The Clinton administration continues to make happy talk about how well it is playing the new "Great Game" of energy politics in the Caspian region . Meanwhile, the centerpiece of that strategy--a set of pipelines that would transport oil and gas to Turkey--appears to be sagging.
President Clinton's aides had touted his "diplomatic victory" after a European summit meeting last November in Istanbul, where they won pledges from Turkey, Georgia, Azerbaijan and Turkmenistan to support the American pipeline plan. Administration officials were patting themselves on the back for outsmarting the Russians, who wanted to control the pipeline trade themselves.
But the Istanbul proclamation, like much else in Clinton's foreign policy, turns out to have been partly a public relations exercise. The Russians have played the pipeline game harder than the administration expected--all the way to fighting a bloody war in Chechnya, in part to secure access routes for their pipelines. And America's friends in Ankara, Baku and Ashgabad may have been paying lip service to U.S. diplomacy--telling our visiting president what he wanted to hear and then making side deals with Moscow.
A sign that Clinton's pipeline strategy is in trouble came Monday, when the Turkish energy ministry announced that it had failed to reach agreement with Azerbaijan and Georgia over terms for the so-called Baku-Ceyhan oil pipeline. That's the U.S.-backed plan to link Azerbaijan's capital of Baku, on the Caspian, with the Turkish Mediterranean port of Ceyhan.
The Baku-Ceyhan plan "is collapsing of its own weight, because the oil isn't there for the pipeline," explains Julia Nanay, an analyst with the Petroleum Finance Co., a Washington consulting firm. She notes that on current projections, the Baku-Ceyhan line would have far less than the million-barrel-per-day throughput needed to make it work commercially.
The other leg of the administration's pipeline strategy, the Trans-Caspian Gas Pipeline, is also wobbly. The consortium planning to build the line--which includes powerhouses Bechtel, GE Capital and Shell--insists that "we believe it's commercial and a good investment," says a spokesman.
But the Caspian route faces strong competition from two alternative gas pipelines to Turkey backed by America's rivals for regional influence, Russia and Iran.
The Russian gas project is known as "Blue Stream." The Russian giant Gazprom proposes to build this pipeline under the Black Sea. That's quite a technological feat, and the Russians and their Italian partner have encountered some delays in financing the project. But even administration officials now expect that it will go forward this year.
The Turks, despite their pledges to support the Clinton administration's plans, have been quite enthusiastic about Blue Stream. One explanation for this Turkish support, notes one administration official, may be the "persistent rumors" in the Turkish press that key Turkish politicians have been bribed to back Blue Stream.
Meanwhile, the Iranians have completed their own gas pipeline to Turkey. Construction of the Turkish side of the pipeline has been slowed, and the Turks and Iranians just agreed to delay the "take-or-pay" start of gas deliveries until September 2001. But Nanay and other industry analysts predict that the Iranian-Turkish line will indeed meet that revised schedule.
So, will the market support a third, U.S.-backed Caspian pipeline? That's the practical business question--with the Russians planning to send Turkey 16 billion cubic meters of gas annually via Blue Stream, and the Iranians planning to send 10 billion cubic meters through their line. The Trans-Caspian line would add another 16 billion cubic meters, and that's a whole lot of gas, even for a fast-growing Turkish economy.
Even the consortium that would build the Trans-Caspian line notes that the field may be getting crowded. "If Blue Stream goes forward, we'd re-examine our design and capital plans to fit what would be a slower ramp-up," says Ed Smith, president of PSG International, a partnership between Bechtel and GE Capital that will own 50 percent of the Trans-Caspian line.
But the administration, with its eye on the Great Game, continues to insist that its pipeline projects will work out fine. "We still think we've maneuvered all sides into this agreement rather skillfully," says Energy Secretary Bill Richardson. "I'll stand by what I said, that it's a foreign policy victory."
If only victories were so easy. While we write position papers and framework agreements, Russian tanks have been leveling Grozny--and lobbing shells or dropping bombs on our pipeline pals, the Georgians and the Azeris. For the Russians, notes Bulent Aliriza at the Center for Strategic and International Studies, maintaining control over energy deliveries to Turkey is a deadly serious business.
Russia has put some potent chips on the table in this game of pipeline poker. Our friends in Turkey and neighboring states might reasonably ask whether the United States really intends to match Russia's escalation--or whether we're just making a loud but ineffectual bluff.