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Caspian: Everyone Wants In On The Oil Action

Washington, 20 November 1997 (RFE/RL) --Experts agree that the Caspian Sea has petroleum resources at least equal to the North Sea and that it will be a critical piece of the global supply of energy over the next 30 to 40 years.

The biggest challenge, they also agree, is transporting the extracted gas and oil to world markets from a region with virtually no existing direct links to the areas of the globe where it is needed.

All the major powers in the world are weighing in on the best routes for getting it out and on this point there is disagreement.

Russia, which is one of the five states bordering on the Caspian, says the primary route should be through already existing pipelines and pumping facilities in Russia.

At a conference on Caspian Pipelines in Washington Wednesday, Russian Deputy Minister of Fuel and Energy, Valery Garipov, said that using the existing facilities connecting Baku, Azerbaijan on the western side of the sea and Tangiz, Kazakhstan on the eastern side and going through Russia, including Chechnya, to Tikhoretsk to the Black Sea, is the least expensive and most logical route.

U.S. Energy Secretary Federico Pena, on the other hand, said Washington favors a main route from Baku to Supsa, Georgia on the Black Sea with a connecting link down through Turkey to Ceyhan on the Mediterranean sea.

Pena said the U.S. continues to support the idea of multiple pipelines, including the link through Russia, but that it favors the proposed Baku-Ceyhan pipeline as the main route.

China has weighed in as well, proposing a pipeline from Kazakhstan -- with which it already has preliminary agreements -- into China and eventually entirely across the giant nation to the East China Sea.

Even Romania appeared at the conference, sending Private Presidential Counselor for Reform and Development, Dan Capatina, to propose that Black Sea port of Constanta as a logical funnel for sending Caspian crude on to the rest of Europe.

Bulgaria and Greece have also proposed themselves as possible shipping links for Caspian oil and there are in fact several dozen proposed routes for pipelines. Everyone wants in on the action.

The only problem is that the United States opposes any involvement by Iran, another country which borders the Caspian. The U.S. government's ombudsman for dealing with energy issues in the area of the former Soviet Union, Commerce Department Counselor Jan Kalicki, says every other country should be involved except Iran because it supports terrorism and is trying to acquire weapons of mass destruction.

But the U.S. is nearly alone in maintaining sanctions against Iran and many of those most directly involved in Caspian Sea oil development also have ties with Tehran.

Pena said that Kazakhstan President Nursultan Nazarbayev promised him and President Bill Clinton to support the Baku-Ceyhan pipeline proposal as the main line of multiple pipelines this week. But as he concluded his Washington visit Wednesday, Nazarbayev told reporters his country could only give up the idea of an oil pipeline running through Iran if the U.S. was ready to finance an alternative by next fall.

Pena and Kalicki didn't hear of Nazarbayev's comment, but did say that the U.S. believes the vast bulk of the financing of the facilities to extract and transport Caspian oil should come from the private sector, not governments.

The U.S. is willing to provide some feasibility study money and perhaps some export financing, they said, but in the end the decisions on which pipelines are running where will rest with the oil companies and other private firms which will finance the whole deal. Russia's Garipov agreed on that point, saying the economics and profitability must be the main determining factors on whether pipelines are built. He acknowledged, however, that "geopolitical" considerations will probably play some role.

The oil companies which are expected to finance most of the project, say they are still looking at the economic issues. But the Executive Vice President of Unocol, Robert Todor, said preliminary studies show that the growth markets in the next century for Caspian oil will be in the Asian-Pacific area and that the most direct routes there are either through Iran or through Afghanistan.