some of the Kazakh and Russian oil officials in recent months.

Putin's Churchillian Aspirations

Ninety-dollar-a-barrel oil is wonderful for one's self esteem, as well as for stimulating the deference of one's acquaintances. But can it earn genuine respect?

That is Vladimir Putin's challenge. His best chance of securing that much-craved legitimacy is to pull off a diplomatic miracle. One such as resolving the Iranian crisis.

His high-minded actions and statements with his Caspian Sea neighbors in Tehran this week imply that Putin recognizes this. But can he do it?

One piece of intriguing news involves Putin's meeting with Iran's Supreme Leader, Ali Khamenei. According to Iranian nuclear negotiator Ali Larijani, Putin gave Khamenei a "message" of which the nuclear issue was a component, and that "we are now examining it."

Yesterday, President Mahmoud Ahmadinejad undercut Larijani by saying that Putin had not even mentioned the word "nuclear."

Still, let's take Larijani at his word. One enormous factor calling for optimism is that the two parties involved -- Russia and Iran -- would love to resolve the nuclear issue in a way that raises their own diplomatic credentials while diminishing the West's.

It's not known what Putin's message was. But we can imagine. For instance, on the difficult issue of electricity-production, he might have suggested a Russian agreement, for example, to build, supply and manage a self-contained nuclear power facility for Iran. In order to make Iran feel both safe and part of a bigger club, Putin might have suggested a comprehensive mutual defense accord building on the declaration that the Caspian republics made Tuesday. Putin definitely would have included a face-saving measure that allowed Iran to climb down on the nuclear issue without appearing to have done so.

Any agreement that gets Iran to renounce nuclear weapons-making ambitions would catapult Putin, and Russia, into a different and higher global sphere, while improving Iran's image as well.

Putin would not be spending so much diplomatic time and effort simply being a spoiler. He would receive -- and deserve -- genuine deference.

Putin's Show: An Opening on the Caspian

Yesterday's Caspian Sea summit in Tehran was decidedly the Vladimir Putin show, but the ostensible common front oddly enough seems to have revealed an opening for a spoiler. The West ought to climb through.

The main news of course was the states' rejection of being used as a staging ground to attack Iran. That's a very real issue, as the word has been on the street for almost a year that U.S. offensive plans against Iran included possible land attacks from both Azerbaijan and Afghanistan. If true, it would be downright unneighborly not to go along with Putin's proposed declaration against such an attack; Azerbaijan's Ilham Aliyev specifically couldn't disrupt the bonhomie and say, "Sorry, fellas, but we have to punch Mahmoud's lights out."

Yet, given Russia's similar peacenik act in Serbia in 1999, Putin's reach for the moral high ground this time wasn't all that surprising.

The more interesting topic I think regarded the issue of controlling activities on the Caspian. In the guise of environmentalism, Russia has long urged that all five Caspian states be vested with a veto against any work on the sea by any of its neighbors.

The actual reason for Moscow's supposed concern for sturgeon and seals is control of the region's oil and natural gas -- as long as no pipeline is built across the sea, Kazakhstan and Turkmenistan are effectively bottled up, and subject to a Russian stranglehold on energy exports.

Tehran was no different. Putin told the other presidents, "Projects that may inflict serious environmental damage to the region cannot be implemented without prior discussion by all five Caspian nations." Read AP account.

Yet, according to the AP account, his fellow former Soviet leaders were noticeably non-commital on the topic. Kazakhstan's Nursultan Nazarbayev, for example, said only that "pipeline routes need to be coordinated with nations whose territory they cross." That logic would not preclude building a cross-sea line, say, from Turkmenistan to Azerbaijan, as long as both agreed.

Russia, of course, expresses no such ecological concern when it regards Nord-Stream, its natural gas pipeline project across the Baltic Sea.

This is a hunch, but it could be that Kazakhstan and Turkmenistan are a bit fed up with, and not a little suspicious over, Putin's turns of glad-handing and subtle pressure to consign their energy future -- and independence -- to Russia.

As it stands, the eastern Caspian states are effectively in Russia's pocket because of the absence of trans-Caspian pipelines west to export their oil and especially natural gas free of Moscow's interference.

It's long been in their interest to commit to construction of that route. And it's in the West's interest -- particularly Europe's -- to make it happen once that commitment is made.

Where's My Cut?

