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Caucasus/Central Asia: Analysts Expect Security, Economic Gains From BTC Pipeline

  • Jean-Christophe Peuch --> The leaders of Azerbaijan, Georgia, Turkey, and Kazakhstan gathered near Baku today to inaugurate the $4 billion Baku-Tbilisi-Ceyhan (BTC) pipeline. The project is generally viewed as the key element of an overall plan to turn the Caucasus region into a transport corridor connecting Central Asia to Western Europe. From the onset, BTC was designed by its American sponsors as a way to reduce Russia's energy grip on its former southern satellites. But regional experts say that by helping make the region safer, the project's expected economic benefits might eventually outweigh its geostrategic importance. [For coverage of the ceremony, see "Caspian-Mediterranean Oil Pipeline Launched In Baku" --> /featuresarticle/2005/05/18a9dc83-9f19-4830-aea2-93a850b985fa.html .]

Prague, 25 May 2005 (RFE/RL) -- The inauguration represents the final touch on the "deal of the century" -- as the 1994 contract that for the first time grants Western oil majors the right to produce oil in newly independent Azerbaijan is known.

Provided revenues from the shipping of crude oil to western markets are redistributed to local populations, both projects are expected to bring the Southern Caucasus region substantial economic benefits.

Economist Sandro Tvalchrelidze of Georgia's Academy of Natural Sciences said that even before the first Azerbaijani oil is pumped, BTC -- once former President Eduard Shevardnadze's pet economic project -- has already brought substantial revenues.

"With regard to [BTC's] economic aspect, it must be noted that its construction alone has -- directly, or indirectly -- contributed to 2 percent of Georgia's gross domestic product," Tvalchrelidze said. "Therefore, one can say that already the project is economically very profitable for Georgia and the rest of the region."

Tbilisi, which depends heavily on Russia for its energy imports, hopes both pipelines will help loosen Moscow's grip on its economy. As a transit country, Georgia will also get part of its new energy supplies for free.

Despite its enormous cost, BTC is considered to be of vital importance for Azerbaijan, as it will help turn the country into a major energy exporter.

Important New Option

Early oil produced by the BP-led consortium had been until today transiting through two smaller pipelines -- to the Georgian port of Supsa and the Russian Black Sea terminal of Novorossiisk, from where it was put on tankers heading to the clogged Turkish straits.

Even though Baku's contribution to world energy supplies will be lower than originally expected, the United States sees Azerbaijan as an alternative supplier to Middle Eastern countries. Washington has also made no secret that BTC and its sister natural-gas pipeline were primarily targeting Russia and Iran.

Vafa Quluzade, a former foreign policy adviser to late Azerbaijani President Heidar Aliyev, told the Baku-based Trend news agency on 23 May that by paving the way for U.S. predominance in the Caucasus, BTC "carries a special geopolitical and geostrategic importance."

Iran remains strongly critical of the U.S.-sponsored project. But that's no longer the case for Russia.

Moscow -- which has a 10 percent stake in the Baku-Tbilisi-Erzurum project -- now says that BTC is economically viable, and last year it even floated the idea of connecting its own pipeline network to Azerbaijan's main export conduit.

Tofiq Zulfuqarov, who was Azerbaijan's foreign minister in the late 1990s, told RFE/RL that he believes BTC's geopolitical aspect, while remaining important, will eventually become secondary to its economic impact.

"Starting from today's inauguration, I believe, the political aspect of BTC is becoming of secondary importance," Zulfuqarov said. "During the initial phase of the project, when its layout and plans were still being discussed, the political aspect was of primary importance. But now this pipeline is becoming more and more a full-fledged economic project. I don't think the difficulties -- be they [real] or potential -- Russia once created with regard to the pipeline's layout are still a very important element. All the more so that I do not rule out that Russia will one day be interested in injecting both foreign and domestic capital into the development of its own sector of the Caspian shelf. In that case, [BTC] could well become a transit route for Russian oil as well."

Energy experts said they believe BTC might be attractive to other oil-producing countries -- especially those of Central Asia.

On 24 May, Kazakhstan -- which expects to produce 150 million tons of oil every year by 2015 -- officially announced plans to export part of its output through BTC after an underwater connection linking the city port of Aktau to Baku is built.

It remains unclear whether or when these plans -- unveiled in Baku by visiting Kazakh President Nursultan Nazarbaev -- will be implemented.

Kazakhstan's participation in BTC had long remained an object of speculation, if only because of Nazarbaev's insistence on maintaining energy ties Russia, China, and Iran.

Yet Zulfuqarov said he believes that, whatever practical effect it might have, Nazarbaev's Baku announcement is a sign of the times.

"My opinion is that because of [BTC], the weight of geopolitics -- or, say, the clash of diverging geopolitical interests -- is no longer of primary importance," Zulfuqarov said. "It's no longer the hot topic it used to be."

Georgian economist Tvalchrelidze said he believes the more countries join BTC, the better it is for regional security.

"I believe that the idea of regional security is what prevails here," Tvalchrelidze said. "Had this pipeline been under construction in the years 1991 to 1992, for example, Georgia would never have gone into trouble with [its separatist republics] of South Ossetia and Abkhazia. The reactions of the world community to these conflicts would have been totally different -- maybe even similar to that we've seen [recently] in Iraq."

Tvalchrelidze also said he believes BTC might even have a positive impact of the war in Chechnya, since the pipeline could help cut many potential channels of oil contraband -- one of the main sources of revenues for both Russian army generals and Chechen fighters.

In his words, "BTC will certainly make the [Caucasus] region safer."

"Some 38 countries are implicated -- directly or indirectly -- in those energy projects," Tvalchrelidze said, "so the world community will be interested in making the region safe."