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Caucasus Report: March 10, 1998


10 March 1998, Volume 1, Number 2

The Great Tug-of-War. Turkish Foreign Minister Ismail Cem invited his counterparts from Georgia, Azerbaijan, Kazakhstan and Turkmenistan to Istanbul on 1-2 March in the hope of reaching a consensus on the merits of what could prove to be a $2.5 billion white elephant. The project in question is the planned 1,730 km pipeline from Baku via Georgia to the southern Turkish terminal at Ceyhan that could pump some 35 - 50 million tons of Caspian oil per year to the Mediterranean market. The Baku-Ceyhan route is one of three alternatives for the so-called Main Export Pipeline (MEP) currently being evaluated by the government of Azerbaijan and the Azerbaijan International Operating Company (AIOC) engaged in developing Azerbaijan's offshore oil. The others run north from Baku via Grozny to Novorossiisk, and west through Georgia to the Black Sea port of Supsa. The final choice between these three options is due in October, 1998, but could be postponed.

Turkey's publicly stated rationale for endorsing Baku-Ceyhan is to preclude an increase in the volume of oil tanker traffic through the Turkish straits, which could pose a serious environmental hazard to Istanbul and its ten million population. That danger could be obviated, given that the entire projected volume of AIOC oil (2 million bpd) could be exported via Novorossiisk or Supsa for consumption by Black Sea littoral states, including Turkey itself. Last year, Ukraine, Romania and Bulgaria discussed with Azerbaijan and Georgia purchasing Azerbaijani crude either for refining and domestic consumption or for re-export. But to be economically viable, the MEP must transport oil from Caspian fields still being explored, and possibly also from Kazakhstan and Turkmenistan. A second reason for Ankara's commitment to the Baku-Ceyhan variant is prestige: routing the MEP via Turkey underscores that country's geo-political significance as a regional transportation hub for Caspian and Central Asian oil and gas.

As for the producer and other potential transit countries, Azerbaijan's President Heidar Aliyev has repeatedly affirmed his preference for the Baku-Ceyhan route, although Azerbaijani oil is already being exported northwards through the Baku-Grozny-Novorossiisk pipeline. Turkmenistan and Kazakhstan see Baku-Ceyhan as a possible alternative/additional outlet to international markets. But that would necessitate laying an under-water Trans-Caspian pipeline to Baku, which Russia and Iran jointly oppose. Turkmenistan's only other export routes transit Iran or Afghanistan. Kazakhstan theoretically has a choice between the west-bound Tengiz-Astrakhan-Novorossiisk pipeline and eastwards via China, but will go with whichever pipeline is operational soonest. Georgia will win out financially whether the MEP terminates in Supsa or Ceyhan, although if a settlement of the Karabakh conflict within the next six months coincided with Georgia's descent into chaos following Eduard Shevardnadze's demise the Baku-Ceyhan pipeline could conceivably be routed via Armenia not Georgia. Russia understandably wants to see the bulk of oil flow north, and argues -- with justification -- that the northern route is more economical. But the U.S., whose oil companies are major players in the Caspian, favours Baku-Ceyhan as a means of anchoring Azerbaijan, Georgia and Turkey to the West and thereby further undercutting Russia's already waning influence in the Transcaucasus.

In the event, the Istanbul talks failed to yield an unequivocal public endorsement of the Baku-Ceyhan option. But that does not necessarily reflect a lack of determination to proceed, and to find ways of buying off Moscow. In late January, Cem floated the idea of giving "all regional states," including Russia, a cut of the profits from exporting Caspian oil to Ceyhan, an offer that is likely to engender more cut-throat behind-the-scenes bargaining. Given the magnitude of the stakes involved, Shevardnadze's 2 March assertion that "an oil pipeline is not grounds for a tug-of-war" is pure wishful thinking. (Lowell Bezanis/Liz Fuller)

Can Armenia Guarantee Transparent and Non-Violent Elections? Two members of National Democratic Union chairman Vazgen Manukian's presidential campaign staff were hospitalized with serious injuries on 8 March after being attacked and beaten in the provincial town of Ararat, south of Yerevan. Spokesmen for Prime Minister and acting President Robert Kocharian rejected claims by a third Manukian aide that Kocharian's supporters were responsible.

Meeting with U.S. and OSCE officials on 1-2 March, and again speaking on national television on 7 March, Kocharian had pledged to do everything in his power to ensure that the 16 March presidential poll is "lawful and just." In addition, Kocharian affirmed that "neither the army nor the law and order forces will in any way intervene in the electoral campaign or the voting process" -- an undertaking already given by the defence and national security and interior ministers. Also on 7 March, Kocharian and four more of the twelve registered presidential candidates, including Manukian, put their signatures to confidence-building measures intended to ensure that voting is free, fair and transparent.

Yet several opposition candidates, including Liberal Democractic Party leader Vigen Khachatrian, one of the seven who declined to endorse those confidence-building measures, continue to claim that local government and police officials are illegally trying to engineer a Kocharian victory. On 4 March, Albert Bazeyan, head of the Yerkrapah union of Karabakh war veterans, implicitly conceded the truth of such allegations, adding that the Yerkrapah will strive to restrain local officials who "act on their own initiative" and whose continued interference will only harm Kocharian.

The Yerkrapah is currently the largest group within the Armenian parliament with 73 members, and one of five organizations aligned in the Justice and Unity Union formed last week to support Kocharian's presidential candidacy. What role its deputies played in the Armenian parliament's 2 March decision not to debate amendments to the election law that would have enabled Armenian domestic observers to monitor the voting is unclear. (Liz Fuller)

Aushev's Game. On 1 March, incumbent Ruslan Aushev was reelected president of Ingushetia with 66 per cent of the vote, defeating eight rival candidates who had accused him of bringing the North Caucasus republic to the verge of ruin by economic mismanagement on a colossal scale. Specifically, they charged that the profits that accrued from Ingushetia's shortlived (mid-1994 -- mid-1997) status as an "off-shore" zone exempt from paying federal taxes were squandered on grandiose and unnecessary projects, such as a new airport in the republican capital, Nazran, rather than used to create new jobs (youth unemployment is estimated at 80 per cent) or to revive the region's once flourishing oil sector.

Issa Kostoev, runner-up in the poll with13 per cent, suggested that there is a direct connection between the present economic crisis and Aushev's decision to hold preterm elections (his term of office was not due to expire until 1999.) Kostoev pointed out that the austerity measures necessary in order to raise even part of the $2 million that Ingushetia is scheduled to repay Moscow this year alone could have aggravated popular discontent to a level that would have jeopardized Aushev's chances of reelection.

The election outcome suggests that either voters were unaware of the gravity of the imminent economic crunch, or that they have faith in the charismatic former Soviet army general's ability to defend his republic's interests vis-a-vis the federal centre. There are in fact two cogent reasons why Moscow might consider writing off part of Ingushetia's debts. First, Aushev has pledged that Ingushetia will never secede from the Russian Federation, even if the international community recognizes neighbouring Chechnya as an independent state. Ingushetia, together with North Ossetia, thus constitutes a desperately needed belt of stability in the North Caucasus. Second, by virtue of his personal friendship with Chechen President Aslan Maskhadov, Aushev is ideally placed to act as informal mediator between Moscow and Grozny. At the very least, Aushev may seek to play one of those aces in a bid to secure federal funding to expedite the repatriation of the thousands of Ingush who fled North Ossetia's Prigorodnyi raion in November, 1992 to escape ethnic cleansing by the Ossetians. (Liz Fuller)

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