What does $86 oil mean in the former Soviet Union? More muscular attitude from Russia's already swollen President Putin, and greater petro-assertiveness from Kazakhstan.

Putin is on his way to Tehran, where there will be much in the way of chest-beating from him and the leaders of the other Caspian Sea states with whom he is meeting tomorrow.

But Kazakhstan in particular will be in a fighting mood over the now 41% surge in crude oil prices this year (read New York Times account). Why, when it is earning more money than it ever expected from contracts negotiated years ago on the basis of $17-$20 a barrel oil?

Because it would be receiving much more money had its foreign partners -- Big Oil -- fulfilled their word and begun producing oil by now at the supergiant Kashagan oil field. The Italian-led consortium -- which includes most of the big names in Big Oil -- was supposed to produce the first barrel in 2005, but now says that won't happen before 2010.

Some people interpreted a recent public remark by Kazakhstan President Nazarbayev as proof of a calming ocean on the topic of Kashagan. If it was, the storm is back.

Over the weekend, Prime Minister Karim Massimov made that plain with a renewed demand for a higher state stake in Kashagan, according to a report in The Independent of London. If he was having sleepness nights over such assertiveness, it did not show, as he said there was "big line of potential investors" should anyone be excessively discomfitted.

Chevron is in the same stew. The California company cannot seem to close a deal with Russia over doubling the size of the dedicated export pipeline from Kashagan's sister oilfield, Kazakhstan's supergiant Tengiz, of which it has a 50% share. That is sure to slow down and complicate Chevron's plans to vastly increase Tengiz production next year, and to vex Kazakhstan over the relative stagnation of its bottom line.

Kazakhstan has already made it plain to Chevron that, as with the Kashagan partners, it means business. It recently levied a $609 million environmental fine for sulfur deposits from Tengiz, demonstrating that the country expects the companies to think of Kazakhstan, too, when they are counting their windfall profits.

Putin's Legitimate Point

Given the fires the U.S. is attempting to extinguish around the world, many the result of incompetence and not happenstance, why is it fanning a deliberate one in Russia?

At issue is the anti-missile batteries that the Bush administration insists on installing in Poland and the Czech Republic. Earlier this month, the Pentagon yet again crowed over a false test of the anti-ballistic system in which a missile unprotected by decoys was shot down by another missile.

In short -- after more than a quarter-century of development, the technology still does not yet work under authentic conditions. Even if it gets installed, even with hard-fought Russian agreement, North Korea, Iran or whomever will know that the system can be confounded with simple diversion.

Considering the many crucial matters on which to debate Russia (Iran, Iraq, Syria, abuse of petro-power, trans-Caspian pipelines, to name a few), one wonders why Condi Rice and Robert Gates were in Moscow pounding the table on an empty issue.

Moscow makes a practice of provoking incredulity on the world stage. But this is an example of Washington's immature foreign policy leadership.

After six years of repudiated treaties, Gates also kept a straight face while nettling Putin over his threats to withdraw from a couple. ``Europeans are beginning to wonder what the Russians are all about,'' he said deadpan today in Moscow. Read Bloomberg account

The West needs to get serious. Drop the non-issues and talk turkey. Warsaw and Prague will still be game when the system is actually functioning.

A Caspian Deal: Tea Anyone?

There has been fanfare leading into Tuesday's meeting of the leaders of the Caspian nations, and their discussion again of the vexing question of whether they are neighbors of a sea or a lake. Let's hope the tea and meals are tasty in Tehran, because there will be no breakthrough.

The main reason: None of the main antagonists are going to capitulate.

Lots of people rightly find humor in the sea-or-lake issue, which ostensibly determines how a body of water is treated in terms of the littoral nations' rights. Apart from its amusement value, however, it's pointless to debate on the merits of the various sides, because each produces its chosen group of long-ago treaties, laws and precedents to make points that are instantly dismissed by the other interested parties.

Instead, it's easiest to look at interests:

Iran and Russia generally fall into the same camp, but for different reasons (Iran wants title to more sea than it would deserve by a purely quantitative count of its coastline; Russia would like to control all activities on the sea, but will settle for halting any cross-sea pipeline that would further weaken its stranglehold on oil and natural gas exports from the region).

It's principally the idea of that trans-Caspian pipeline that will scuttle any deal. Azerbaijan in my opinion will never agree to a prohibition on a pipeline in the sea, and Kazakhstan and Turkmenistan won't either if they are smart. Yet Russia won't agree to any pact that doesn't preclude a pipeline.

