An agreement to build a multibillion-dollar pipeline to export oil from the Caspian Sea region to Western markets through Turkey is likely to be signed in Istanbul later this month, a senior U.S. official said today.
John Wolf, President Clinton's special adviser on Caspian basin energy resources, said he was "very, very hopeful" that officials from Turkey, Azerbaijan, Georgia and a Western energy consortium would iron out remaining "technical" glitches in time to sign the agreement at a European security summit in Istanbul that Clinton will attend.
The proposed 1,240-mile pipeline, which would run from Baku, the capital of Azerbaijan, via Georgia to the Turkish Mediterranean port of Ceyhan, is at the center of a fierce battle for regional influence between the United States and Turkey, on the one hand, and Russia and Iran, on the other. Unlike other major oil producers, the Caspian states are landlocked and all existing oil and gas pipelines run through Russia.
For the Clinton administration, construction of the Baku-Ceyhan pipeline and a parallel natural gas pipeline running from Turkmenistan to Turkey constitute a crucial step toward reducing Moscow's influence in the energy-rich Caspian region and preventing neighboring Iran from stepping in to fill the void.
For Turkey, it would mean reaching its long-pursued goal of becoming a pivotal energy bridge between Asia and the West. Wolf said a framework agreement on the natural gas pipeline also would likely be signed at the Organization for Security and Cooperation in Europe summit.
"I think that this project is accelerating and the negotiators are well-engaged in the process," Wolf said in an interview. "They know what the target is for signature of this and they are working in all good faith to get there, and I am very hopeful that they are going to get there."
Turkish and U.S. officials acknowledge that the signing of an agreement sets out only the legal and political framework, leaving the question of the project's financing to be settled. It would mark only the beginning of a protracted process of negotiations between the BP-Amoco-led Azerbaijan International Operating Company, the consortium known as AIOC, and the host governments. "Real bargaining [on the terms of the pipeline] will only begin then," said a senior Turkish official.
Even so, Russia's first deputy prime minister, Nikolai Askyonenko, traveled to Baku today to try to persuade Azerbaijan President Heydar Aliyev to abandon the Baku-Ceyhan line and stick to an existing Russian export system ring through Chechnya. But renewed violence between Russian armed forces and Islamic militants in the breakaway region has decisively turned investors against the Russian route, industry sources say.
Financing for the estimated $2.4 billion cost of the line remains the chief problem. Officials in Turkey and Azerbaijan complain that the Clinton administration, for all its political support, has failed to come through with any concrete financial commitments.
Turkey has agreed to cover costs if they run over the estimated price of building the pipeline that runs through its territory, Wolf and Turkish government officials said.
Just months ago, prospects for building the pipeline seemed bleak, not least because BP-Amoco has long argued that to be viable, the Baku-Ceyhan line would need to carry at least 1 million barrels of crude oil per day. The AIOC's own production is expected to peak at around 800,000 barrels per day, and not before 2005.
The consortium had been clinging to the idea of incrementally expanding an existing line running from Baku to Georgia's Black Sea port of Supsa, bypassing Turkey entirely. But last month, BP-Amoco unexpectedly announced its support of the construction of the Baku-Ceyhan pipeline. Turkey insists that extra tanker traffic through the Bosporus Straits generated by increased volumes of Caspian oil shipped from Russia or Georgia would pose an unacceptable environmental risk to Istanbul, which the narrow, sinuous waterway bisects.