So the meeting is hopeless in terms of a certain settlement -- Azerbaijan, Kazakhstan, Turkmenistan and Russia will continue to develop their oilfields at will. Washington will persist in trying to get Turkmenistan and Kazakhstan to build a cross-sea pipeline. And Russia will push the states not to build one.

On the other hand, the weather will be lovely (84 degrees fahrenheit; 29 celsius).

Guest Column: Central Asia on Joost?

Sasha Meyer writes about an obscure announcement last week that he says holds promise for Central Asia. Think Joost, a new Internet TV idea.

Many countries and regions have an image problem. Central Asia has a different one: It has virtually no image. And the 2006 release of a faux documentary featuring a faux Kazakh journalist left many in the region with the belief that, if you don't create your own image, someone else will. Or worse: In the popular mind, Central Asia will get lumped together with its volatile neighbors to the south, resulting in an unwanted and unwarranted association with violence and religious militancy. That's the opposite of how most Central Asians want their societies to be perceived: as secular and modernizing.

The most influential images are what people see on their TVs. But creating a TV channel is both cumbersome and expensive. Distribution deals for Central Asian content would need to be negotiated with individual satellite and cable TV companies in each country. Such companies in the developed world, facing capacity constraints, are picky about new content and reluctant to add channels with unproven profitability.

Joost solves those problems. It's the brain child of the people who brought us Skype. They aim this time to deliver TV free via the Internet. Last week they entered open beta status, meaning anyone can try out the test version of the software. It's slated for full release later in the year.

Joost will offer ethnic content: Spanish-language series from Colombia, Chile and Peru, and an Arabic-language comedy. Channels in other languages will include Romanian, Turkish, Russian and Bengali. There is even Australian Food Channel and one on Chilean rugby.

Central Asians would do well to set up one of their own. The region produces a sufficient number of films and music programs. There are also Soviet-era movies. Some of that content is already on YouTube (a great number of music clips) and Google Video (some movies).

Most or all the Central Asian governments will be reluctant to strike a deal with Joost, but they oughtn’t be. Just like Skype, it offers instantaneous global reach at no cost. It delivers its content in TV-quality, unlike YouTube and similar services with bandwidth limitations. And, unlike traditional satellite and cable TV companies, Joost can have an infinite number of channels. Joost also accepts only professional content; no YouTube-like amateur clips here.

Big names like CNN, CBS, MTV and Paramount Pictures have signed up. So have small independent producers like CenterStaging, a music production company based in California. Central Asian governments and NGOs should be next.

Gentlemen on the Caspian

Kazakhstan President Nazarbayev and Italian Prime Minister Romano Prodi have engaged in the latest round of mutual shoulder-massaging amid the Caspian Sea country's recent oilfield muscle-flexing. What does it mean?

We can still be friends.

That's important as contract renegotiations become a principal theme in the former Soviet Union.

The two leaders met today in Astana to talk over Kazakh demands that the Italian-led consortium developing the supergiant Kashagan field cough up some compensation for its miserable performance.

Nazarbayev came out of the meeting saying that he had no intention of revising the decade-old Kashagan contract. That means precisely nothing in terms of the final agreement -- the demands on Kazakhstan's menu involve no contract revisions.

Specifically, Kazakhstan wants big cash much earlier than the consortium had in mind; and, to foreclose future such misunderstandings, it wants to keep the foreigners on a much shorter leash -- meaning some form of joint operatorship of Kashagan.

Rather than any softening of Kazakhstan's demands, what the remarks signify is that both sides would like to conclude this unpleasant business in as civilized a manner as possible, so as to maintain a basis for workable future relations.

Eni Chairman Paolo Scaroni, the field's operator, has done exactly the same thing with Nazarbayev in recent weeks-- gone in, polished the president's apple, then engaged in informal, smiley-face post-meeting news conferences. Chevron Chairman Dave O'Reilly, facing a $609 million environmental fine for his own supergiant Kazakhstan field (Tengiz), did his own diplomatic rounds two weeks ago.

Guest Column: Architecturally Fashionable Kazakhstan Could Be More So

Sasha Meyer calls for more cutting-edge technology in Kazakhstan's building boom --biomimicry such as that used in an indoor rain forest (right).

Kazakhstan is right to build its urban centers to world standards and seek top architects to design the structures. Astana's use of the latest in materials and technology also makes sense. But its designers should add biomimicry, the building science that copies the environmental adaptations natural to plants and animals.

Last month, Kazakhstan announced plans to invest $20 billion in Aktau, the Caspian port city, to create a second megapolis in the oil-rich country. The Kazakhs employ the world's best architectural designers for such projects, such as Lord Norman Foster and Kisho Kurokawa, a justified expense given the plans involved.

Astana also uses advanced materials and technologies. The Khan Shatyry Entertainment Center for instance uses ETFE, an exceedingly strong and temperature-resistant polymer that DuPont invented for the aerospace industry. Astana Build, an annual construction technology exposition, attracts cutting-edge innovations.

But biomimicry has not been used in these otherwise fancy, expensive buildings, and should be.

The Economist reviews some of the new approaches. The latest innovations mimic biological systems to cool buildings, generate energy and desalinate water. These technologies help reduce costs and environmental impact.

They are not as uncommon as they might sound. A Paris office building controls indoor temperature by regulating the entry of light from outside; the operative technology mimics the iris of the eye. The ventilation system in a Zimbabwe shopping center relies on the same principles as a termite mound.

Two more advanced concepts are being proposed by Grimshaw, an international architectural firm. One is to make seawater drinkable by mimicking camels and a type of beetle. This approach is part of their design of the Las Palmas Water Theater and Botanical Garden in the Canary Islands. The system can provide enough water for a 70,000-square-meter office complex, while decreasing energy use almost ten-fold. Another building there is entirely self-sufficient in its energy needs, supplied through an indoor tropical rainforest that uses solar power and biomass-produced heat.

Domino Bluff in the Caucasus

There is important wisdom in a passage of Arthur Schlesinger Jr.'s new Journals, contained in a New York Times review posted today. It involves a post-mortem of the Cuban Missile Crisis by President Kennedy, as recounted by JFK's in-house intellectual.

The Times says: Schlesinger writes that Kennedy resisted seeing the missile crisis as part of a holy war with the Soviets. “Too many people will think now that all we have to do in dealing with the Russians is to kick them in the balls,” he says, after the Soviets back down. “I think there is a law of equity in these disputes. When one party is clearly wrong, it will eventually give way.” Read review

This is sharp counsel in the West's current standoff with Russia in former Yugoslavia. Eight years after halting Serbia's murderous assaults on its Balkan neighbors at Kosovo, the West supports finally recognizing the ethnic Albanian region's status as an independent nation.

The date set for that recognition is Dec. 10.

President Putin vehemently opposes Kosovo independence unless it's in agreement with its former aggressor, Serbia. He argues that, short of such an accord, uncontrollable warfare will re-ignite to the east in the former Soviet Union, specifically in the breakaway Georgian republics of Abkhazia and South Ossetia.

Balderdash. Putin's angst has nothing to do with a highly principled nightmare of dominoes falling and everything to dowith who calls the shots in Russia's claimed sphere of influence.

Putin's own intellectual cadre assert that Abkhazia and South Ossetia rose up in response to Georgian genocide. It is true that indefensible Georgian nationalism at the time is to blame for triggering the separatist revolts of the early 1990s. But what followed was inflamed and assisted by then-Russian siloviki only too happy to give the upstart Georgians a black eye.

Those events are not equatable with Serbia's ethnic cleansing.

Instead, Putin and his brain trust are making an empty threat. Putin no more than the Georgians wishes to re-ignite instability in the Caucasus.

Dominoes will not fall of their own accord in response to Kosovo any more than they did when the other parts of the former Yugoslavia became independent. Neither will Putin manufacture a cause-and-effect.

While Putin chooses to see issues like Kosovo as a humiliating physical blow, they are rather simpler matters. Most of the former Yugoslav provinces long ago chose not to be joined to Serbia any longer. Kosovo is merely the latest.

A Few Hundred Millions Dollars Between Friends

Just two weeks ago, Chevron Chairman Dave O'Reilly scurried aboard the corporate jet to Kazakhstan after a legislator urged a shutdown of the company's supergiant Tengiz oilfield for environmental violations.

But O'Reilly emerged cheerily from a meeting with President Nazarbayev -- the Kazakh leader had called Tengiz "an excellent example of how the government and a foreign investor can work together successfully," O'Reilly crowed.

In other works, he seemed to imply, Chevron wasn't in the same boat as the Eni-led Kashagan development, a sister oilfield whose work the Kazakhs have suspended.

Maybe, depending how one defines working successfully. Yesterday, the Kazakhs quantified their own view, and the number is $609 million. That's the fine the Kazakhs have levied against Chevron for three years of alleged sulfur violations at Tengiz.

Dow Jones reports that Chevron is challenging the fine. And it is true that, five years ago, Chevron successfully resisted a similar ecological penalty by the Kazakhs, who sought $71 million but finally accepted $7 million.

Yet, nothwithstanding the warm and fuzzy shoulder massaging that went on between O'Reilly and Nazarbayev last month, look for the current dispute not to end as peaceably.

For one thing, it's a wholly different atmosphere, both in the global oil industry in general, and in Kazakhstan specifically.

Big Oil has been knocked on its heels by a sea change in who gets access to the newest oil fields around the world -- by far, it's nationally owned oil companies and state ministries, not publicly held oil majors like Exxon Mobil, BP and Chevron.

In addition, Russia is leading the way locally in tearing up 1990s-era oil contracts in order to take control of its most promising oilfields. While Kazakhstan is acting under different circumstances, the impact could be similar -- Kashagan (the largest discovery on the planet in more than three decades) is under threat of a Kazakh state assumption of joint operatorship.

In the 2002-2003 row, Chevron played brinksmanship with Kazakhstan, even temporarily shutting down the Tengiz operations to demonstrate its resolve. It will hardly try such antics today, given the possibility -- even if remote -- that Kazakhstan could simply push the envelope all the way and find ready companies or contractors, in China or India, say, prepared enthusiastically to take over Tengiz.

Gazprom Humor in Ukraine

Gazprom's latest turn as the heavy in Russian geopolitics may be high comedy or low tragedy, depending on who is talking. Perhaps it's simply chutzpah? Because who apart from Gazprom would try to persuade the world that debts it effectively owes to itself justify severing natural gas to Europe?

The issue has attracted attention because Russia supplies more than a third of Europe's gas (some European nations rely on Russia for 90% of their supply), and 80% of that supply transits Ukraine. Russia has been accused--with some merit-- of using the leverage of that supply to get its way on European political and economic matters.

Today the Financial Times reports that Ukraine seems for now to have defused a row in which -- just as a pro-Moscow slate of parliamentary candidates coincidentally seemed headed for possible defeat in Ukraine elections -- Gazprom threatened to cut natural gas to its neighbor.

But the issue of the $1.3 billion debt persists. While Gazprom seems to have much of Europe running in circles to discover the root of this suddenly vital debt, there is really no mystery.

It's a simple matter of an opaque deal involving Gazprom, its insiders and friends.

The key player to look at is a middleman company called Rosukrenergo, which is half owned by Gazprom and a Ukrainian businessman named Dmitry Firtash (for background, google the work of Glenn Simpson, my former colleague at The Wall Street Journal).

Rosukrenergo is the middleman for Turkmen gas exports to Ukraine. In other words, Gazprom -- the biggest natural gas company in the world -- itself has been incapable of shipping this natural gas, so has contracted out the work to a non-transparent middleman. As of now there is not a public list of who is getting rich from this deal apart from Firtash.

However, we now know that a $1.3 billion debt for this gas has appparently accumulated since June. Rosukrenergo perhaps has failed to collect it from Ukrainian users. But since the entire matter is cloaked in darkness, we have only Gazprom's word for it.

The bottom line, however, is that the debt is the middleman's -- Rosukrenergo owes this money to Gazprom proper.

Gazprom is such a card.

A Collective Czar

Vladimir Putin's announcement today that he is running for Parliament solves the main question that's vexed the Kremlinology guessing game: How would he retain influence after leaving office in March given that any new president was bound sooner or later to be territorial and jealous of his own prerogatives?

The answer: Putin has shifted that debate over to the Duma, which now will find it to its enormous self-interest to change Russian law to a strong parliamentary system. With Putin as its leader, the United Russian party will annoint itself the collective czar. Here is the AP story on Putin's announcement.

Who will be president? Right now, Putin is trying out Viktor Zubkov, the prime minister he named last month. But it almost doesn't matter -- Putin will select whoever he thinks will be easier to get along with as prime minister. Sergei Ivanov or Dmitri Medvedev are still in the running for that spot.

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